The logo for Robinhood is displayed on a smartphone in an ordered photo.
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Shares of GameStop, AMC and others jumped into expanded trading Thursday after Robinhood said it would resume limited trading in previously limited securities on Friday.
“Starting tomorrow, we plan to allow limited purchases of these securities. We will continue to monitor the situation and can make adjustments as needed,” Robinhood said in a statement.
GameStop shares rebounded after trading hours following the Robinhood decision. The stock gained 28% to trade against $ 247 in out-of-hours trading, after falling 44% to $ 193.60 during Thursday’s regular business hours.
The company said their decision to restrict trading – which angered many users – was to comply with the capital requirements imposed on brokers by the SEC.
“These requirements are there to protect investors and the markets and we take our responsibilities to meet them seriously, including through the measures we have taken today,” the company said.
Amid a frenzy of retail investor trading activity, Robinhood, among other private brokers, restricted trading of several names on Thursday. The free stock trading app said that in some cases, investors would only be able to sell their positions and not open new ones.
In addition to GameStop, limited trading drove AMC Entertainment and BlackBerry shares up 56% and 41%, respectively, Thursday.
Interactive Brokers took similar steps, with both it and Robinhood increasing margin requirements for certain securities. TD Ameritrade and Charles Schwab raised margin requirements on Wednesday.
Increasing margin requirements increases how much money an investor using leverage and derivatives should have in their trading account after a stock purchase.
The influence of retail investors – most evident in GameStop – has captivated the streets in recent days, appealing to a new class of traders who grew up during the pandemic.
Individual investors create minor bottlenecks by piling up on names that hedge funds bet against, forcing the funds to rush to cover their losses. This typically pushes stocks even higher. Retail investors promote their activity on the WallStreetBets Reddit board, which has more than 3 million members. Some see it as small, private investors pulling back against the Wall Street establishment.
Amid the meteoric booms – and then falls again – some lawmakers are calling for an investigation. Amid noise from lawmakers, Democratic leaders of the House Financial Services Committee and Senate Banking Committee said they would hold hearings.
Here’s Robinhood’s full statement:
“Over the past year, we’ve seen the financial markets become a voice for the voiceless. We’ve seen a new generation of people enter the markets, sparking conversations about what it means to be an investor. show the world that investing is for everyone, not just institutional investors and hedge funds.
In the midst of this week’s extraordinary market conditions, we made a tough decision today to temporarily limit the buying of certain securities. As a brokerage firm, we have many financial requirements including SEC net capital liabilities and clearinghouse deposits. Some of these requirements fluctuate based on the volatility of the markets and can be significant in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
Starting tomorrow, we plan to allow limited purchases of these securities. We will continue to monitor the situation and can make adjustments if necessary.
To be clear, this was a risk management decision and was not made based on the direction of the market makers we are heading. We are starting to open up trading for some of these securities responsibly.
We support our clients and the freedom of private investors to shape their own financial futures. Democratizing finances has been our leading star since our very beginning. We will continue to build products that give more people – not less – access to our financial system. We will continue to monitor market conditions to restore full trading for these securities. We will update this Help Center article with the latest changes.
We are very grateful to our customers. “
CNBC’s Maggie Fitzgerald and Tucker Higgins contributed to the reporting.