The GameStop Corp. logo on a laptop and the Robinhood application on a smartphone.
Tiffany Hagler-Geard | Bloomberg | Getty Images
Robinhood will continue on Monday to restrict trade in short-squeeze names like GameStop, which have seen explosive rallies and unprecedented volatility over the past week.
Customers can only buy one share of GameStop’s stock and five options contracts. However, the stock trading app loved by millennials has cut the list of restricted stocks from a whopping 50 on Friday to 8 on Monday.
“The table below shows the maximum number of stocks and options contracts to which you can increase your positions,” Robinbood said in an updated help center post on Sunday. “These limits are subject to change during the day.”
The eight names are GameStop, AMC Entertainment, BlackBerry, Koss, Express, Nokia, Genius Brands International and Naked Brand Group. Robinhood also limits the buying of options contracts in those securities.
If traders already have more stocks or contracts than the limits listed above, their positions will not be sold or closed, but they will not be able to open new positions, Robinhood said.
The move to extend the restrictions came after Robinhood revealed that the Wall Street clearing house had imposed a tenfold increase in the company’s deposit requirements last week to ensure orderly settlement. Clearinghouses seek to protect investors and the markets by ensuring that brokers have the resources necessary for trade settlement, a process that takes two days.
The company also increased margin requirements, or the amount of money in a client’s account when it would use leverage to buy a security.
The popular trading platform took advantage of lines of credit and raised $ 1 billion in new funds from investors last week to meet clearinghouse requirements.
A speculative shopping frenzy flooded Wall Street last week as a new wave of stay-at-home traders continue to use social media, in this case Reddit’s WallStreetBets forum, to coordinate massive short squeezes. Shares of GameStop, a struggling brick-and-mortar video game seller, skyrocketed 400% in the past week and closed January with a 1,625% rise. AMC was up 277% last week, while Koss was up more than 1,800%.
Many on Wall Street were increasingly concerned that this shopping mania would cause more pain for brokers like Robinhood and the short bottlenecks will force large hedge funds to sell other positions to raise money, causing unrest in the wider market.
Stock futures fell early trading Sunday.
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