Online trading platforms Sharesies and Hatch have reopened trading in GameStop, after earlier being forced to shut down trade in several volatile US companies because of extraordinary collateral requirements.
DriveWealth, which provides the infrastructure for the companies to trade in the US, warned yesterday that the central securities depository for US markets was demanding a clearing fund premium, raising the amount of capital required to trade through the system “by more than 250 per cent”.
DriveWealth said it could not meet the requirements meaning users of the platform could only sell shares in GameStop, AMC Entertainment, Nokia and Koss Corporation, but not buy them.
One source claimed the move could have required DriveWealth to hold more than $100 million each for Sharesies and Hatch.
Sharesies and Hatch immediately warned customers that the decision to restrict trading was out of their hands.
“When we can provide access to buy this investment again, we will,” a warning on the Sharesies site said.
“We want to be clear; this isn’t a decision Hatch has made,” a similar warning on Hatch said.
Nevertheless, a number of people on Twitter and Facebook said they would leave the platforms, or claimed that the move was the system protecting vested interests.
“2 sets of rules,” Facebook user Nick King wrote on the Sharesies Facebook group.”1 for those with money and 1 for those that don’t….. until you can afford to lobby a politician too”.
“The rigged market arrives in NZ,” Twitter user @CellyWratt wrote.
Around 9am though, Sharesies and Hatch were able to lift the restrictions.
Traders attempting to buy shares in GameStop or AMC on Sharesies were instead given a warning.
“GameStop Corporation is a volatile investment because its share price has recently changed by a significant amount. A volatile investment has a share price that frequently changes by large amounts—it could go up one moment, and down the next. Most investments have some volatility, but some investments are more volatile than others.”
Trading in GameStop, a US company that owns a nationwide chain of video game shops, has been the talk of international markets after a group of retail users centred around the Wallstreetbets forum on Reddit exploited a massive short position by hedge funds to drive shares up around 1700 per cent at one point.
It was one of only a group of companies affected, causing sharp increases. Prices in most of the targeted shares have since plunged.
Online US platform Robinhood Markets restricted trading on a number of the shares, prompting threats of a massive exodus amid claims the system was rigged.
But the need to provide capital to continue to trade the highly volatile shares appears to be real. The Wall Street Journal reported this morning that Robinhood Markets has raised US$3.4 billion ($4.75b) in the past week, more than doubling the amount it has raised since it was established.
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