Thomas Peterffy, chairman of Interactive Brokers, said the broker’s move to curb speculative name trading is to protect the market and the clearing houses that do the business.
« We are concerned about the integrity of the market and the clearing system, » Peterffy said on CNBC’s Closing Bell on Thursday.
On Thursday, Interactive Brokers liquidated options trading on a handful of highly volatile stocks like GameStop, AMC Entertainment and Koss that have brought together an army of retail investors looking to crush hedge funds that are shorting out the names. The company also increased margin requirements, or how much money an investor using leverage and derivatives must have in their brokerage account for certain securities after buying shares.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in hopes that the market value will drop below that level when it is time to pay off the borrowed shares.
« We are concerned about the ability of the market and clearing systems to continue providing liquidity through the onslaught of orders. And we are concerned about the financial viability of intermediaries and clearing houses, » said Peterffy.
Clearing is the trustworthy transfer of securities and funds between buyers and sellers, an essential function on Wall Street. Some other online brokers are self-clearing companies, meaning they have their own clearing company, while others rely on a third party to clear the transactions. Robinhood, E-Trade, TD Ameritrade, Charles Schwab and Vanguard are among those who are already clear about themselves.
Peterffy said Interactive Brokers received no pressure from market makers to set parameters for stocks and options trading.
« The broker stands between these customers and the clearing house, » said Peterffy. « So if some option holders are making money, the clearing house has to give us the money to give to our customers, while other option holders, sellers or buyers on their own side lose money, we have to collect money from them and give it to the clearing house our customers cannot pay their losses, we have to raise our own money. «
Interactive Brokers has $ 10 billion in equity to fund these payments if necessary, but Peterffy said he couldn’t say the same about other brokers with complete confidence.
Peterffy also called what was going on with GameStop’s stock this week « illegal » and « manipulated ». He said that Interactive Brokers clients will be able to trade the speculative names once trading returns to « normal ».
Peterffy also said he doesn’t know if there are any big institutions on the side of GameStop’s massive rally.
« May they all be individuals, but I doubt it because it takes a lot of money, » Peterffy said.
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How Long Can Robinhood Restrict Trading?
If you do not cover your day trade call within the 5 day window, you will not be able to trade the day trade for 90 days.
Can I trade with 25k on Robinhood?
As long as you have a $ 25,000 cash account, you can trade during the day. With a Robinhood Cash account, you can place commission-free trades both during regular and after-hours. You don’t have access to instant deposits or instant billing.
Can you trade without 25k?
If you do not have $ 25,000 in your brokerage account prior to day trading activities, you will not be allowed to make day trading activities. The money must be in your account before you start day trading and you must have a minimum balance of $ 25,000 in your brokerage account at all times during day trading.
Can you set limits to Robinhood?
Due to the high volatility in the options market, Robinhood requires you to set a limit price for all option trades. With a buy limit order, you can set a limit price, which should be the maximum price you would like to pay for a contract. The contract will only be bought at or below your marginal price.
Why should Robinhood restrict GameStop?
Vlad Tenev, CEO of Robinhood, explained on Thursday afternoon on CNBC why the investment app decided to discourage users from buying stakes in GameStop, AMC and other companies. « To protect the company and our customers, we had to restrict the purchase of these stocks. » Said Tenev.
What happened to Robinhood and GameStop?
New York (CNN Business) A Robinhood customer filed a class action lawsuit against the stock trading app Thursday after the company banned traders from buying GameStop stock promoted by WallStreetBets, a popular Reddit group for investors .
Why did Robinhood block?
The company cites the “recent volatility” of the market as the rationale for the change. We continuously monitor the markets and make changes if necessary.
Can trading platforms restrict trading?
Trading platforms restrict the trading of GameStop and other companies.
Can you sell GME on Robinhood?
Robinhood has restricted the trading of highly volatile stocks, including GameStop and AMC, on its platform so that its users cannot buy the highly volatile stocks. The discount brokerage advised clients that they could close positions in the affected stocks but would not be able to buy additional stocks.
Can Robinhood stop trading?
It’s the greatest source of income for Robinhood. There has been some speculation that brokers were receiving pressure from other companies to stop trading certain stocks. “Citadel Securities has not directed or caused any brokerage firm to cease, suspend, restrict, or otherwise refuse to do business.
Who stopped trading with GameStop?
Robinhood and Webull were two of the brokers who stopped buying GameStop stock on Thursday, along with stocks of other companies including AMC and Koss Corporation.
Has GameStop stopped trading?
As a result, Grapevine, Texas-based company GameStop went offline several times on January 27th and 28th, but the interruptions only lasted a few minutes. … When equity volatility is high, capital requirements increase.
Should I still buy GameStop shares?
Last updated at 1:53 PM ET on January 28, 2021. With many online brokers claiming GameStop is in a « volatile state, » Robinhood and others have turned off the ability to buy stocks. At the time of writing, these online brokers are offering GameStop stock to investors: Etrade.
Why is GameStop falling?
GameStop shares rose another 40 percent in pre-market trading before falling sharply on Thursday after a public battle between Reddit users and Wall Street hedge funds. … Thursday’s volatile price action came after the Reddit forum that propelled shares in the company, r / WallStreetBets, got into trouble.