Posted on Jan 28, 2021, 7:04 p.m.Updated Jan 28, 2021, 9:04 PM
Faced with the crazy rise of certain stocks on Wall Street, in the heart of a pitched battle between stock marketers and hedge funds, trading platforms are trying to calm things down. Several of them, such as TD Ameritrade or Charles Schwab have started to suspend part of the operations on GameStop and other speculative values. On Thursday, the restrictions multiplied: the favorite online platforms of individuals, Robinhood and Interactive Brokers, in turn decided to limit trading, on overheated stocks like GameStop and AMC Entertainment.
As a result, the prices collapsed. In the panic, the exchanges had to be interrupted several times. At the 15th interruption, the price of GameStop lost 68%. For the record, in the last two weeks, the price had multiplied by 18. In recent weeks, individuals have engaged in a standoff against hedge funds, triggering a wave of purchases that has forced institutional investors specializing in the sale short (borrowing securities to capitalize on their decline and paying them later at a reduced price) to close their positions or even sell other stocks to cover their losses.
Has the revolt of the “little guys” against the “establishment” of Wall Street been stifled by the very actors who gave them power? The platforms were not ordered to suspend transactions, they did so on their own. Therefore, professionals suspect possible market manipulation. ” Investigations will have to determine to what extent there may have been concerted actions and a deliberate desire to destabilize a particular actor or another. », Comments an investor.
Among the most prominent financiers, some have decided to minimize the phenomenon. Philipp Hildebrand of BlackRock called it an “absurd” phenomenon, while James Gorman, of Morgan Stanley, said the stock marketers involved in this type of operation risked “a rude awakening. “.
Concern of the authorities
It prevents. The turbulence of the last few days is worrying. Beyond Melvin Capital, other hedge funds have suffered significant losses and the risks of transmission to the entire financial system are taken very seriously. In addition, the movement of recent days does not look like a simple stock market euphoria, it shows a real “bubble of anger” against the financial system. ” It’s not a casino, it’s a riot », Wrote Thursday morning, a bank analyst. The euphoria around the best-selling short titles on the market has attracted the attention of the White House. Joe Biden’s new Treasury Secretary Janet Yellen said on Wednesday that she ” monitored the situation “.
William Galvin, head of financial regulation in the State of Massachusetts, even asked the New York Stock Exchange to suspend the listing of GameStop for one month in order to promote a return to calm.
” Regulators will have to assess the impact of the meeting between social networks and the provision of extremely powerful tools such as derivatives for individuals. It’s totally new », Remarks Wilfrid Galand at Montpensier Finance. It is not, however, certain that simple trading restrictions will really calm down Reddit marketers. Other assets are also starting to be targeted, especially metals such as silver. And already Robinhood is the subject of at least two complaints, in New York and Chicago, for having prevented operations. The aggrieved user, Richard Joseph Gatz, considered that the purpose of stopping transactions on Blackberry, Nokia and AMC Theaters was ” protect institutional investment to the detriment of retail clients. “