Some of the free-stock trading brokerage houses figured out a way to slow the Reddit inspired frenzy with GameStop, and any other of the heavily shorted companies that have seen their stock prices explode during the past week or so.
Robinhood and Interactive Brokers both announced on Thursday that in some cases, they would not allow investors to open new accounts. Investors would only be able to sell their positions, and both Robinhood and Interactive Brokers raised margin requirements on some securities, meaning they increase the amount of money an investor who is using leverage and derivatives must have in their brokerage account after a stock is purchased. Interactive Brokers said in a statement “long stock positions will require 100% margin and short stock positions will require 300% margin until further notice.”
After this, the market immediately responded, as shares of GameStop immediately reversed the gains they had made. At one point in premarket trading Thursday, GameStop stock was traded above $500, but after the moves by the brokerages, it fell to under $290 per share. By late morning on Thursday, GameStop had fallen 24% from their closing price on Wednesday.
Robin hood announced in a statement that “We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities.”
Some of the other heavily shorted stocks include AMC Entertainment, BlackBerry and Koss.