The dramatic surge in GameStop’s stock this week has unnerved both Wall Street and Washington, D.C., where some lawmakers are calling for congressional inquiries and regulatory actions against brokers on behalf of smaller investors.
Yesterday, Robinhood, TD Ameritrade and Interactive Brokers limited trading on GameStop, AMC, BlackBerry, Nokia and other stocks as they experienced an unprecedented spike in shares within less than a day. The frenetic snatch-up was driven by some members of social media platform Reddit and other forums, who rallied behind struggling companies that were bet against by a number of hedge funds and other seasoned investors.
“We continuously monitor the markets and make changes where necessary,” Robinhood said in a statement. “In light of recent volatility, we are restricting transactions for certain securities to position closing only.”
The backlash was swift: A bipartisan group of politicians — including Democratic representatives Alexandria Ocasio-Cortez of New York and Ro Khanna of California, as well as Sen. Ted Cruz of Texas and even the former president’s eldest son, Donald Trump Jr. — has argued that the brokers’ move effectively knee-capped retail traders while offering favorable treatment to hedge funds, who could still buy and sell.
“This is unacceptable,” wrote Ocasio-Cortez, who is a member of the House Financial Services Committee and indicated her support for a hearing. “We now need to know more about Robinhood’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.” The post was also retweeted by Cruz, with the message, “Fully agree.”
Fully agree. 👇 https://t.co/rW38zfLYGh
— Ted Cruz (@tedcruz) January 28, 2021
In addition, Trump Jr. wrote, “It took less than a day for big tech, big government and the corporate media to spring into action and begin colluding to protect their hedge fund buddies on Wall Street. This is what a rigged system looks like, folks!”
It took less than a day for big tech, big government and the corporate media to spring into action and begin colluding to protect their hedge fund buddies on Wall Street. This is what a rigged system looks like, folks! #RobinHood #RedditArmy #GME #GMEtothemoon https://t.co/UhrwGHCjng
— Donald Trump Jr. (@DonaldJTrumpJr) January 28, 2021
Similar to his Democratic colleagues, Khanna demanded that the government hold those responsible for cutting off trading access to smaller investors. In a statement issued to the public, he wrote, “This entire episode has demonstrated the power of technology to democratize access to American financial institutions, ultimately giving far more people a say in our economic structures. This also showed how the cards are stacked against the little guy in favor of billionaire Wall Street Traders.”
On Thursday, Democratic Rep. Maxine Waters of California, chairwoman of the House Committee on Financial Services, announced plans to address the “predatory and manipulative conduct” of hedge funds in an investigation. Sen. Sherrod Brown, a Democrat from Ohio and the incoming chair of the Senate Banking Committee, also promised to hold a hearing on “the current state of the stock market” in response to the volatility.
“People on Wall Street only care about the rules when they’re the ones getting hurt. American workers have known for years the Wall Street system is broken — they’ve been paying the price,” Brown said in a statement. “It’s time for the Securities and Exchange Commission and Congress to make the economy work for everyone, not just Wall Street.”
As of 10:30 a.m. ET, shares of GameStop were up 61% to $313.43. Robinhood announced that it would resume limited buys on its securities and other stocks starting today.