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In all likelihood the internal teams responsible for risk management and compliance all determined that this was likely criminal activity, and recommended tradi
by betterunix2 6y ago
In all likelihood the internal teams responsible for risk management and compliance all determined that this was likely criminal activity, and recommended trading restrictions until the SEC weighs in. Brokerages are typically over-cautious about this sort of thing because they do not want to invite additional scrutiny from the powers that be. The brokerages probably did not communicate these decisions to each other, they just all use similar logic and all arrived at similar conclusions. Those that did not make this decision probably did not observe suspicious trading patterns from their customers.
- paxys 6y agoThere is zero chance they all independently came to the same conclusion at the exact same time. There has to be a bare minimum amount of coordination involved, which is likely illegal. Either that or they got an order from the SEC/White House.
- betterunix2 6y agoFinancial companies all use the same logic to make these sorts of decisions, so yes, there is a very good chance that they independently came to the same conclusion at the same time.
- mlthoughts2018 6y agoIt’s also not a clear conclusion even remotely at all. There’s nothing remotely illegal about retail investors coordinating together to profit from a short squeeze opportunity.
- wonderwonder 6y agoIf they got orders from the SEC they would likely be shouting it from the roof tops by now in a desperate attempt to shore up their reputation.
- paxys 6y agoDoesn't have to be an official order
- Ericson2314 6y agoThen they should have blocked all trading, not just buying. The benevolent story just doesn't hold up.
- deleted 6y ago[deleted]
- betterunix2 6y agoThey blocked the opening of new positions. You can still buy if it results in a short position being closed. Pretty typical move, almost certainly done to protect themselves from scrutiny by the SEC and CFPB.
- dpbriggs 6y agoWhy block buying and not selling? Why did they all come to the same conclusion at the same time?
- betterunix2 6y agoThey did not block selling, they blocked opening new positions. You can buy if doing so closes a short position.
- dpbriggs 6y agoAnd that's somehow fine? It's blatant protection for short positions. These brokers are hamming up the "we need to protect retail from volatility" narrative when they're clearly trying their best to stop their business partners from going bust. It's sickening.
- betterunix2 6y agoMore like they wanted to preempt possible sanctions from the SEC for failing to take action when they observed suspicious behavior by their customers. Let's be clear about a few things. Brokerages do not care about protecting retail investors, they only protect their customers when forced to do so by regulators. What brokerages do is protect themselves from liability, financial losses, and scrutiny. They have no problem screwing over their customers when it suits them. They will raise margin requirements and force customers to take a loss as soon as their risk models say that they should do so. They will restrict trading whenever it looks like there is a scam, simply because it wards off possible investigations into their business. What they can get in trouble for, and RH did get a slap on the wrists for already, is working against their customers' interests for the benefit of their business partners. One brokerage I could believe, but I doubt that half a dozen would all do it at the same time and with the same securities.
- dpbriggs 6y agoThat's great, but they should be halting trade of the stock all together if they really believed retailers were manipulating the stock. I can see the nice narrative of allowing retailers to sell ("capture gains"), but it's indefensible to only allow selling. That's _blatant_ market manipulation.
- pfisch 6y agoExcept it is still ok to sell these stocks...ok bro...
- ClumsyPilot 6y agothey respond to 'likely criminal activity' with certain criminal activity?
- betterunix2 6y agoNothing criminal about it, brokerages do this all the time.
- dpbriggs 6y agoI'm genuinely curious: can you find examples of brokerages only allowing buying, or only allowing selling? I'm not talking about edge cases with margin calls.
- betterunix2 6y agohttps://ibkr.info/article/2892 https://ibkr.info/article/2892 https://us.etrade.com/l/f/disclosure-library/otc https://us.etrade.com/l/f/disclosure-library/otc Would you like more?
- justupvoting 6y agoThese are examples of specific, ahead-of-time rules for entire types of stocks, not a sudden, reactionary move against particular names.
- dpbriggs 6y agoKeep them coming. I want other examples where it's appropriate for some brokers to restrict _buying_ but not selling, especially in the context of a short squeeze, with potential conflicts of interest. I understand that brokers can restrict trade on risky items as yes, it impacts their risk model. I'm failing to find justification for RH and others to restrict buying but not selling of GME. Your first link is for penny stocks, and the restrictions revolve around the usual pump-and-dump. You're allowed to go long, and can trade between days. Your second link is for OTC, and I fail to see how this is relevant to GME. GME is traded on formal exchanges, and brokers that haven't arbitrarily restricted buying aren't having any liquidity issues.