Gamestop rally: Trading restrictions prompt anger | DW News

Robinhood and other brokers on Thursday restricted transactions on shares at the center of major volatility on stock markets spurred by people organizing on platforms such as Reddit. The restrictions sparked outcry among the individual traders — known as retail investors, and among US lawmakers on Thursday. They said that established professional funds were largely able to continue trading the affected stocks.

These companies of what social media users have been calling a "Reddit rally" where an army of retail investors, supporting each other on Reddit threads such as r/wallstreetbets which has some 5.4 million subscribers, bought stocks in heavily shorted companies. The collective action forced up stock prices while simultaneously ruining the short positions held by the hedge funds, causing them huge losses. Stock for aging bricks-and-mortar US computer game store Gamestop traded between $112 and $480 dollars a share in the past 24 hours, in massive swings, from just $18 (around €15) a few weeks ago. The unexpected rises in prices cost established hedge funds millions. Gamestop's stock had been falling for six straight years and both funds had bet heavily that the firm's stock would continue to fall. They do so in a process called short selling: borrowing a share from someone else, selling it, and agreeing to buy one back and pay back their debt at a later date. They profit if the price sinks as expected, but still must repay the shares if prices rise. The rising prices forced Melvin to close its short-selling positions in GameStop shares on Thursday and cut its losses.

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