I'll say a few things.
First, I applaud the people who made money long GME stock. Good for them. And if the hedge funds lost money, that's the way the cookie crumbles. They're pros. They know the risks.
Second, at some point, it's going to collapse. And it's going to collapse because what is occurring is a mania driven by technical conditions in the market. GME is not worth $30 billion. It's probably not worth $3 billion. Eventually, it will go to $0 because it's a broken business model. A retail investor buying at these prices is going to lose almost everything.
Third, there may be nefarious things going on, which I will address in my last point, but you must understand why brokers are shutting down trading in these stocks. They've done it in the past, and they will do it in the future.
www.wsj.com
That last point is important. In effect, the brokers were cutting trades because if they didn't, they'd risk losing money themselves. These brokers make money matching trades for a buyer and a seller. This business is not about taking market risks. It's about their ability to execute your stock trade. You would not be able to trade stock without this service.
Finally, I have heard from reputable sources - i.e. not on the Internet - that one firm may have done illegal things. If what he said was true, then those people should be prosecuted to the fullest extent of the law.
First, I applaud the people who made money long GME stock. Good for them. And if the hedge funds lost money, that's the way the cookie crumbles. They're pros. They know the risks.
Second, at some point, it's going to collapse. And it's going to collapse because what is occurring is a mania driven by technical conditions in the market. GME is not worth $30 billion. It's probably not worth $3 billion. Eventually, it will go to $0 because it's a broken business model. A retail investor buying at these prices is going to lose almost everything.
Third, there may be nefarious things going on, which I will address in my last point, but you must understand why brokers are shutting down trading in these stocks. They've done it in the past, and they will do it in the future.
At least three brokerages said the trading restrictions stemmed from mandates from their clearing firms, which process the securities on the back end after a user executes a trade with their brokerage. Webull Chief Executive Anthony Denier said his platform’s clearing firm, Apex Clearing Corp., notified him Thursday morning that Webull needed to shut off the ability to open new positions in certain stocks. Otherwise, Apex wouldn’t be able to settle the trades. ...
“It’s a domino effect,” Mr. Denier said, adding the industry was likely reckoning with the question of whether “customers could pay for the stocks they had to buy to cover their short positions.”
“If [they] are not able to pay to cover their short positions, someone else is going to have to pay for that purchase,” he said. “And if their clearing firm fails and there’s not enough collateral in the account to cover the purchase, that trade fails and will cascade into multiple trades with multiple customers.”
Robinhood, Other Brokerages Restrict Trading on GameStop, AMC
Popular online brokerages restricted trading in some highflying stocks, sapping some of the euphoria around shares of companies that individual investors have sent skyrocketing in recent days.
www.wsj.com
That last point is important. In effect, the brokers were cutting trades because if they didn't, they'd risk losing money themselves. These brokers make money matching trades for a buyer and a seller. This business is not about taking market risks. It's about their ability to execute your stock trade. You would not be able to trade stock without this service.
Finally, I have heard from reputable sources - i.e. not on the Internet - that one firm may have done illegal things. If what he said was true, then those people should be prosecuted to the fullest extent of the law.
