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Updated Jan 28, 2021 - Economy & Business

Senate panel to hold hearing after high-flying Reddit stocks cause Wall Street chaos

Courtenay Brown

Major trading platforms including Robinhood, TD Ameritrade and Interactive Brokers are restricting — or cutting off entirely — trading on high-flying stocks like GameStop and AMC Entertainment.

The latest: Senate Banking Committee Chair Sherrod Brown (D-Ohio) announced Thursday that he plans to hold a hearing on "the current state of the stock market" in response to this week's 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 SEC and Congress to make the economy work for everyone not just Wall Street."

Why it matters: The restrictions imposed by the platforms limit access to the traders who have contributed to the wild Reddit-driven activity of the past few days — a phenomenon that has gripped Wall Street and the country.

Robinhood said it will only allow traders to close out their positions in stocks like GameStop, AMC Entertainment, BlackBerry and a slew of others that have been popular on Reddit boards, TikTok and other social media platforms, citing "recent volatility."

Interactive Brokers is cutting off options trading for these names and upping the requirements necessary to take long or short positions in these stocks.

  • "We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only. We will continue to monitor market conditions and may add or remove symbols as may be warranted," the company said in a statement to CNBC.

TD Ameritrade also limited trading for these stocks, while Charles Schwab (which owns TD Ameritrade) tightened margin requirements for trading.

What they're saying: Elected officials from both parties began responding on Thursday to the news that Robinhood was only allowing users to sell the Reddit-driven stocks, with several calling for hearings on the matter.

  • Rep. Alexandria Ocasio-Cortez (D-N.Y.) tweeted: "This is unacceptable. 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. As a member of the Financial Services Cmte, I’d support a hearing if necessary."
  • Sen. Ted Cruz (R-Texas) responded, "Fully agree," to Ocasio Cortez's tweet.
  • Donald Trump Jr., who is not elected but remains a popular figure within his father's base, tweeted: "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!"

Where it stands: Shares of GameStop peaked at $469 before plummeting down $126 at around 11:30 am. It began to recover again around noon. A number of trading platforms said they were experiencing device disruptions.

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