New Zealand firms Hatch and Sharesies are not blocking users from trading in speculative, volatile stocks such as GameStop even while US counterparts have.
US-trading platform Robinhood barred users from investing in GameStop overnight, prompting a significant fall in its price and attracting widespread criticism for interfering in the market.
Retail traders on internet forum Reddit have been deliberately pushing GameStop's price higher in an effort to squeeze Wall Street hedge funds that were short selling the video game retailer.
Kristen Lunman, general manager of Hatch, said the company was not making any attempt to shut down the trading frenzy as it was “part of democratising access” to the market.
While she warned Hatch was not a platform for day trading, she said many retail traders had a sophisticated understanding of financial markets.
“This is not investing, its pure speculation and/or activism,” she told BusinessDesk. “It’s a random event that is going to happen from time to time.”
Sharesies co-founder Leighton Roberts also said it was not blocking trading, although the brokerage infrastructure is struggling to cope with the trading pressure.
“All of those brokers over there are under pressure at the moment and we are wearing some of that slowness back into our own service,” he said. “We’ve always said it is not built to be a day-trading platform and even the day trading platforms are struggling.”
Yesterday, global brokerage firm Interactive Brokers stopped offering option trading on GameStop and four other stocks due to the “extraordinary volatility” in the markets.
“We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only,” it said in a statement.
Minority madness
This afternoon, the Australian Stock Exchange halted trading in nickel mining firm GME Resources after its shares jumped 52 percent. It has the same three letter ticker as NYSE-listed GameStop.
Most users on Hatch and Shareises are not trading GameStop shares. Lunman said less than 2 percent of users had a position in the speculative stock.
Roberts said the Sharesies platform was responding to the speculative surge with some educational content, but not by preventing trades.
However, as the initial Reddit trade snowballed, it collected a group of investors with “eyes wide open” to the risk, but also a third group of more innocent traders.
“That third group are people who might be coming into this a bit blindly and may end up losing money they don’t want to lose. Those are the ones we are worried about,” he said.
The Financial Markets Authority said it was “following the Gamestop case with interest” but wouldn’t speculate on whether it involved any market manipulation.
“We have welcomed the new wave of retail investors to the capital markets, however we have expressed our concerns about investors potentially spreading misinformation on social forums and following the herd into high-risk investments,” it said in a statement.