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Graphic shows timeline of recent GameStop share price.
GN41001EN

BUSINESS

GameStop hedge fund battle

By Duncan Mil

January 29, 2021 - A battle between so-called day traders, co-ordinated on Reddit, and Wall Street created a trading frenzy, inflicting billions of dollars of losses on “short-squeezed” hedge funds.

Many Reddit members’ 4.8 million-strong WallStreetBets forum who have bought GameStop Corp. shares were left furious after online trading services such as Robinhood Markets and Trading 212 put blocks on trading the company on Thursday (January 28). The move by online brokers saw the video seller’s stock tumble from a high of $492.02 to close at $193.60.

Earlier in the day, the stock market’s central clearing hub -- the Depository Trust & Clearing Corp. -- demanded significantly more collateral from member brokers.

By the end of Thursday, DTCC collateral requirements from brokerages, including Robinhood, jumped from $26 billion to $33.5 billion.

Robinhood, with a mission “to democratize finance for all,” has been the platform of choice as online traders inflicted billions of dollars of losses on hedge funds by sending stocks that those firms had shorted soaring in price.

Robinhood’s reaction to the DTCC collateral demand drew the most public attention, but other brokers also curbed trading in GameStop and other stocks.

Morgan Stanley’s E*Trade and Interactive Brokers Group Inc. took similar action on Thursday, following Charles Schwab Corp.’s TD Ameritrade on Wednesday.

Sources
PUBLISHED: 29/01/2021; STORY: Graphic News; PICTURES: Associated Press, Bill Jerome
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