On Thursday evening, when most of those involved were probably already dizzy, the Gamestop gold rush was over for the time being. The stockbroker app Trade Republic wrote to its users that the buying of shares in Gamestop, AMC Entertainment, Blackberry, Nokia, Express Inc. and Bed, Bath & Beyond was stopped “because of the risks associated with the extreme price fluctuations”. Investors could now only sell the shares, which Trade Republic justified with wanting to protect its customers. But many of these customers are mad as hell.
They felt unilaterally excluded from a market that the neobrokers fueled in the first place. Apps such as Trade Republic or the US programs Webull and Robinhood benefit when investors trade a lot, attract with low fees and advertise the democratization of stock trading.
Now they have become targets of investor anger after they have temporarily restricted trading in the much sought-after stocks. In the Google Play Store, Trade Republic and Robinhood crashed to a lousy 1.1 out of five points. Comments like: “It is not acceptable for TR to stop trading certain stocks and thus intervene in the free market! Absolutely NO GO!” According to a report by the specialist website 9to5mac.com, Google deleted 100,000 negative reviews of the broker Robinhood in its US Play Store, which the company probably classified as a concerted action.
The users see the purchase ban as excessive, not as protection, and consumer advocate Niels Nauhauser from the consumer advice center Baden-Württemberg says: “First the customers are enticed to trade a lot, and then it is unilaterally decided that this is no longer for certain stocks that has nothing to do with consumer protection. “
Trade Republic lifted the restrictions on Friday and apologized, but none of this did little to calm the angry mob of investors. Trade Republic initially did not respond to an SZ request.
Spectacular location on the stock exchanges
The fact that it got that far is thanks to the spectacular situation on the stock exchanges, which drove the shares of Gamestop and the other companies higher and higher. Private investors had found out which individual stocks hedge funds had sold severely short. In a short sale, investor A borrows a share from investor B for a period of time. In the, he sells the share for, for example, 100 euros, but buys the same share back before the end of his loan period, in the best case for less than 100 euros. So he’s betting on a price crash. If the deal is through, he collects the difference between the buying and selling price, and the lender pays a small fee.
The private investors, who organized themselves on the online platform Reddit, wanted to counteract this and drove the price higher and higher, which meant that individual hedge funds had to buy back the shares for very high prices – this “short squeeze” cost them billions. With the purchase ban on Thursday, the brokers then slowed down private investors for the time being and thus took the side of the hedge fund.
Michael Zollweg finds it difficult. For 20 years he was head of the trading surveillance office (HÜSt) of the Frankfurt Stock Exchange and Eurex Germany. During this time, the stock exchange has repeatedly suspended individual stocks from trading, but he has never seen an individual broker exclude certain stocks on his own. “I think that’s extremely critical,” he says. He considers the argument that he only wants to protect the investor to be advanced. “That all sounds very nice, but there is no exception. Brokers have to ensure that investors’ orders are listed on the stock exchange – everything else is not their job.” He suspects that the systems simply couldn’t keep up, which the financial supervisory authority should make Bafin prick up. “That could well entail a special test,” says Zollweg.
In fact, the Bafin has received “a large number of complaints” about “technical malfunctions” at Trade Republic, as the supervisors write on SZ’s request. And further: “We have strongly advised Trade Republic to comply with the regulatory requirements and to provide customers with all services in accordance with regulatory law and without disruption.”
The Robinhood app needed cash – lots of it
In the case of broker Robinhood, according to the company itself, it was simply about the available money. After the price rally around Gamestop, many investors had their winnings paid out – and Robinhood needed cash to be able to serve the customers. The company had to raise a billion dollars in the short term from investors such as the venture capital fund Sequoia Capital. Company boss Vlad Tenev said he was forced to do so in order to comply with tax authorities’ requirements. Trading in the shares was only restricted for reasons of risk management, not due to pressure from Wall Street. Sequioa also described rumors as “completely wrong” that they had put pressure on Robinhood to have the app forbid stock purchases.
Fans have certainly not won the brokers with their hard line. Consumer advocate Nauhauser says that he had as many complaints on the table early in the morning as rarely on a single topic in such a short time. He advises consumers to document damage and to complain to the Bafin.
In the USA, two camps have formed in the dispute over the Gamestop share: on the one hand, traditionalists and hedge fund managers, who declare the price jumps to be a danger through online bets. On the other hand, the surprisingly successful private investors, on whose side comedian Jon Stewart, among others, fought. The traders are now only coming to a party that Wall Street insiders have celebrated for a long time, he tweeted. If anything, they can be sued for copyright infringement – after all, they have only copied the successful model of the financial industry.
Jaime Rogozinski founded the forum “r / wallstreetbets” on the Reddit website, in which traders mainly organize themselves to drive the price of the Gamestop share up. Today he has nothing to do with the forum, but he explains the basic idea of the trader rebellion as a redistribution campaign at the expense of the super-rich who run or invest in hedge funds: “They can do what Occupy Wall Street never did.”
Left-wing Democrats and right-wing Republicans also rarely unanimously condemned the ban on stocks on the apps. “The people on Wall Street only care about rules when they are harmed. American workers have known for years that the Wall Street system was broken. It is time for the Securities and Exchange Commission to run the economy works for everyone, not just Wall Street. ” Maxine Waters, Democratic MP in the House of Representatives, announced a hearing on the Gamestop case.
Meanwhile, the tension has reached a climax on Reddit: A user of the forum “r / wallstreetbets” wrote on Friday: “We are now in the final.”