Investing app Robinhood blocked access to GameStop and other highflying names on Thursday as trading surged among retail users.
The move comes after GameStop (GME) stock has shot higher over the past week, inspiring a short squeeze. The action — driven by retail traders often using options — has spread to other names like BlackBerry (BB), AMC Entertainment Holdings (AMC), and Bed Bath & Beyond (BBBY). Several of those stocks were falling in premarket trading after enormous run-ups in the past few days.
Users began reporting that they couldn’t trade GameStop and other stocks on Thursday. They got a message that “This stock is not supported on Robinhood.”
In a statement on Thursday, Robinhood detailed which stocks now had restrictions. “In light of recent volatility, we are restricting transactions for certain securities to position closing only,” the company said. These include AMC Entertainment, BlackBerry, Bed Bath & Beyond, Express (EXPR), GameStop, Koss (Koss), Naked Brand Group (NAKD), and Nokia (NOK).
“We also raised margin requirements for certain securities,” Robinhood said. The trading platform is raising margin requirements for investors in GameStop and AMC to 100%, Robinhood told Barron’s on Wednesday.
On Thursday morning, Robinhood was also reporting outages.
Other brokers have instituted similar restrictions. Interactive Brokers (IBKR) on Wednesday put AMC, BlackBerry, Express, GameStop, and Koss option trading into liquidation “due to the extraordinary volatility in the markets,” the company said.
“In addition, long stock positions will require 100% margin and short stock positions will require 300% margin until further notice,” the company said. “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.”
TD Ameritrade (AMTD) also placed restrictions on some transactions in GameStop and other securities, the broker said on Wednesday. A spokeswoman didn’t specify exactly what the company was doing but said it could include “actions like increasing margin requirements, or limiting certain types of transactions, like short sales and those that may involve unlimited risk. It is not uncommon for us to make such decisions, which we consider on an individual basis, in the interest of mitigating risk.”
“We have been adjusting our requirements for several days as we continued to see trends indicating unusual volume in an unprecedented market environment, which appear to be divorced from traditional market fundamentals,” the company said. “We have made what we believe to be prudent and appropriate decisions to place some limits on certain transactions for certain securities.”
And fast-growing privately held broker Webull said it was limiting some activities, too.
“Webull has been very successful in limiting our intraday risk during the course of these events by not allowing any short positions in these volatile names since as early as Friday of last week,” CEO Anthony Denier told Barron’s. “Trading has been open for these stocks and uninterrupted amidst this volatility and the only new restrictions we have placed is not allowing market orders opening of new multi-leg option strategy positions.”
Robinhood has grown faster than the rest of the industry over the past year, attracting younger investors. Last year, it said it had more than 13 million account-holders, adding 3 million from January until May. The privately held broker was sued last month by a Massachusetts regulator on allegations that it encourages risky investing among its clientele. The company denied those allegations and said it does not recommend stocks.
On Wednesday night, Robinhood sent a notice to users directing them to educational products in light of the recent volatility.
One trader who has made money in the GameStop trade through his Webull account was frustrated by the new limits.
“It’s one thing if I had a pattern of misconduct, or a lot of violations. It’s another thing for you to tell me that you can’t trade this stock because we don’t like what’s happening to it,” Brandon Luczek, a 28-year-old who lives in Virginia, told Barron’s on Wednesday night. “That’s not for you to decide. I have my own personal risk tolerance.”
Others on reddit’s wallstreetbets forum lashed out at Robinhood. “How in the hell is this legal? They are tanking our legitimately bought and held stocks/options by arbitrarily restricting trading,” one wrote.
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Food prices continue to rise at a rapid pace, surprising central banks and pressuring debt-laden governments
LONDON—Fresh out of an energy crisis, Europeans are facing a food-price explosion that is changing diets and forcing consumers across the region to tighten their belts—literally.
This is happening even though inflation as a whole is falling thanks to lower energy prices, presenting a new policy challenge for governments that deployed billions in aid last year to keep businesses and households afloat through the worst energy crisis in decades.
New data on Wednesday showed inflation in the U.K. fell sharply in April as energy prices cooled, following a similar pattern around Europe and in the U.S. But food prices were 19.3% higher than a year earlier.
The continued surge in food prices has caught central bankers off guard and pressured governments that are still reeling from the cost of last year’s emergency support to come to the rescue. And it is pressuring household budgets that are also under strain from rising borrowing costs.
In France, households have cut their food purchases by more than 10% since the invasion of Ukraine, while their purchases of energy have fallen by 4.8%.
In Germany, sales of food fell 1.1% in March from the previous month, and were down 10.3% from a year earlier, the largest drop since records began in 1994. According to the Federal Information Centre for Agriculture, meat consumption was lower in 2022 than at any time since records began in 1989, although it said that might partly reflect a continuing shift toward more plant-based diets.
Food retailers’ profit margins have contracted because they can’t pass on the entire price increases from their suppliers to their customers. Markus Mosa, chief executive of the Edeka supermarket chain, told German media that the company had stopped ordering products from several large suppliers because of rocketing prices.
A survey by the U.K.’s statistics agency earlier this month found that almost three-fifths of the poorest 20% of households were cutting back on food purchases.
“This is an access problem,” said Ludovic Subran, chief economist at insurer Allianz, who previously worked at the United Nations World Food Program. “Total food production has not plummeted. This is an entitlement crisis.”
Food accounts for a much larger share of consumer spending than energy, so a smaller rise in prices has a greater impact on budgets. The U.K.’s Resolution Foundation estimates that by the summer, the cumulative rise in food bills since 2020 will have amounted to 28 billion pounds, equivalent to $34.76 billion, outstripping the rise in energy bills, estimated at £25 billion.
“The cost of living crisis isn’t ending, it is just entering a new phase,” Torsten Bell, the research group’s chief executive, wrote in a recent report.
Food isn’t the only driver of inflation. In the U.K., the core rate of inflation—which excludes food and energy—rose to 6.8% in April from 6.2% in March, its highest level since 1992. Core inflation was close to its record high in the eurozone during the same month.
Still, Bank of England Gov. Andrew Bailey told lawmakers Tuesday that food prices now constitute a “fourth shock” to inflation after the bottlenecks that jammed supply chains during the Covid-19 pandemic, the rise in energy prices that accompanied Russia’s invasion of Ukraine, and surprisingly tight labor markets.
Europe’s governments spent heavily on supporting households as energy prices soared. Now they have less room to borrow given the surge in debt since the pandemic struck in 2020.
Some governments—including those of Italy, Spain and Portugal—have cut sales taxes on food products to ease the burden on consumers. Others are leaning on food retailers to keep their prices in check. In March, the French government negotiated an agreement with leading retailers to refrain from price rises if it is possible to do so.
Retailers have also come under scrutiny in Ireland and a number of other European countries. In the U.K., lawmakers have launched an investigation into the entire food supply chain “from farm to fork.”
“Yesterday I had the food producers into Downing Street, and we’ve also been talking to the supermarkets, to the farmers, looking at every element of the supply chain and what we can do to pass on some of the reduction in costs that are coming through to consumers as fast as possible,” U.K. Treasury Chief Jeremy Hunt said during The Wall Street Journal’s CEO Council Summit in London.
The government’s Competition and Markets Authority last week said it would take a closer look at retailers.
“Given ongoing concerns about high prices, we are stepping up our work in the grocery sector to help ensure competition is working well,” said Sarah Cardell, who heads the CMA.
Some economists expect that added scrutiny to yield concrete results, assuming retailers won’t want to tarnish their image and will lean on their suppliers to keep prices down.
“With supermarkets now more heavily under the political spotlight, we think it more likely that price momentum in the food basket slows,” said Sanjay Raja, an economist at Deutsche Bank.
It isn’t entirely clear why food prices have risen so fast for so long. In world commodity markets, which set the prices received by farmers, food prices have been falling since April 2022. But raw commodity costs are just one part of the final price. Consumers are also paying for processing, packaging, transport and distribution, and the size of the gap between the farm and the dining table is unusually wide.
The BOE’s Bailey thinks one reason for the bank having misjudged food prices is that food producers entered into longer-term but relatively expensive contracts with fertilizer, energy and other suppliers around the time of Russia’s invasion of Ukraine in their eagerness to guarantee availability at a time of uncertainty.
But as the pressures being placed on retailers suggest, some policy makers suspect that an increase in profit margins may also have played a role. Speaking to lawmakers, Bailey was wary of placing any blame on food suppliers.
“It’s a story about rebuilding margins that were squeezed in the early part of last year,” he said.
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