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At least one major retail-focused brokerage house is starting to respond to a frenetic surge in shares of companies that have been attributed to rabid buying by mom-and-pop investors on social-media platforms.
On Wednesday, TD Ameritrade said it was restricting trading for GameStop GME, +125.50% and AMC Entertainment Holdings AMC, +215.73%, as well as other names, amid a triple-digit percentage surge in the value of those companies in recent days.
“In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in $GME, $AMC and other securities,” a spokeswoman for TD Ameritrade told MarketWatch, referring to the ticker symbols of the companies.
“We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors,” the spokeswoman said.
The moves come as shares of videogame retailer GameStock have shot up 1,600% in January as traders have been gathering on online chat forums and taking large bets on the stock using options—often out-of-the-money calls that pay off only if the stock rises in value over a set period.
Fanatics on sites lilke Reddit’s WallStreetBets have clashing with hedge fund investors and have been casting the clashes been prominent Wall Street short sellers and individual investors in GameStop as a battle between deep-pocketed traditional investors and average folk.
However, the recent run-up in GameStop is spilling over into other areas of the market, with shares of companies like AMC Entertaintment also surging in price on Wednesday, along with shares of Bed Bath & Beyond BBBY, +26.53% and retailer Express Inc. EXPR, +250.15%. whose shares were up 220%.
The recent bubblicious trade has apparently made many on Wall Street uneasy, with worries of a bubble. The Dow Jones Industrial Average DJIA, -1.02%, the S&P 500 index SPX, -1.36% and the Nasdaq Composite Index COMP, -0.99% were all trading lower on Wednesday.
Regulators have been mindful of the recent action, with William Galvin, the Secretary of the Commonwealth of Massachusetts, telling Barron’s in an exclusive statement on Tuesday that he was watching the action play out.
“This is certainly on my radar,” Galvin said. “I’m concerned, because it suggests that there is something systemically wrong with the options trading on this stock.”
