GameStop, up 350% this month, is one of the stocks restricted in some brokerage firms.
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The CEO of popular online broker Webull Financial LLC said Thursday that the restrictions on trading
and other highly liquid stocks backed by the platform’s clearing firm, which helps streamline trading.
CEO Webull said in an interview Thursday morning that his clearing firm, Apex Clearing Corp., had to close the possibility of opening new positions in certain stocks, because otherwise the clearing firm would not be able to process the transaction. Apex Clearing has been advised by the Depository Trust & Clearing Corp. that it needs to provide more collateral to facilitate the settlement of transactions, Mr. Denier said. This message was then relayed to Webull, where individual investors can trade securities such as shares for free.
Summit was not immediately available for comment.
The decision to restrict trading in a handful of popular Webull stocks and other brokers such as Robinhood Markets Inc. has caused outrage among individual investors and some members of Congress. Numerous promotions, including for GameStop and
AMC Entertainment Holdings Inc,
fell sharply on Thursday as the euphoria surrounding the action subsided. GameStop is down 25%, while MCA is down 50%. Both stocks continue to rise over 350% for the month.
Webull Executive Director Anthony Denier
Webull then tweeted that the company was taking over from GameStop, AMC and the headphone manufacturer.
the three stocks she has limited.
The process that takes place after an individual investor has placed a transaction on a platform such as Webull via a smartphone or computer generally comes across to the end user as a transparent transaction. When an individual investor buys or sells a security, the transaction normally appears instantaneous.
Backstage, however, many parties are organized and large sums of money are spent on the show.
Webull, like other online brokers, channels its trades through a clearing firm, which simplifies the trading process all the way to settlement. Normally, Denier said, it takes two business days to process a request. He stated that clearing houses like Apex are required to provide collateral on behalf of the broker and the client to facilitate transactions as an intermediary. Mr. Denier reported that Apex has been notified by DTCC that transaction security requirements for GameStop have been increased to nearly 100%.
Email Caitlin McCabe at [email protected].
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Published on January 29, 2021 in a print publication titled Online Broker Blames Trading Limits on Clearing Firm.
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