The impact of the massive buying spree in GameStop shares and other companies has affected the user signups in online broker-deal TradeZero America.
The company’s founder Dan Pipitone stated that new account applications rose by 200% compared to the number of applications received by this time last year. The company said the reason behind the surge is most probably the high interest of retail investors on some stocks. There has been a trade war between Wall Street institutional investors and small investors. As a result, the retail investors have taken things into their hands to cause a massive demand on some selected stocks.
In a related development, Shares of videogame retailer GameStop rose significantly on Friday as activists small investors dominate market proceedings after gaining access to share trading platform Robinhood.
The platform initially placed buying limits on stocks such as Blackberry, cinema chain AMC, and GameStop on Thursday, but was forced to cancel those limits after retail traders threatened with a lawsuit.
Before the traders resumed on their buying spree, the broker injected $1 billion cash into the platform to cover the massive cash defection from retail payouts.
When Robinhood permitted what it called “limited buys,” Gameshop’s shares rose by 67%. Its current notional value is now $22 billion, which is 80 times more than its value in January last 2021.
The rate of applications for new TradeZero accounts started increasing as the price of GameStop increased, surging to unprecedented levels on Friday.
SEC monitoring the market
Trading 212 also witnessed a similar issue yesterday, before temporarily stopped receiving applications for new users.
The massive trading demand by retail traders is causing operational difficulties for many trading platforms. Some of them took some measures to correct the issue, but the retail investors are not forcing them to rescind their decision.
With the current trading war going on between retail traders and the Wall Street hedge funds, the U.S. Securities and Exchange Commission has come out to warn both parties about their activities. The SEC said it is monitoring the market to make sure no trader violates the established market conduct.
Similarly, the UK Financial Conduct Authority (FCA) has issued warnings to British retail traders looking to join the trade war. The British regulator advised that investing massively without due consideration could be counterproductive, as it could result to complete loss of funds.
Although Robinhood does not operate in the U.S., some other firms like Trading212 offer similar services, and the FCA has warned users not to copy U.S-based investors.