What is the alternative to TD Ameritrade
Robinhood prohibits gamestop purchases, but there are (still) alternatives
The excitement surrounding trading in Gamestop stocks continues. The latest development in the stock market drama: The trading app Robinhood now prohibits users from buying the stock. Other trading apps have already followed suit. But buyers have already found alternatives.
Robinhood had had enough. On Thursday, the trading app added new user restrictions. The company announced this in an online statement.
Specifically, the restrictions affect the purchase of shares that are hyped in the popular Reddit thread r / wallstreetbets. These include Gamestop ($ GME), AMC ($ AMC), Blackberry ($ BB), Bed Bath & Beyond ($ BBBY), and Nokia ($ NOK).
Investors and Robinhood users are still allowed to close their existing positions. But buying new shares is no longer possible for the time being.
Robinhood justifies the measure with the current "volatility" of the market.
Reddit group wanted to show Wall Street the middle finger ...
This refers to the current stock market hype that has sparked a group of Reddit users. In the online forum, users call for shares in companies such as Gamestop or Blackberry to be bought.
With this, the users want to show the middle finger to the traditional hedge funds on Wall Street, which had bet on the short sale of the shares of these companies.
Instead of falling prices for companies like Gamestop, which investors were betting on, the Reddit campaign has now exploded them, and massively.
Robinhood played a crucial role in this for Reddit users. Because the popular stock exchange app allows non-professional traders to buy stocks free of charge. This has allowed the Reddit group to drive prices so high. At times the price of the Gamestop share rose by 4,500 percent.
One can certainly argue about how legitimate the actions of Reddit users may be.
But Robinhood apparently had enough and wanted to stop the artificial price increase with the buy stop.
... now Wall Street raises its fist
This is a particularly blatant measure when you consider that more than half of Robinhood users hold at least some Gamestop stocks.
Robinhood is not alone in this. Interactive Brokers and Webull, as well as more traditional trading firms such as Charles Schwab and TD Ameritrade, have also restricted trading in the affected stocks, although some of them have suspended it.
In fact, trade stops are not uncommon when market volatility is feared and you want to prevent complete market chaos. However, these stops usually only last a few minutes.
In the current case, it was more like hours and some trading apps and companies have not yet stated any time limits for the trading stops. Robinhood is one of them.
Robinhood competitors are happy about an increase in users
So it's not surprising that Reddit users feel betrayed, especially by their trading app of choice, Robinhood. A user writes on Twitter that Robinhood's private shareholders will be restricted, while large hedge funds and international traders can continue to trade freely.
Users feel that Robinhood's ban is unfair. (Photo: Screenshot / Twitter)
Politicians have also intervened. MP Rashida Tlaib said:
That is more than absurd. The Democratic Finance Committee should hold a hearing on Robinhood's market manipulation. They are blocking the ability to trade to protect Wall Street's hedge funds that are stealing millions of dollars from their users to protect people who have been using the exchange like a casino for decades.
In the meantime, frustrated investors are looking for alternative trading apps.
Webull, for example, benefited from a user switch from Robinhood when Webull lifted its own trading ban.
The public trading app can also look forward to an increase in users. Public had also lifted its own purchase stop relatively quickly and thus benefited from the ongoing Robinhood ban.
Perhaps it also helped that famous YouTube personality Casey Neistat recommended Public as a Robinhood alternative to his followers on Twitter. Neistat later made it clear that no one should follow his financial advice and that he was one of Publics' investors.
However, moving from one trading app to another also costs investors valuable time. Because the apps have to check and approve the registrations for new users. This can take a few days. It is possible to move a portfolio from Robinhood to Webull or Public, which is a bit faster.
But that too could cost private shareholders valuable time.
In Germany, on the other hand, many of these apps are not even available to users. But here too, providers such as Trade Republic or E Toro blocked the purchase of the affected shares, but only for a short time.
The drama continues
How the situation around the shares of Gamestop and Co. will develop is completely unclear.
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But one thing can already be said: now that private investors, large investors, technology companies, retail chains and politicians are involved in the action, the drama is only just beginning.
Update from February 1, 2021: As expected, the excitement about Gamestop, Robinhood and Reddit users is still great. Reddit had meanwhile deleted the “WallStreetBets” subforum. On the other hand, those affected have filed a class action lawsuit against Robinhood.
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