Robinhood has taken the unprecedented step of direct intervention in a number of popular stocks ahead of a crucial Friday.
“We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities,” Robinhood said.
Interactive Brokers (IB) had a more lenient approach, stating today:
“As of midday yesterday, (1/27/2021) Interactive Brokers has put AMC, BB, EXPR, GME, and KOSS option trading into liquidation only due to the extraordinary volatility in the markets. In addition, long stock positions will require 100% margin and short stock positions will require 300% margin until further notice. 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.”
GME’s stock crashed from some $500 in after hours trading to $260 before seemingly somewhat recovering as pictured above.
All this is renewing attention on centralized power and its abuse with popular stocks seeing numerous trading halts and now are deplatformed.
On decentralized finance (defi), no one can halt bitcoin or ethereum trading and platforms like Uniswap or Balancer are a dapp where anyone can list anything without requiring any permission from anyone.
A lot of retail traders therefore may be looking at this space more and more, with Synthetix for example offering stock derivatives.
The centralized platform FTX tokenizes actual stocks, including GME, but doing this in a decentralized way is difficult if at all possible as some entity would have to hold the actual stock.
Unless the company tokenizes the stock itself, something that they may really consider because afterall it is GameStop itself, which employee 40,000 Americans, that is being attacked here by allegedly naked short selling.
Naked short selling is where the bank lends the same stock to two or more people, in effect creating stocks out of thin air just as they do with fiat.
This is illegal since 2008, and there is no concrete evidence they have engaged in naked short selling, but some estimate as much as 250% of GME’s stocks are short, that is 2.5x more than exist.
Many companies therefore may well take the initiative to tokenize so as to gain access to the free defi space where centralized manipulation is impossible.
For now, some are reporting these centralized platforms cancelled their order so they most probably will see lawsuits because they are effectively changing the rules of the game mid-way in picking winners and losers out of a trade just ahead of a most crucial day.