Retail brokerages restricted trading recently in GameStop and other stocks caused big losses for hedge funds.
Free-stock trading pioneer Robinhood and Interactive Brokers said that in some cases, investors would be able to sell only their positions and not open new ones. Both brokerages raised margin requirements on certain securities.
Robinhood said its decision to restrict trading, which angered many users was necessary in order to comply with capital requirements mandated by the SEC for broker dealers.
This has led to a lawsuit being filed in New York claiming that Robinhood rigged the market against its customers. It is alleged that Robinhood’s actions were “done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers”.
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