Alternatives To Robinhood After They Stopped GameStop Trading

Last week the financial market was stunned to find out that Robinhood, a U.S. based brokerage house popular among millennials and retail traders, halted trading on GameStop (GME) shares. Furious users turned their back and boycotted Robinhood by shutting off their accounts and leaving the broker.

GameStop held the headlines as retail traders in the subreddit group WallStreetBets took the other side of the short-selling in GameStop stock. A massive short squeeze started, sending the shares of GME above $400. However, due to liquidity constraints, the broker, Robinhood, was forced to halt trading because it needed to place collateral with the clearinghouses. Trades typically clear in T+2, and the two days may mean Robinhood is going out of business. As such, the decision to halt trading was a no brainer.

This was not the first time Robinhood got into trouble, back in December of last year, the company had to settle the charges brought by the U.S. regulator, the Securities and Exchange Commission (SEC), regarding misstatements on how it routes its customers’ order. Robinhood paid $65 million to settle those, and now it tapped credit lines to survive.

Where to Still Trade GME?

As Robinhood halted trading on $GME shares, it helped ease the pressure on the short-selling hedge funds. Moreover, the broker allowed traders to close their longs, but not allowed them to open new longs. In other words, it allowed only the selling, not the buying. As such, the retail traders viewed it as the broker siding with the hedge funds (i.e., the enemy), and left in search for other brokerage houses.

Robinhood was founded on the desire to “democratize finance for all”. It grew with the retail sector in the United States and became one of the first names to offer fractional shares trading. One of their best-offering was to give traders access to cheap derivative solutions, albeit leveraged ones. This is exactly what hunted the firm down to the point of halting trading in the $GME last week.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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