The Real Reason Robinhood Froze GME Buying – And Why It Matters

Retail investors, Redditors, hedge funds, trading platforms, and financial media are "over" the epic GameStop Corp(Nasdaq: GME) "Super Squeeze" that saw shares rise several thousand percent in days.

Now that GME is down 36% for the day, trading for $59 a share, and sinking like a stone, it's all very "last week."

Congress and regulators, who always seem to be late to the party, are making more noise than ever, though, and that means it's not quite over. No one seems to know what really happened.

And that means we've still got some things to talk about, because Robinhood's move and what could be coming in the aftermath have big implications for retail investors.

Here's why…

The Spoiler Few Saw Coming

One of the biggest, most contentious questions at issue is why Robinhood and other mobile investing and trading apps basically stopped their users, particularly the Redditors from WallStreetBets, from buying GME; they allowed only sale orders to go through.

Just when the "Super Squeeze" was reaching a crescendo, right when the Redditors had Wall Street on the ropes, and at the point of maximum pain, with blood in the water – at the exact wrong time, the platforms threw cold water on the small day traders.

Every tweet, soundbite, and quote from everyone who wasn't a hedge fund trader conveyed anger with Robinhood, to put it mildly – saying things like "un-American," "unfair," "fake news," and a whole bunch of other words I shouldn't print here.

That's because, while retail buying was halted, big institutions could buy and sell whatever they wanted. People felt Robinhood had put their thumb on the scale and thrown the game for Wall Street. There were credible reports that Robinhood was automatically unwinding users' GME positions against their will.

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Disclaimer: Any performance results described herein are not based on actual trading of securities but are instead based on a hypothetical trading account which entered and exited the suggested ...

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William K. 3 weeks ago Member's comment

Really, the fix for the problem is quite clear: Make the deals CASH! No credit that can be walked away from, but cask in some form or the other, so that the DTCC will always be sure of getting the cash owed by buyers into the hands of the sellers. No instant credit, and no escaping by declaring bankruptcy. Make the purchases a cash-onoly deal, and do it for ALL buyers, not just those day traders. That could put some serious dampers on a lot of the nastier speculation, which wil benefit A whole lot of people.

Frank Underwood 3 weeks ago Member's comment

This has hedge fund ass kicking revolution all over it. David and Goliath. Put a giant down with a small stone in the middle of the forehead. It’s coming

William K. 3 weeks ago Member's comment

When you read some of the more in-depth analysis you discover that at least one other hedge group made a huge profit. Perhaps the method was a bit questionable but at least mostly legal, sort of. So in summary it was not quite like it looked like. "David and Goliath" were the distraction from the big action..