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In retrospect, stock memes were inevitable. Unfortunately, it seems a lot of brokerages weren’t ready.
Vanguard, Charles Schwab and Fidelity Investments, among others, have experienced blackouts, The Wall Street Journal reports. None of the brokerage firms would tell the WSJ specifically why the outages were occurring. In addition, Charles Schwab and TD Ameritrade restrict trading around GameStop and AMC as individual investors crowd into these companies MarketWatch reports.
See, GameStop action increased 1600% in january alone, MarketWatch points out. What happened is a bit complex, but it basically boils down to traders coming together on Reddit, Discord and elsewhere to encourage others to buy call options on the stock. The Internet exuberance on GameStop has also affected AMC, Bed Bath and Beyond, BlackBerry, Tootsie Roll and other companies. Trade action has made some of the richest people in the world even richer. It also caught the attention of Janet Yellen, the US Secretary of the Treasury.
Over the past decade, most of us have seen the power that social media can wield over politics, for example, and the media. Now, social networks are disrupting finance. The pandemic has more people day trading – 2020 was an all-time high for individual trading volume, said Devin Ryan, analyst at JMP Securities. The Wall Street Journal. And collectives of retail traders can use platforms like Discord, Twitch, and Reddit to coordinate their actions in real time.
Until recently, it was hard to imagine making a swap would be as easy as posting on Instagram, but here we are. Plus, trading is cheaper than ever – free at many brokerages – further reducing the confidence an investor might need in a stock to buy options on it. Currently, Robinhood, a brokerage that allows free trading in stocks and options, is the most popular free app in Apple’s App Store.
The result of this frenzy is what appears to be a huge casino, but investors beware: in a casino, the house always wins.
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