I love to dump on Boomers. It’s all love, really. But I will 100% give the Boomers the W when it comes to brokers. Meme stocks, the bread and butter of Zoomer investors, should only be traded on real brokerages like Fidelity, not the plastic brokers like Robinhood.
Recap: in case you missed all the drama (and at time of writing it’s still ongoing), GameStop’s stock ($GME) had an absolute tear in January. From a low of $3.77 less than a year prior to a high of $483.00, this stock has had a wild run.
Why did GameStop get so high? That’s probably 10 blog posts to itself—really. Long story short, GameStop stock was shorted 140% and retail investors figured if they bought a ton of shares, then shorts would have to buy back eventually to cover their position. Additionally, if they bought all at once and drove the price high very quickly, it would trigger a cycle of margin calls sending the stock into the stratosphere. It looked like an asymmetric upside opportunity.
What stopped it? At risk of a libel lawsuit: Robinhood. The millennial-focused stock broker turned off the ability to buy the stock. Really. At that moment, the bull run turned around. Despite some volatility, the stock dropped after this.
Why did Robinhood do this? According to their CEO Vlad Tenev, it’s because they couldn’t make liquidity requirements. Testimony by the institution that oversees brokerages in these areas (the DTCC) conflicts with this story.
Is Robinhood corrupt?
I don’t want to get sued, but yes.
At the end of the day, it’s not 100% clear what happened. But the outcome is the same: get your money out of Robinhood. Whether through malice or incompetence, they were unable to support trading of a very bullish stock. Not only GameStop, but other meme stocks and securities like Dogecoin (lol) and AMC and BB were allegedly affected. Do not keep your investments there.
They also changed their rules on options trading in the middle of the day for me and sold my call contracts when I didn’t want to, causing me to miss out on 10s of thousands of dollars in gains. So yeah, I’ve got a bone to pick.
Robinhood isn’t the Only Enemy of Meme Stocks
Other brokerages prevented buying of GameStop. The common theme between them is the use of Apex Clearing, a company that actually finds the shares and clears the trades bought through Robinhood and other brokerage firms (like Webull).
No fault to the brokerages that wanted to trade and were just prevented, but retailers still can’t trust them. Perhaps it’s not malice, but it’s still incompetence.
Brokers to Flee, Brokers to Trust
Sourced and stolen from a reddit thread. List compiled by u/CriticDanger.
Restricted purchasing of certain tickets and lied/gloated about it
- Robinhood – Now Blocking 50 Equities – CEO lying saying they have no liquidity issues, 1 day before getting a 1 billion bailout – Join the lawsuit against them if you were affected
- Interactive Brokers (US/CAN) – Display visible contempt for Retail traders, wants GME to go to 17 before re-enabling trading – Blocked Trading212, as their acting intermediary
- E-Toro – Proof – Forced stop-losses
Restricted purchasing of certain tickers
- E-Trade – Proof
- Ally – Proof
- Public.com – Proof
- Merrill Edge – Proof
- IG Broker – Proof
- Trade Republic – Proof
- Webull – Admitted they were forced to by clearing firm – Clearing firm is Apex – They’ll be moved to neutral once they publicly confirm Apex was sole reason the trades were restricted.
- Stake – Proof
- Trading212 – Proof – re-enabled, caused by intermediary – Intermediary is IB – Restricted purchasing of other securities previous – Based on them restricting securities before this, and countless complaints regarding other restrictions, I’ve put them back in the bad list.
Restricted trading, publicly naming their intermediary
- Freetrade – Proof, blames Barclays – CMO Interview – CMO Tweets
- M1 Finance – Proof – Blames Apex Clearing
- Tastyworks – Proof, blame Apex Clearing
- Stash – Proof, blamex Apex Clearing
- TD Ameritrade/Canada – Proof – Proof2 – (Margin requirements increased, Covered call and short put orders may only be placed with a broker and support times are > 2h, other trades restricted) – Neutral because they didn’t restrict the purchase of stocks with cash.
- Revolut – Proof – Blames DriveWealth LCC
Good Brokers: Meme Stocks’ Best Friend
Did not restrict trading
- Most Canadian Brokers (Questrade, Qtrade, Disnat, BMO, HSBC, RBC, TD, etc.)
- Most European Brokers (Swissquote, TradeStation, Degiro)
- WealthSimple (CAN, US)
- Schwab (Margin requirements increased)
- You Invest (JP Morgan/Chase)
- Wells Fargo – allowed trades but banned its advisors from talking about GameStop
The only edit I made to the above list is highlighting Fidelity. Why do I trust them?
The biggest reason is they are privately owned (you can’t trade their stock), they are extremely cash-heavy so they won’t have cash reason to restrict trading, and they also clear their own trades so they’re not relying on Apex or other sketchy clearing corporations.
They’re one of the oldest names in the broker-dealer game. At any moment, the market could become incredibly unstable. If you plan to trade meme stocks like GameStop or AMC during a period of extreme volatility, good for you. Use a broker that itself will remain stable through the crisis.
Better to ride out a hurricane in a cruise ship than a sailboat.
I am not sponsored for any recommendations on this post.