Wrapup 1: Traders return to GameStop plays as brokerages ease restrictions

N Citron

29/01/2021 10:03

* GameStop gains return, up 100% in initial trades
    * Stocks at heart of hedge fund squeeze had fallen on
Thursday
    * Robinhood, other brokers to ease restrictions on Friday

    By Sagarika Jaisinghani and Medha Singh
    Jan 29 (Reuters) - Wall Street braced on Friday for the
return of an army of amateur investors to trading in GameStop
and other hot stocks whose surges this week and subsequent
suspension have pitched the little guy against short-selling
hedge funds.
    Shares in GameStop  GME.N , AMC Entertainment  AMC.N  and
BlackBerry  BB.N  plunged more than 40% on Thursday after
several online platforms imposed buying halts, but rebounded in
late trading as Robinhood and Interactive Brokers said they
planned to ease the restrictions on Friday.  urn:newsml:reuters.com:*:nL1N2K401H
    The showdown between individual investors and professional
short-sellers has roiled global equity markets as funds were
forced to sell some of their best-performing stocks, including
Apple Inc  AAPL.O , to cover billions of dollars of losses.
    Wall Street futures  EScv1   NQcv1  and European stock
markets  .STOXX  fell 1% on Friday, while Asian equities headed
for their steepest weekly loss in months as the GameStop effect
added to growing doubts about the future of a decade-long rally.
 MKTS/GLOB 
    Shares in GameStop surged as much as 100% before the formal
open of premarket trading in New York.
     "My expectation is that this will blow over and then the
Robinhood crowd will look for a different target, but typically
these things come in waves," said Andrea Cicione, head of
strategy at TS Lombard in London.
    Investors, celebrities and policymakers denounced Thursday's
restrictions, with two customers suing Robinhood over the
trading ban and Capital Hill committees signalling they would
hold hearings on the affair.
    On Reddit forum WallStreetBets, which with almost 6 million
members is seen as having fuelled the rallies, GameStop and AMC
remained overwhelmingly favored stocks.  urn:newsml:reuters.com:*:nL1N2K32LY
     J.P. Morgan has named 45 stocks that may be susceptible to
"fragility events" in days to come, including real estate
company Macerich Co  MAC.N , restaurant chain Cheesecake Factory
Inc  CAKE.O  and clothing subscription service Stitch Fix Inc
 SFIX.O .
    Like GameStop, AMC and American Airlines Group Inc  AAL.O ,
all have high "short" interest ratios, making them subject to a
squeeze on funds that have bet on the shares falling.
 urn:newsml:reuters.com:*:nL1N2K325I
    "Unfortunately, it's definitely not a one-off thing," said
Randy Frederick, vice president of trading and derivatives at
the Schwab Center for Financial Research. 
    "The type of activity that drove that (move) higher, I
believe, has caused people to try to duplicate that in other
names."
    
    STEAL FROM THE RICH?
    Online broker Robinhood has been one of the hottest venues
in the retail-trading frenzy but its sudden curbs on buying set
off a raft of online protests as the firm tapped credit lines to
ensure it could continue trading.
    A report in the New York Times overnight said the brokerage
was raising an infusion of more than $1 billion from its
existing investors, having been strained by the high volumes and
volatility of trading this week.  urn:newsml:reuters.com:*:nL4N2K35IY
    Robinhood did not immediately respond to a request for
comment, but said in a blog post earlier that volatility
affected its obligations to hold capital and clearinghouse
deposits, adding there was no liquidity crisis.
    Regarded by market professionals as "dumb money", the pack
of retail traders - some of them former bankers working for
themselves - has become an increasingly powerful force of the
financial world, sparking calls for greater scrutiny into
trading on easy access online apps fueled by anonymous
discussions on social media.
    After Thursday's moves, those who are involved in the trades
now face the dilemma of closing out positions in the red with
losses, selling to cash in winnings or pushing on to force more
short-sellers to capitulate.
    "Now we're really figuring out what can happen when
something doesn't go their way," said JJ Buckner, a 29-year old
Robinhood trader whose YouTube live-stream got over 250,000 hits
earlier this week.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EXPLAINER-Why regulators may scrutinize GameStop's Reddit-driven
retail stock surge     urn:newsml:reuters.com:*:nL4N2K246P
TIMELINE-GameStop's 1,600% surge in retail investor vs hedge
fund battle     urn:newsml:reuters.com:*:nL8N2K2494
BREAKINGVIEWS-Short squeezers could end up strangling themselves
    urn:newsml:reuters.com:*:nL8N2K22TV
The big short: GameStop effect puts global bets worth billions
at risk     urn:newsml:reuters.com:*:nL1N2K217R
GameStop surge leaves U.S.-based mutual funds and ETFs behind   
 urn:newsml:reuters.com:*:nL1N2K230Y
Europe's top shorted stocks soar on GameStop contagion   
 urn:newsml:reuters.com:*:nL8N2K22G4
U.S. state regulator says GameStop trading could be
'systemically wrong' - Barron's     urn:newsml:reuters.com:*:nL4N2K20QJ
Bearish GameStop options contracts fly off the shelf after stock
surge     urn:newsml:reuters.com:*:nL1N2K22YX
Hedge fund Melvin Capital has closed GameStop position
-spokesman     urn:newsml:reuters.com:*:nFWN2K20LX
BlackRock may have raked in $2.4 bln on GameStop's retail-driven
stock frenzy     urn:newsml:reuters.com:*:nL4N2K23QG
QUOTES-No let up in short squeeze, retail frenzy forces funds to
cover     urn:newsml:reuters.com:*:nL1N2K21PS
GRAPHIC: GameStock surge timeline    https://tmsnrt.rs/2KSQYX3
GRAPHIC: The short squeeze    https://tmsnrt.rs/3t1OlU8
EXPLAINER-How retail traders squeezed Wall Street for bets
against GameStop     urn:newsml:reuters.com:*:nL1N2K221Y
Retail trading frenzy, reflation trade drive smallcap stocks
higher    https://tmsnrt.rs/2Ylef7l
GRAPHIC-U.S. most shorted index soars as wider market cools    https://tmsnrt.rs/36mHWcx
GRAPHIC-Hedge funds scrambling to exit shorts, cut losses    https://tmsnrt.rs/2M3Ke9D
GRAPHIC-GameStop 'long the shorts' trade goes mainstream    
 urn:newsml:reuters.com:*:nL8N2K33OF
FACTBOX-A peek into stocks swept up in GameStop retail trading
frenzy     urn:newsml:reuters.com:*:nL4N2K33W6
TAKE A LOOK-From Reddit rally to trade curbs: The retail trading
frenzy     urn:newsml:reuters.com:*:nL4N2K365N
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Sagarika Jaisinghani and Medha Singh in
Bengaluru; Additional reporting by Munsif Vengattil and Juby
Babu in Bengaluru, Anna Irrera, Saqib Iqbal Ahmed and April
Joyner in New York and Thyagaraju Adinarayan in London; Writing
by Patrick Graham; Editing by Saumyadeb Chakrabarty)
 ((Sagarika.Jaisinghani@thomsonreuters.com; within U.S. +1 646
223 8780; outside U.S. +91 80 6182 2256;))