Whilst it is well known that the global markets are volatile and unpredictable, the clamour surrounding GameStop regarding the amateur day-traders and professional investors is noticeably louder and has reached the ears of the regulators and the new President's economic team led by Treasury Secretary Janet Yellen who is said to be monitoring the situation. There have also been calls for the regulators NYSE to step in to calm the situation.
The issue hinges on shorting or short selling, the type of trading both the amateur day-traders and professional investors have been applying to GameStop and the fact that the amateur investors were blocked from trading by the portals and platforms they were trading through, leaving the field open to the professionals alone to make money.
Amateur investors have every right to believe that illegal market manipulation may have scuppered their trading opportunities.
Joanna Bailey, an associate in the finance and banking litigation team says “the platforms that the amateur investors were trading through, such as Trading 212, appear to have breached their agreements by blocking accounts and preventing trading.” Joanna further commented, “I am aware of a considerable number of individuals who have been blocked by Trading 212 and now face heavy losses.”
All market trading comes with the caveat that investments can go down as well as up but it is a reasonable expectation that the opportunities to trade are even.
Shorting is a fast-paced risky type of trading where shares are borrowed from the owner then sold by the borrower when the price is high and subsequently bought back when the price drops then returned to the original owner, the borrower keeps the profit made between selling and buying back the shares. The trade is time-constrained as the borrowed shares must be returned within a designated time frame. In the case of GameStop the platforms appear to be creating an advantage for the professional investors by preventing the day-traders from trading. This amounts to manipulation of the markets.
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