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Robinhood blocks GameStop stock purchases; AOC floats committee hearing

Robinhood blocks GameStop stock purchases; AOC floats committee hearing

Robinhood has stopped users from buying several stocks - including GameStop - at the centre of the Reddit-led price rally.

In a blog, Robinhood says it is "restricting transactions for certain securities to position closing only". Others, including TD Ameritrade, have also put restrictions in place.

Among the affected stocks are GameStop, BlackBerry and Nokia, which have been targeted in an assault over the last few days by day traders who use the WallStreetBets subreddit.

The move has prompted pushback from politicians, including Democratic congresswoman Alexandria Ocasio-Cortez who tweeted:

The idea secured backing from other high-profile Tweeters, including Elon Musk and Republican Senator Ted Cruz, although the latter's support was firmly rejected by Ocasio-Cortez.

GameStop, a loss-making video games retailer, has seen its share price rise by more than 700% since last week as Reddit users made their push, inflicting billions of dollars of damage on hedge funds that were shorting the stock.

By Monday, one hedge fund - Melvin Capital - needed a $2.75 billion cash injection because of the squeeze.

The day traders have since targeted a host of other stocks, pushing up their prices, with the hugely popular trading app Robinhood used for much of the action.

With newly-appointed Treasury Secretary Janet Yellen “monitoring the situation” Robinhood took action on Thursday to stop users buying the affected stocks. The decision affects the more than half of all Robinhood users that own some GameStop stock.

The firm has been forced to draw down $1 billion from its credit lines to ensure it has enough cash to clear trades.

The suspension of trading in targetted stocks has sparked fury on social media, and a class action lawsuit, with users accusing Robinhood, Wall Street and regulators of protecting the big hedge funds against individual traders.

Rapper JaRule is among the those calling on Robinhood users not to sell:

Update: Robinhood on Friday lifted its restrictions, allowing for “limited buys” of stocks such as American Airlines, AMC, and GameStop, whose stock rose by 99% to $389 a share in pre-market trading.

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