June 22, 2021

Money App Users Blocked From Buying AMC, Nokia Stocks

2 min read

Cash App launched a declaration earlier today stating that Axos, the app’s cleaning broker, is now subject to a 250% boost in capital requirements, momentarily obstructing the app from satisfying AMC and Nokia (NOK) purchases.

Money App Blames Clearinghouse for Trading Halt

Money App mentioned that Axos, its cleaning broker, now requires to offer 250% more capital than before to continue its services. Neither Axos nor Cash App was able to secure a line of credit to satisfy the new requirement, and Cash App was required to stop its users from purchasing AMC or NOK.

Nevertheless, users can still sell their stocks.

Clearing brokers require to offer capital deposits for apps like Cash App to support trading. The DTC, a world-leading clearinghouse, recently raised the capital requirement on Axos, and Axos has actually restricted Cash App’s trading appropriately. A

declaration from the app checked out that “& ldquo; We are totally based on our brokers’ ability to support our trades,” & rdquo; including that & ldquo; Axos has not supplied the needed extra capital and has actually limited purchases of AMC and Nokia.”

& rdquo; Cash App posted the email from its broker-dealer, DriveWealth, which signaled them about the change.

Cash App Statement
Source: Cash App The declaration went on to say there was no clear path to a service at “this time, including that & ldquo; we are keeping an eye on the situation carefully and are working to make these stocks available for purchase once again as quickly as possible.”

& rdquo; Market Wide Bans Affect Retail Traders

The buy trade stop comes simply days after the Robinhood trading app suspended GameStop (GME) trading following a price pump led by retail traders that resulted in $5 billion worth of liquidations for hedge funds like Melvin Capital.

Retail traders on Reddit’s WallStreetBets neighborhood openly posted their own trading activity, suggesting that they were purchasing up GME due to the Melvin Capital hedge fund’s overexposed short position. Nokia and AMC were 2 stocks being targeted by the community for purchase.

Robinhood supposedly offered users’ stock without consent and halted purchasing, leading to a public outcry as Wall Street traders continued unhindered. The GME rate pump was among the very first instances of retail traders going toe-to-toe with Wall Street and triumphing.

Robinhood blamed the incident on clearinghouse capital requirements and has considering that raised $2.4 billion to cover its own clearinghouse collateral.

Significantly, Robinhood is partnered with Citadel, a Wall Street hedge fund and a significant financier in Melvin Capital. Robinhood personnel claim they were not pushed into halting trading by Citadel.

Disclosure: The author held Bitcoin at the time of composing.