While trading frenzies are as old as the markets themselves, the novelty of widespread retail trading in obscure US stocks fueled by Reddit chat forums has prompted recent interventions by regulators on both sides of the Atlantic.
Unfortunately the FCA’s terse 29 January statement on “recent share trading issues” gave little insight into how it viewed these events from a regulatory perspective. The FCA said only that buying shares in volatile markets is “risky“, and “unlikely to be covered” by the FSCS.
Several of the major online securities trading platforms responded to the volatility by stopping orders in affected securities. The FCA was supportive, noting that broking firms “are not obliged to offer trading facilities to clients“, and “may withdraw their services, in line with customer terms and conditions if…they consider it necessary or prudent to do so“.