Local broker survives billion-dollar stock surge amid GameStop frenzy

Low-cost broker Stake says its platform survived a major test on Monday evening as it dealt with an unprecedented volume of transactions that has seen more than $1 billion worth of US stocks traded on its platform in just over a month.

Stake, which allows local retail investors to buy US stocks, said its platform was “healthy” despite more than 54,000 trades being executed through its platform which suffered service problems last week amid the global trading frenzy around stocks like GameStop. The chaos was triggered by a day trader revolt against major Wall Street short-sellers.

“There was some isolated latency issues to downstream partners feeling some strain from the record-breaking volumes we’re seeing in the markets,” said Stake chief executive Matt Leibowitz of Monday’s trading performance.

GameStop has been at the centre of a trading frenzy as a chatroom-inspired army of retail investors took on hedge funds which were shorting the stock.
GameStop has been at the centre of a trading frenzy as a chatroom-inspired army of retail investors took on hedge funds which were shorting the stock. Credit:Bloomberg

He said Stake worked through the weekend to try and fix performance issues and deal with the incredible surge in trading activity that saw $US813 million ($1 billion) worth of stocks traded through the platform in the first weeks of the new year.


More than 185,000 trades were executed through the platform in the last week alone, according to Stake.

As a platform to buy US stocks, Stake has been caught up in the international sharemarket frenzy surrounding struggling US video game retailer GameStop and other stocks such as AMC.

GameStop shares surged more than 1500 per cent last week as an army of retail day traders on Reddit forum WallStreetBets rushed to buy shares in order to create a “short squeeze” against major US hedge funds that had bet against the struggling company’s share price.

Stake is one of many brokers that have struggled under the unprecedented volume of transactions from customers. Major US brokers such as Charles Schwab, Vanguard Group and Fidelity Investments also reported service disruptions.

The incredible volatility has provided an opportunity for other Australian investors. Forager Funds more than doubled its money on US retailer Bed, Bath & Beyond in just 10 days as hedge funds caught by the GameStop “short squeeze” were forced to close their short positions on the struggling company.

In a blogpost on Tuesday, Forager’s Gareth Brown emphasised that “this is a very, very unusual market and probably won’t last very long”.

He said other Forager positions have also worked out “blisteringly quickly”. “This is a strange market. We feel more comfortable when an investment thesis takes a year or two to play out,” he said.

Not everyone has caught the gravy train.

David Paradice’s funds management firm Paradice Investment Management missed out on a potential $1 billion windfall after selling shares in GameStop just before a day trader revolt led to an incredible surge in the stock.

“It’s been crazy to watch, it’s also been very interesting,” Mr Paradice told The Age and The Sydney Morning Herald. “It really is madness.”

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Source: Thanks smh.com