GameStop’s Plunge Triggers Halts as Platforms Restrict Trades

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. So I have to say, Tim, we were taking our weekend show this morning, and you know, it's a crazy week when virus news is overshadowed in our world by the phenomenon that is game stopped, which we are going to continue talking about over the next few hours. It's the story. It is the story. But

let's not forget the other big story is the virus. Yeah, and look, um, it does feel like we are getting to a point where it's the sad reality is that thousands of people dying, our fellows citizens every day is not the headline anymore. No, and Um, and though the numbers are still troubling, even though some of them are coming down, let's talk about it because there's a lot of stuff going on, including we talked about the variant, the South African variant for the virus UH finding cases

in South Carolina. Dan Pulsky is with us. He's professor of health policy and Management at Johns Hopkins Bloomberg School of Public Health. He has studied health economics and health care policy. The Bloomberg School of Public Health, supported by Michael R. Bloomberg, founder a Bloomberg ALP and Blomberg Philanthropies, stands with us on the phone from Philadelphia. Dan, good to have you here with Tim and myself. Um, there

is a fair amount of headlines out and about there. Uh, what do you think is most important for our audience to kind of focus on right now when it comes to COVID and the vaccine rollout. Um. I guess patience that's patients with a C. Yes, exactly. UM. You know, I think there's a lot of optimism that everything's going to get back to normal, but it's going to take

some time. Um. And you know, the vaccines are in shortage, so all of the issues that I think are um out there around you know, the anxiety about getting my dose. When am I going to get it? What's going wrong? Um? You know it comes back to that. They're just it's gonna take a little time to produce vaccines for for everyone around the world. Dan, I I gotta ask. Um. You know Carol mentioned the South African strain being found

in South Carolina today. Uh. We we don't know, based on testing how effective the existing vaccines are against new strains that emerge. UM, but we do know that the drug manufacturers are already altering their formulas in order to address this. Should should people put off getting a vaccine that first shot to try to get one that actually uh protects against new strains? Uh? No, don't put it off. Get your vaccine when it's your turn to get your vaccine,

for sure. UM. But you know in the new variants UM bring up, you know it's something similar to flu and that over the law, we're going to be living with this virus for a long time, UM, for years, UM, and it's gonna keep evolving, just like we need a flu shot every year. UM. I wouldn't be surprised if we end up needing ah, you know, to get the COVID whatever variants of the year into our um shot. Um, just as part of how we conduct our daily lives. You know. I groaned when I heard that, but then

I thought to myself, Hey, that's not so bad. You know, getting the flu shot is not that big of a deal. Yeah, it's not the big of a deal. But also getting flu isn't that big of a deal. I mean, it's it's still you know, a serious can be serious for people, especially if they're vulnerable. UM. You know right now, COVID is certainly much more serious than the flu. So that's I think where the difference is. Getting a flu shot isn't a big deal, but you know, getting getting of

it certainly is worse. And I think that's some of the fear on the new variants is just so much uncertainty and you think, Okay, well we've finally got this tackle, and then these variants come up, and it just brings up the fact that you know, this is something we're gonna have to live with one way or another for quite some time. When you say that we may have to get a vaccine for COVID on a regular basis,

just like we do for a flu vaccine. Will it be a case that it's the same thing that if you don't know, you might get a little sick, or is it a case that if you don't get it, you're gonna get really sick and maybe create some problems in society? Um, you know, I think it's the same messaging as as flu that every person who gets the flu vaccine, you're not only protecting yourself, but you're protecting others, particularly those most vulnerable that actually can't get the flu vaccine.

So that's certainly um going to be the case for for the coronavirus vaccine as well. Um. Uh, but you know, and and then I think on top of that, uh, you know, this is a kind of thing that you know, like up a expert in in like you know, Dr Fraud she can explain better than myself. But um, if if the vaccine doesn't have really great coverage, variants that can spin out when you know a lot there's a lot of people covered, but not enough people covered. Yeah

that the viruses. People are fighting against the virus, and then the virus kind of fights back, and and the one who's fighting back the virus who who's fighting back is a little bit stronger than the one that before. So that's kind of the scientific challenge why it's so important to get vaccinated. Dan, Um night, We we only have about thirty seconds left. But I know you've been looking very closely at the rollout of the vaccine. Um, we've heard a lot about speed bumps in your opinion.

How are we doing so far, because this is a race. Well, we've been doing pretty poorly. Um, but you know we now have you know Biden's goal of a hundred million doses in a hundred days. Um, it's gonna be some a lot more bumps in the road to kind of get to the point where, um, things are rolling at a pace where I feel like that can be achieved. So, UM, I think it's a worthy goal and I'm optimistic. Let's

get back to you. Dr Dan Pulsky, Professor of Health economics and Policy at the Johns Hopkins Bloomberg School of Health. He joins us on the phone from Philadelphia. The Johns Hopkins Bloomberg School of Public Health is supported by Michael R. Bloomberg,

founder of Bloomberg LP and Bloomberg Philanthropies. Dan I wanted to get your thoughts on what we We just heard from Jason Farley at the Bloomberg who's the professor of nursing at talking all about how we need to ramp up production of vaccine to get those shots in arms.

What is the right way to ramp up production and then also ramp up distribution in an administration of vaccine UM, I would say that the challenge of ramping up distribution is you know, were more challenging and that it's so distributed. So to ramp up production, you know, we can rely on industry UM that I think has that capacity. But to ramp up distribution, it's like inventing a new company. UM. You know, it's putting up places to distribute vaccine, that's

training people how to do it. UM. The staffing challenges, the logistical challenges, the information system challenges are you know, there's just no infrastructure in place to really UM, you know, ramp up quickly and reliably. But I think one thing that's so frustrating to people is that it's not like we had no warning, right, Like, this is something that we knew since you know, some people since February, most people since March, that we would need to distribute an

administer vaccine and manufacture tons and tons of vaccines. Well but the manufacturing. And we're not mad at you, We're just trying to understand how did it happen. I mean, I think it was, you know, a leadership, a vacuum in the prior administration. Uh. You know, I was part of this panel talking of you planning for one aspect, which is, you know, how to distribute vaccines equitably when it's in shortage, And we were talking back in the

summer and making really detailed plans for that. But we we we just wanted information about what the administration was doing to plan for this period that we all knew was going to start, you know, six months in the future, right, and we never got any information. We were frustrated, like why why aren't they sharing any information? Only now do we realize there was no information to share. It's like planning for It's like planning for war, right, planning for war.

You know it's coming, we know we have to manufacture a lot of tanks and being really basic here and then okay, we make the tanks, but wow, how do we get it to people in the field who need it? How do we get it to you know, the members of the military. I mean, I feel like that's what we did, and I just into it staggering. And I do know the body administration has been has been rather frank about saying that maybe the situation was a lot worse than we anticipated, and they're getting up to speed.

But I guess I just don't understand why it is a nation all of the companies involved just say okay, let's go on, you know, into overdrive and just let's ramp up manufacturing of the vaccines and do everything and

anything to get them out there. Yeah. Um, well, the the the issue with the manufacturing, it is actually it's quite a miracle, and that a typical way of vaccines developed is the manufacturing doesn't start to laughter, everything has been approved, but this was such an extraordinary circumstance that everything was being done in parallel. Um, so while the drug was being tested, manufacturing was being ramped up. And uh, it's actually been quite a feat compared to the past.

It's a highly regulated industry. It's hard to do these things. A tremendous amount of um collaboration between industry partners, new partnerships being developed and working with government, so you know, while it's certainly not fast enough and there's a lot of challenges to get it at a rate that I think people would feel would be you know, even a

bee will probably not to be here. UM. But you know, I think the larger perspective is that, um, it has been you know, historic feat of development and of manufacturing. It's just the demand is so an extraordinary Dan, we only have about fifteen seconds left. Your best estimation for when everybody who wants a vaccine will be able to get one here in the United States? Um, I would say,

you know, through the year, end of the year. Wow, that's a lot different than what we heard from the President earlier this earlier this week, who said that it will be by this spring. Yeah. Well it's it's yeah, Dan, Thank you so much, UM, and really appreciate it. Dr Dan Pulsky, Professor of Health economics and Policy at Johns Hopkins Bloomberg schoo Public Health, on the phone from Philadelphia and of course the Bloomberg School of Public Health supported

by Michael R. Bloomberg, founder of Bloomberg Elpy and Bloomberg Philanthropies. Listen, I know you and I kind of hammer. He was such a gem. But you know, I think we all kind of want to know, like when when do we start to get back to normal? When will we be vaccinated? I'm so sick of this pandemic. No I'm not the only one, alright, So great story. Pillow King. Mike Glendel, you know him from those late night commercials. You'll also know him because a couple of years ago Bloomberg business

Week did a deep dive into him. He's an ally of former President Donald Trump, and his reporter Josh Dean is back writing about him again. Laugh at dam Shunn his business sue him. That my pelo ceo will not stop trying to prove Donald Trump got cheated. That's the headline, Josh joining us on the phone in New York along with Bloomberg business Week editor Joe Webber on the access line in Brooklyn. Tim and I could not get enough

of this story. Chill uh boy? I I could, um, but that was mainly just because of what it is. But you know, backstory here. Four years ago, Aosh Dean wrote basically the definitive story on Mike Lindell and just the preposterous business success story. Um. That that is my pillow And this is a guy who went from basically being a crack addict UM to an unlikely entrepreneur with

actually like a pretty successful business. UM. And Josh actually did that story four years ago for the magazine and it happened to coincide basically with the first couple of visits that Lindell had with Trump. And obviously, if you know anything about Mike Lindell, the past four years, UM

have become much trumpier UM, let's say. And so when the administration was in its last days, we've kind of reached out to Josh and said, what do you what do you think about getting back in touch with Mike Lendel And so that led to a pretty memorable conversation that Josh had with him and this feature. UM, Josh, what was the what was the opening question? How did the converse stations start with with Mr Lindell? I don't

even know if I needed to ask a question. I think I think I just said hello often running started just going I mean that man is UM. I think I said in the original story, you know, he's been off cocaine and crack now for a long time, but it's like his body is permanently stuck in up in up cocaine mania. Like, I don't think he's used drugs in a long time, but he talks like someone who's who maybe just did it for so long that he

can't he can't control himself anymore. Well so listen, though he's definitely an ally of Donald Trump, we know that, and you laid out really well, why has he continued to be so adamant despite the court cases that have shown that there was no fraud in the election? Why has he and I know this is when he was often running and talking with you, why has he, though

continued to say there was fraud. I mean, he's he's just one of those people who are so convinced of something that no amount of information or evidence would ever change his mind. I mean he would tell you, you know, for hours on end that he's convinced and that he has this you know, quote unquote forensic evidence of machine hacking and all this stuff, and talking about examples like

this man and Italy who allegedly confessed and cord to hack. Well, I mean some of these stories you just have to do a little bit of begging to realize, like it's either been debunked or it's being spun in a slightly um disingenuous way so that the evidence isn't really evidence. But I mean, you know, unless he's completely doing this for show, and I don't think that he is. He truly believes that, you know, he's here to save Donald

Trump's presidency and to save democracy. Well, Josh, I was so surprised to read that he's not concerned at all by this, uh what you call a big danger the dominion voting systems UM having threatened him with a defamation suit. Uh you write that a decision in Dominion's favor could destroy my pillow as a company. Uh, why is he

not concerned about this? This is a big deal. Yeah, I mean, here's probably the most convincing evidence that he truly believes what he's saying, that it's not some kind of act, because yeah, I mean, this is a potentially an existential threat to my pillow, like a decisive judgment, and we're talking like, you know, I think dominions going after these these defense for hundreds of millions of dollars. If they choose to sue him, um, and he loses,

then he could lose the company. But he thinks that he's right, So he believes as he as he tells it, I'm going to go to court and I'll present my evidence and i will prevail. I mean it's from the outside objectively, it seems crazy and self destructive, but he doesn't see it. Tell uh, what do you have to say about how his business has been doing? Because there was this photograph taking taking of him, uh leaving the White House with what appeared to be um some papers

that referenced martial law. Uh, and and I'm curious, like, hey, what do you say about that? And then be how is how his business been doing well? The martial law of thing he said that was we're not his notes. So basically he was going to see Trump to present his you know, quote unquote evidence of of like election fraud. And then a lawyer friend of his, if he wouldn't name, gave him a second set of notes that included um, that martial law reference. So he's like, I don't even

know what marshal is. That wasn't me um. As for the business, he's you know again, he thinks that this is good for his business, and it may be. I mean, in the short term, he says, sales are up, he's hiring more people. He's actually added floor space because you know, I think there's probably everything is political today, right, so people maybe buying pillows as a reaction to what they see as like left wing blowback. Yeah, it's interesting. Really a buddy of Donald Trump's. No, I mean I asked

you talked to the president. He said, no, Like I don't have his faw number. We've only met a handful of times. But I mean he loves he thinks it's Trump is amazing. I mean they've had some meetings. He appeared at that that famous or infamous I guess some coronavirus briefing. He's been on, you know, in in tons of rallies. But he said they're not friends. They've just met a fanful of times. And what about you guys talk about Yeah, go ahead, go ahead, Joel. What else

do you guys talk about? Josh, we talked about the pandemic, the pandemic and um coronavirus. Mike does not believe that it's the threat that we all believe it to be. And he takes a supplement that he also sells that he thinks keeps him safe. He will not be getting the vaccine. Wow, that's shocking to hear. I mean, I

guess there is some vaccine skepticism. Um. What about his political ambitions, Well, for for a lot of the past year, there's been pretty rampant speculation in Minnesota the who runs for governor? And he has not discouraged that. Um, I think the Minnesota Republican Party has has essentially propped him up as a likely candidate. He's now saying he's not

so sure. I mean, this is how far in the rabbit hole he is that he believes, like this fraud was so bad and so um widespread that no election going forward can ever be trusted if there are machines us. I mean, this is basically his position now. So he's like, why would I run for governor? Couple just deal up for me. I just want to know, Jan Krokowski, they're not dating. Can we just set the record straight. Definitely not dating that one. That story? Yeah, well, Josh, real quick,

what are the pillows? Like? Very briefly you got him off. Jane Krokowski, I don't know love these pillows, right, you know, I'm one of those people who I like a memory film pillows. I don't I have to say my husband one night if because we both were not sleeping, we bought some. Uh, I'm not going to say we have a lot of different kinds of pillows on our bed. Josh Dean is a great read. We're going to feature it in the weekend story as well. Uh, and Jill

Webber thank you as well, really appreciate it. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stenovy on Bloomberg Radio. So, yeah, a top story this hour, this day, this week, and I already know that in December when we look back, it's going to be a top story this year. It's game Stop and the like other names that we don't usually talk about, but all of a sudden, they've been really dominating the

trade in terms of big moves. Yeah. Look it's it's not just game Stop, right, it's other stocks as well. And and look we're just learning moments ago the Senate panel, a Senate panel is planning to hold a hearing on the current state of the stock market. And this prompted by the activity that we've seen this week. Totally alright, So let's get into it, and let's get you up to speed on some of the day's headlines because they

are happening as we speak. Let's bring in Bloomberg News cross At reporter Katie greifeld Uh and talk about kind of where we are. We're also going to get to Jennifer Schelp. She's director Financial Regulation Studies over at the Cato Institute, and we'll bring her in just a moment. Katie, though,

set the scene. Um, where are we when it comes to what's going on with game Stop and other stocks that have had some big moves and the playing the trading platforms that they trade on, Well, it's very much a fluid situation. Obviously. The big story today is that you have apps like robin Hood and other brokerages limiting trading on some of those popular names such as game Stop, UM and some of the other we've been calling the

meme stocks that have just taken off this week. And so interestingly, I mean, as you mentioned, game Stop is thinking today, as is a n C Holdings, and you have seen the benchmark indexes bounced back like the SMP for example, it's having a best game game in two months, whereas yesterday it was the worst fault since October. So clearly a total flip in in who's leading and what's leading.

And part of the theory is that all of the hedge funds who are just getting crushed yesterday on their short bets, now that that speculation is curbed, at least temporarily, they're basically regrossing and re leveraging on their position. So, Katie, when you say restricting trades on platforms like robin Hood,

what what exactly do you mean? Does that mean that if somebody holds robin Hood and they want to sell it, they mean, excuse me, holds game Stop and they want to sell it, they can't necessarily do that, that's the question.

So it's it's a bit different across apps. So robin Hood, for example, I mean, there are restrictions placed on shares and options, and the fact that options trading is restricted is a really interesting nuance here because that's theorized the fact that you fall just such rampant call buying in some of these names. People were saying that's fueling this

bullish feedback loop. So obviously, with these restrictions and the fact that you can't trade options, it's clearly having an impact on the stocks, whether because you know the fact that people aren't really able to trade the retail traders at least hedge funds can still trade those names. Or I mean perhaps it's just a turn and sentiment that you know, this idea that there could be further regulation coming. Yeah, we're certainly looking into all of that. Katie, Thank you

so much. Our own Katie Greifeld, cross ass at reporter at Bloomberg News. Let's get to our next guest. We want to bring in, Jennifer Schulp. She is Director of Financial Regulation Studies at the Cato Institute's Center for Monetary and Financial Alternatives. She focuses on the regulation of securities and capital market. She's also a former director UH in the Department of Enforcement at FINRAD. She joins us on the phone in Washington, d C. Jennifer, forgive me if

I shaalp it is right, okay, so right, okay. I want to make sure UM really appreciate you being here, as you know, our top story here. What do you make of what we're seeing in terms of the trades. Initially that all of a sudden got a lot of these trading platforms attention for them to all of a

sudden start restricting them. Well, I think it's a powerful message about the power of retail trading that Heretofore Wall Street has been able to generally ignore the retail trader, and we're we're really seeing that that's no longer the case. And with the rise of low cost trading apps and this kind of increased activity on the chat boards, we're really seeing actions here that they are going to make Wall Street stand up and take notice about retail trading. UM,

maybe not call them dumb money anymore. Um, that might be a harder habit to break than just this one time. Well, I'm wondering what it means for potential regulation. I mean, we're hearing lawmakers way in a Senate panel is going to hold a hearing on the current state of the stock market. This reached the White House briefing room yesterday.

Two of the three people yesterday the first three people to ask questions to fed chair your own pole at the press conference, ask questions about games game stop specifically, UM, what is potential regulation that you know that that we could see out as a result of this. I think there's going to be a difficult road to walk and trying to find any sort of regulatry path here UM, and I think that Congress is going to find that

as they start digging in. This is obviously an unusual situation. UM. Although rallies and bubbles are not UM, nor is short selling. This is just a different twist with different players taking different positions than where they've been before. UM. We might see some additional regulation in looking at how short selling

operates UM, just the mechanics. UM so that some of these feedback feedback loops that we're seeing here, UM, that might be a place to take a look to see if there's a better way to do things to prevent the feedback. Do you think Robin Hood's wrong? Interacting brokers is wrong? Do you think they should not have restricted trading? I think that's a tough question. UM. I think as a matter of principle, UM, the traders should be able

to trade. But there's also UM risks to the brokerage houses at issue here as well, UM clearing risks that I'm not sure that Robin Hood or some of these other brokerage houses would be able to continue to operate through the clearing firms and through the clearing process given how fast the stock was rising. So I think it's a you know a matter of principle, yes, um, individual

traders should be allowed to keep trading. So it sounds like a technological limitation more logistical, right, and logistical and just capital um in order for the firms to be able to put up money um to clear through the settlement process. I just don't know that there's not capital limitations on what robin Hood can do to support this trading at this point. Do you think they think that's something we're going to find out if we move through

these lawsuits. Yeah, listen, we're gonna we're gonna come back and talk some mohorrew but we've got about forty seconds here. Do you think this could potentially be the end of robin Hood though? Uh, I don't think so, But I think they could have done some reputational damage that they're going to have to come back from. All right, listen, sit tighten, Jen, We're gonna do a little bit of

news and then we'll come back with Jennifer Schalp. She's Director of Financial Regulation Studies over at the Cato Institute, and she's a former director at FINRA, specifically at their Department of Enforcement. I mean a lot of questions coming out and you want markets to move and operate smoothly efficiency. It's why we had trading stops put in right after some of the big stops we saw from from the eighties.

We did different measures after the financial crisis. Um, but you have to make sure it's still free markets and you know, free for everybody. Yeah, you do, and especially with with a platform like robin Hood. I think a fascinating story following this will be what is the reputational damage if any, to robin Hood and to what extent can it hold on to its customers. So earlier this week, NASAC CEO Dina Freedman participated in the Bloomberg the Year head Virtual event UH and she was asked about the

trading that we've seen this week. She talked about specifically how the NASDAC handles potential market disruptions from social media. Check it out. We basically have some tools that track changes in chatter on social media. We think that there's something unusual or you know, even worse nefarious going on, we can halt the stock and then we will contact the company make sure there's no news all right, And

that was again nasac CEO at Dina Freeman. So what they do when there's you know, social media chatter, which we know Tim has been a big part of the run ups that we've seen in game Stop. There have been conversations going on for weeks. Yeah, yeah, they have. I mean it makes sense given that this is you know it. I guess what. What's what's kind of surprising about this whole story, Carol, is this stuff was happening

back in the nineteen nineties on message boards, right. The differences I think the apps and the commission free trading and that that you're allowed to do now. But I mean people have been been talking talking their book for since books existed, exactly. It happens all the time. So let's get back to Jennifer Schullp. She's Director of Financial Regulation Studies over at the Cato Institute's Center for Monetary and Financial Alternatives. She's also former director in the Department

Enforcement at FINNERA. Still with us on the phone from Washington, d C. What do you make of what you just heard from nastac CEO aDNA Freedman about how they deal with talk about social media and Tim's right, I mean, go back to you know, the dot com bubble. I mean, people were talking about things. UM, what's different, what's new? What do we need to do? You know, I agree

with him, this is this is not new, so to speak. UM. And I don't fault Nasdack at all for keeping an eye on social media, particularly where there might be misinformation or in fighter information that's been leaked. That's that's great things for the UM, for the exchanges to be keeping an eye on to see if there is a need to pause trading. UM. Where I where I walk away a little bit. Is nazdac statement yesterday that they would

have stopped trading here for extended period of time? UM, kind of at least implicitly supporting some of the thirty day type of suspensions of trading that it's Secretary of State of Massachusetts Bill Galvin was supporting. UM. I think that gets in the way of actual markets from san and this type of discussions trading talking your book, this is normal, even if the outcome here might not look look normal at the moment. Well, that's what that was exactly.

My next question to you, Jennifer, I mean, our our markets functioning normally here? Is this what's supposed to be happening. I think the answer is yes. UM. I think that there's concerned because there's a bubble um. But but bubbles are part of our markets, have been a part of markets since their inception. Um. We don't need to talk about tulips to know that, right. Um. And the overall market, if you look at it, I mean today it's you know,

it's not like it's bringing down the overall market. And I do wonder if if we are ignoring that, and we shouldn't be that the fact that the market rose today when it was pulling down a little bit as a sign that that's something. Well, I'm saying that something isn't that you're seeing, you know, a pretty signific get correction in game stopped today, and yet the rest of

the market is doing okay, it's actually valid. I don't think there's any indication here that we have sort of a contagious event um and that there's any sort of larger market instability problem. I think we're functioning correctly. It's just kind of crazy. So how does the story end? I mean, is this something that we're going to continue to see because Wall Street bets on Reddit is a thing and there's so much interest around it, or are is this going to be a flash in the pan.

That's an interesting question, and I think some of that's going to play out in how badly some of these individual investors get hurt when the stock comes down UM, and I think the stock is going to come down. I don't think that's a controversial position, and I think that UM individuals are going to lose money here UM is not a controversial position to the extent that people really get burned. I think we might see less excitement

for jumping into another bubble in the future UM. But at the same time, I think people are having fun here UM, either fun just for fun's sake or fun to stick it to Wall Street. And I wouldn't be surprised if we see more of this, at least in

the short term. It's interesting because I do feel like that there's a lot of big trading houses and firms and investment firms who often talk about, you know, what we need to, you know, figure out ways for alternative investments for it to be much more accessible to kind of the little guy and retail investors. So there is that argument in one hand. But as soon as kind of retail investors figure out how to I guess game the market Um, but it doesn't look like they're breaking

the law. You know, everybody kind of gets upset, and I would point out that hypocrisy. Um, I'm I'm pretty solidly in favor of giving retail investors the opportunity both in the alternative investments front and here. Um, we need to make sure people are educated and understand the risks of the markets that they're playing in, and those risks are real, but giving them the opportunity to try, I

think we should be permitting that on all fronts. Yeah, I gotta say, Um, I'm just looking at the amount of the questions and things that are coming in on my Twitter feed because this is really resonating with a lot of people. Tim, Yeah, it is. And and and look, I think there's a big part of this story is about the little guy versus you know, the big guys and them like sticking it to the man and sticking

it to those hedge funds. Well, somebody tweets me, you know, so should we have a lot of bands people from going to Vegas so we can protect them from losing money? Like it's just there's I know you're looking at No. I mean, I don't know the answer this is like uncharted territory in some ways. Yeah, exactly. Um, Jennifer, thank you so much. Really really enjoyed that. Jennifer shelp. She's director of Financial Regulations. Studies are at the Cato Institute

Center for Monetary and Financial Alternatives. She as a director at the Deportment director former director in the Department of Enforcement at Finneret. Listen, there's gonna be lots of conversations about this to come, so stay tuned. Everybody. Buckle in because there's a lot more to come. You're listening to Bloomberg Business Week and this is Bloomberg Radio. So we want to get to the big story of the day and really the week, and it's already going to be,

as we said earlier, a story of the year. Let's get right to Interactors Brokers chairman and founder Thomas Peturfhee. He is on the phone in Connecticut. Interactive Brokers among the platforms that did start restricting trading of stocks that have run up rapidly, including game Stop. They did that earlier today. Thomas, good to have you here with Tim and myself. First of all, why did you stop the trades? What was the nail and the coffin that made you

ultimately decide to do it. And I'm curious if you were getting calls from either clients, investors, or even your board that you had to do something. Uh So, first of all, I'm in Sunny Bomb Beach Okay, sorry, which I was told Connecticut. I wish I was there too. Thank you for inviting me onto the show. Yes are The answer is yes? So this stuff today games the game game gm E, it was at one point as low as two as one and twelve dollars and one point as high as for under an eighty three dollars.

Currently it is reading at two londerd and thread four dollars um. So why did we resort to these measures. We did because we are extremely concerned about the continuing viability of intermediaries, the clearinghouses and the brokers. Now why is that Because every option contract there is a buyer and sellers to a number of For each number, each each option contract that that exists in the world, there

is a loser and a winner. The broker stands between the broker and the clearinghouse spends between the winners and the losers. The broker has to collect from the losers, give it to the clearing cause. The clearing cause gives it to the winners broker and gives it to broke winners broker gives it to the winning The problem arises when the loser loses more money than is in his or accounts. Right now, there are currently um three billion

options contracts are standing on game. The average option contract I, since the stuff has moved around so much, I estimate the average option contract is worth about ten thousand dollars. So un some three million contracts, half of them are worthless half of the worth on the average of ten thousand dollars. That's uh, that's fifteen billion dollars of the winners and losers, right. So now the brokers have to

collect from the losers and pay to the winners. If they can't, they have to put up their own money, right right. So uh, Luckily enough, we have a very large uh capital base of nine billion dollars and they have automated liquidation systems. But many of other brokers do not have them. But but can I, if Thomas, if I can break in, and we should put out that Interactor Brokers is a sponsor Bloomberg Radio and Bloomberg TV. So it's not the case that traders were doing anything

wrong or illegal. It's just a case of logistically there were going to be problems right in terms of clearing houses. So that's more an operational problem versus a market problem or traders doing something wrong. Correct. No, no, no, not correct.

So so short squeezes are illegal. Na, when when you buy a stock for three hundred dollars that months ago was the failing company right there, you know, basically a second and store for for video games, right, Uh so it wasn't really worth and it's much money and it's not reading that two hundred and thirty dollars, right, So your only motivation to buy that stuff with you know full well eventually we'll go down to seventeen dollars is dead.

I'm sorry, there is. I don't know what that's okay, We're all getting a lot of Skype calls at home when working from home these days, right, So we go ahead, go ahead, I want you to finish that time, if I may, if I may continue, please, So your only motivation to buy this start or two hundred and thirty dollars could be to join the short screech, because why would this stuck go up. Why is the first two hundred and thirty dollars, It's first hundred dollars right right?

Are you are you guys closing out account? Are you closing closing out positions? We learned just minutes ago that robin Hood has told users that it may close some at risk positions previous legislation they introduced in Thomas, I don't think. I don't know if you can hear us. Yeah, yeah, I can hear you now. I just didn't hear you before that at least positions. What did you mean? Yeah? Are you are you closing out any accounts? We did know that robin Hood says that it told users that

it may close some at risk positions. We have we have closed thousands of positions. We have we have twenties as of yesterday morning, we have twenty seven thousand customers who are involved in in GM stock, either via the stock or via options them. Of course many many of them, especially since we have tend to have professional customers that tended to be at the short side. So yes, we close out many of those positions. And was a lot of the the positions that you closed out of me?

I'm curious about in terms of your business. How much is retail investors individual investors versus bigger institutional clients. So well, it's hard to spell our Our average client account is uh, just under three d dollars, so they are not your regular Moments clients. But of course many of them are solder are many of them are much bigger, but it's just the average. Ye have one point one eight million customers.

So yeah, hey, you know, Thomas, you know it's hard, and I think we're trying to get our head about I have lots of conversations with you know, big name shops too, and and investors who say, you know, we're increasingly trying to open up alternative investments to individual investors, give them access to the types of investments that the

bigger institutional clients typically have. And yet I feel like when a smaller retail investor to some extent acts like one of the big guys, all of a sudden, their hands gets slapped. I So I don't think that's true. So short squeezes are not legal. Maybe many of the long heres do not know that they are participating in a short squreet, but uh that that that's the only issue I see that they inadvertently doing something that they

shouldn't be doing. But it's it's really stupid to look at the stock and buy the three hundred dollars and you know that it's a it's a little business, right, it's a it's a corner store. Thomas. We only have fifteen seconds for this. But are you worried that there's going to be a pr impact from this and retailer traders will go to other trading platforms. I don't think so, because our professional customer understands that we have to protect

the marketplace for their's sake and their money. We have to protect. Do you think regulators just quickly twenty seconds? I have to get involved from Congress and others. I think unless regulators come out and say that training should be in these stocks for liquidation only, and this is going to continue indefinitely and that's not good. Thomas. I know it's been a busy day, uh, And we really

appreciate you finding some time for us. Interactor Broker's chairman and founder Thomas Petter feed joining us on the phone. Interactor Broker's a sponsor of Bloomberg Radio and Bloomberg TV. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News