UK Broker Trading 212 Suspends Trading in Penny Stocks

Trading 212 has suspended trading in microcap penny stocks, which attracted the attention of both regulators and amateur investors over the past two months amid social media interest.

The FCA-regulated broker said it temporarily halts purchasing of penny stocks that are highly illiquid and have a market cap in the tens of millions. “If we don’t do so, we risk being suspended by both the relevant exchanges and market makers," Trading 212 said in statements published on its website.

These tiny-cap stocks, commonly referred to as penny stocks, have for decades been a tool for fraudulent schemes, including the pump-and-dump where manipulators hype a stock before exiting positions.

Volatile trading in so-called 'meme stocks' has been drawing scrutiny from policymakers in the US and elsewhere, which promoted many brokers to stick to the safe side and halt related products.

The soaring retail investor interest driven by conversations on Reddit and Twitter was most notably seen in a surge and subsequent plunge in share prices of GameStop, AMC Entertainment, Blackberry, among others.

Trading 212 Stops Accepting New Clients

“The huge inflow of new retail investors is an unprecedented phenomenon for the financial markets. Brokers, market makers, regulators and even exchanges are still trying to navigate this new environment. We will continue pushing forward to provide as much trading freedom as is possible within the regulatory framework. A notice indicating that purchasing is suspended will be placed on each of the affected stocks,” Trading 212 further explains.

The UK broker was among trading platforms that took matters into their own hands recently amid unprecedented Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term in certain stocks. The company was getting tougher to restrict the trading of several highly shorted stocks following a trading frenzy led by small investors. This was extended to reduce the Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term ratio available to silver traders as the grey metal became the latest flashpoint in the Reddit mania.

Furthermore, Trading 212 halted new account creation and said onboarding more clients would be enabled only after processing the existing applications currently in line. The London-based fintech was one of several platforms, including Robinhood and IG Group, that experienced outages as the number of retail trades soared in many wild days for the markets.