By Daniel Lanyon on Wednesday 3 February 2021
The Wall Street Bets saga has shown the power of social media's effect on financial markets but increasing volumes of trading by investors is also showing second-order issues for a number of fintechs.
Drivewealth, a US broker-dealer powering Revolut and Freetrade’s access to US stocks, shuttered trading on a number of high profile stocks such as GameStop, AMC and Nokia yesterday. The firm allowed selling of stocks but not buying.
Normal services, for both companies, have now been resumed AltFi understands, but the interruption to those wishing to buy the stocks in yesterday’s market demonstrates the increasing pressure placed on firms to meet customers’ demands following last week’s Reddit-induced rally and subsequent volatility.
DriveWealth’s outage relates to high margin requirements, according to blog post from Freetrade, via the Depository Trust Company in New York, the clearing house for US shares, requiring a rise in capital requirements by more than 250 per cent for broker-dealers on Monday.
Adam Dodds, CEO of Freetrade, warned via a message to users today that while trading was now resuming “there is a high possibility of further market-level disruptions, including circuit breakers and rejected orders resulting from the extraordinary volatility that we have seen in recent weeks”.
It powers a number of consumer-facing fintechs,m via its suite of APIs, offering share trading including Stake in Australia and the Nigerian platform Chaka.