Hi BC readers,
Hope you're having a good time. Let us share a personal story in this post. You know the drill already with GME, r/WSB and so on. Here, we'll share how we at BrokerChooser noticed that something historical was happening.
Looked like any other day
A week ago on Thursday, we had our regular meeting in the evening. We were discussing the ridiculous market movements that were taking shape that day. As we reside in Europe, for us the US market is open from late afternoon until deep into the evening. We were checking what was going on with GME and all other stocks on the markets. And we were also looking around to check those brokers that allowed trading them.
The meeting above took place on the 21st of January. Today is the 28th. Imagine our faces now.
But let's stop for a moment. What's the market buzz all about? Basically, retail clients realized that something was wrong with the most shorted stock on US markets, GameStop, as it was 140% shorted. Just think about that for a second - more stocks were shorted than what is actually out there. So someone decided to go long on these shares to create a so-called short (and gamma) squeeze. If you are in a short position, you borrow shares from the broker to quickly sell them, hoping to re-purchase them at a lower price before you hand them back and pocket the difference. But if the price is not moving in your favor, you eventually have to close your position by buying the shares back, therefore contributing to the price increase yourself. This building up of the share price is a strange, exciting phenomenon. What's more exciting is that hundreds of thousands - if not millions - joined the bandwagon.
If you'd like to read more details about what a short sale or a short squeeze is, read our article about the topic here.
Early on during the week that started Monday, 25th of January, we were mostly just sharing memes with one another in our free time about the whole thing. Talking about where this story was heading. But on Wednesday, we started to notice a few things that signaled that something was not right.
1. Brokers shutting down
Some of us realized that our test accounts at various brokers did not work at all, or not the way they were supposed to. In most cases, we were simply locked out of our platforms. Twitter and Reddit were abuzz with similar stories.
2. Growing number of customers on BrokerChooser sites
All of a sudden, we started to reach never-before-seen numbers of customers on our pages. Record after record. We thought our eyes were twitching and compared the overall figure with our previous record. It was way bigger, and there were still a few more hours left from the day.
3. More people visiting
As we were browsing Google Analytics, we saw an unprecedented amount of people reading BrokerChooser at the same moment. Like, three times as many as what we were used to. Basically, Analytics became our "Downdetector" for the moment: we were able to track broker outages by spotting a massive spike in interest in our broker reviews and "alternatives" articles for services that went down. (At one point, Analytics fooled us and multiplied visitor data to levels that were completely insane for a brief moment. It turned out to be a bug, but we nonetheless enjoyed it while it lasted.) So we just kept up with the frenzy as best as we could in our homes, staying on-call with one another. We were shaken. We decided to name Wednesday “Crazy Wednesday”. And so far, Thursday is way crazier than it ever has been.
So what's up with broker services now?
So to recap, basically, a Redditor had an idea to squeeze shorts on certain assets, and plenty of others joined in. And I mean, plenty as in massive amounts of people. Brokers couldn’t keep up with the massive surge of incoming clients, a surge that is far bigger than what we saw in Spring 2020. It’s something historic.
The story still goes on, but many brokers don't seem to be ON at all. First, Trading212 felt like having a Bad Gateway error for four hours straight. Others, like TD Ameritrade or Charles Schwab, simply couldn’t deal with the influx of new orders, and froze, lagged, or even shut down in severe cases. An unprecedented amount of people were trying to get into trading, but the industry’s answer is yet to come as they tackle technical and other, unknown errors. People want to trade, but they can’t. This leads to situations where platforms are unavailable or not responding quickly enough.
We wanted to share a few insights with you on what to watch out for if you're looking for a broker right now. Not all, but most of the popular services are experiencing difficulties. These tips are from the top of our minds as we are still researching what's happening within the industry.
Things to watch out for when choosing a service
If you’re thinking about starting your investment journey during these tumultuous days, here are a few things to watch out for or be careful about:
- The account opening process can take a bit longer due to the massive inflow of new customers. There have been brokers, like Trading212, that stopped opening new accounts altogether.
- Outages can occur on the trading platforms, while order executions can lag or not be completed at all. Be careful - you may not be able to close any of your ongoing positions, no matter when they were opened.
- There are also some brokers where trading specific stocks is restricted at the moment.
You can find our broker reviews here, where we highlighted information on any issues we may have encountered with that specific broker. Also, if you experience any issues, we'd really appreciate it if you left a comment under the reviews or emailed us directly at [email protected].
All the best,