I’m writing to provide further information on the update we sent out yesterday about leverage being unavailable for GameStop (GME) trading - GME has experienced extreme volatility since the start of the year and even over just the last five days. Since the start of the year GME was up yesterday at one point over 2,600% and over just the last five days it was up over 1,000%. CNET has a good article explaining the cause of the volatility - the summary is a battle developed between regular people like you on social media and big multi-billion dollar hedge funds that created a short squeeze sending the GME price and volatility skyrocketing. The volatility makes investing in GME extremely risky and some hedge funds (primarily Melvin Capital) were massively short GME, lost billions of dollars, and could face bankruptcy. The massive GME risk caused various entities in the US stock market to limit the risk through actions such as increasing collateral requirements and even freezing GME buys - an action that has amazingly garnered bipartisan criticism in the US where the two major political parties can’t agree on much.
This brings us to yesterday’s notice about GME leverage being unavailable - we did not make this decision, had no prior notice, and unfortunately currently have practically no ability to change the decision. In the US the brokerage industry is hierarchical with clearing brokers at the top and introducing brokers at the bottom.
We are currently an introducing broker which means our risk is limited and correspondingly we don’t have much say in policies (this is also why our leverage feature is delayed) but know that we are on a mission to democratize investment opportunities worldwide and that includes modernizing the marketplace. Part of the problem is trades take two days to settle because of very antiquated technology and during the settlement period the broker must post any money due from their own funds - not client funds.
Two goals we have as we continue to grow are to 1) move up the brokerage hierarchy so we can set policies ourselves and take on greater risk in support of our mission and 2) modernize the marketplace by tokenizing stocks and putting them on the Stellar blockchain which has practically instant settlement (no more T+2 delays!). Both of these goals are big projects and will take significant time and resources to implement but we are working on them!
Thank you for all your support and understanding as we work to create a unified, fast, and efficient global investment marketplace accessible to all! If you are a software engineer interested in helping us fulfill our mission please send your resume to email@example.com. We are looking for senior React Native and Node.js engineers based anywhere - we are a decentralized team recruiting the best talent in the world!
Remember you can also help us grow and earn stock rewards by referring friends (see https://www.passfolio.us/referral for details) or making your first deposit be at least $1,000.
Founder & CEO
Passfolio is a San Francisco fintech company democratizing investment opportunities by creating a unified, global, and borderless investment market starting with the United States Stock Market.