>> i'm caroline hyde. romain: let's get you caught up on where u.s. market stand right now. the daytrading frenzy getting oxygen to the market. joe: the question is "what'd you miss?" caroline: we are still transfixed because of the debate

around investing circles, and how your personal phenomenon. seeking action to try to limit what the call the risk tied to world news. share prices fell and it's caused a complete outpouring. the brokerages -- you can't argue that it did have an effect on the trading of gamestop as it -- and retail as well. joe: it seems possible, there was the flywheel of more and more people getting into it and buying the stock. an incredible onrush. finally breaking today with some of the curbs that we saw in a lot of the trades. on the other hand, when you have insane moves like we've had over the last couple of weeks, it's

not impossible to imagine that some of the moves are going to happen at some point. fontaine: and we may have some of the same moves the opposite way. gamestop of 35% and a lot of it is based on the idea that limited buying of certain security starts tomorrow. we also saw other trading platforms, charles schwab and td ameritrade as well as interactive brokers. but the same robinhood things where it appears some restrictions to some degree will be lifted. we'll see how the retail core reacts to this in the morning. joe: for more were joined by our guest who covers a lot of these market structure issues. what happened today? we saw this incredible run-up. what do we know right now about

what caused robinhood and introducing more curbs on the trading of selected earnings? >> as a run-up started and got hotter and hotter, we saw td ameritrade yesterday put some restrictions in place. then there was a flood of similar actions today including by robinhood and interactive brokers, e*trade. robinhood put out a statement this afternoon saying it would cause other -- we've just seen such crates activity that they had to act. caroline: we had someone from interactive brokers on the show earlier and he was trying to say was about the integrity of the market in some way. and he wanted to protect the market. he sort of insinuated that some of the activity was illegal.

the key question is who are going to have the big losses? can you talk to us about the real food trade that happens -- food chain, who's going to be holding the losses at the end of the day? annie: that's right, any person sitting at home with a robinhood trading app, sees their order cell and that's kind of it. but what we see on a crazy day like today is that there is all this sheen re-underlying the market and all of these nuanced ways that trades are getting done. they are all intermediaries involved. they don't include the market makers are taking the orders to and selling them. there's also risk-management players in the market, the clearinghouses, for example. so on a day like today it

highlights all of that underlying machinery that it's easy to foboutn you're just sitting at home trading on an app. fontaine: i'm curious, you talk about the machinery which we are led to believe is generally sound and generally there to prevent the types of systemic breakdown particular that we saw that during the last financial crisis. there seems to be a lot of speculation here that women talk about the clearing of these trades and settlement of these traits, that there were some significant cash concerns and might've been the reason why we saw some of these platforms try to curb some of the activity. annie: that's right, and that's why will be interesting to watch what does come out in the coming days. when the person from interactive rocher said he's worried about the integrity of the marketplace, those are some pretty strong words at your hearing from the chairman of one of the biggest brokerage houses.

so it has already risen above the level of just the everyday stock trading discourse. now we even see politicians starting to weigh in. aoc kind of had a statement on how robinhood's should not be able to curb stock trading for customers. so you've seen that it is already risen to such a heated level that politicians are wading into the fray as well. joe: one other thing we saw is people talking about -- not just the market structure issues. other brokerages do we think are benefiting from this? annie: some brokerages actually went out and advertise for a while, come to our trading firm, we are still allowing -- as the day wore on, more and more brokers restricted trading so will have to see what happens in the next couple of days.

gamestop was down today so we will have to see what happens is the markets continue to fluctuate. caroline: a totally fascinating story, one that keeps us riveted. we thank you so much for all the inside track on the brokerages. coming up, we continue the discussion with howard who will be joining us. this is bloomberg. ♪

fontaine: today we are focusing on the madness of the crowd. the retail traders basically

taken the world by storm. joe: another extraordinary day, a surge in the morning, crash, surge, crash, halt, curbs. a pretty wild day. just massive volume across activity. year to date is incredible, so much higher than 2020. the people of trading stocks, there is no denying it. joining us is the cofounder of stock twist. howard, gamestop, 13.5 billion dollar company now, is it the public's right that politicians should get involved at the right to buy gamestop at a $13.5 billion valuation? howard: we've known each other a long time. it's a little over my pay grade,

so it's a slippery slope. i'm glad i don't have to make that big decision but i've seen this building and i have been writing about it for years. you have this massive unbundling for a decade, people were told to put their money in index. with that came problems that lead to really bad behavior at the corporate level and the banks like wells fargo. next day or next month the money that's world puts her money in their 401(k) and it finally gets allocated to indexes, that is pretty bad behavior on the corporate side. on this side, it's hard for me to say if people should be allowed to do something really dumb. the stock is trading, i feel like i don't know all the mechanics behind it, but it is

not seeming like a great decision leading up to letting people on these things and then pulling the rug. caroline: it's sort of fascinating, people weighing in on if you should reverse it. everyone is sort of frustrated by it and they're all talking about this on your platform. if the shoe was on the other foot and it was the hedge funds and the institutional investors that were raking in money and retail investors were losing it, with the same thing be happening, do you think? everyone has a cynical idea that people are stopping the transaction because wall street is booming. howard: i don't know. it's a really good question. the most important thing i saw today was, the internet is very lathered. the markets have behaved very

well considering how angry the mobs were. if you look at the number one app at the app store, it's robinhood. i can't tell who won or lost. i definitely lost. people yelled at me all day. and people were yelling on the internet all day. we saw this building. the massive volume on the amc and gamestop streams. amc had -- it's not a bot. it's just a fact. tesla last year and its major run in december was getting 30,000 messages a day. that is almost a trillion dollar company. so people have lost their mind over this. it's in the consciousness and because it is so easy to buy a share or half a share or trade

at one lot around the world, people played. my daughter was calling me who has a robinhood account. what should they do? my advice to them was to not get involved in these silly parts of the market. you need to educate people. they are going to do what they are going to do. but whoever was listening to me the last few days, all i can say is, i'm not going to do that. if i'm going to do it, it's going to be with 10 share so i can learn, or 10,000 shares, so -- depending on your position. fontaine: there's obviously a lot of people who just sort of jumped on the train at the end with no real research at all. there's an argument to be made with what we saw come up out of these reddit boards was some degree of research, some degree of assessment of risk and some degree of assessment of value. whether we agree with that or not is neither here nor there.

that was really the catalyst for a lot of the move higher. why should that in and of itself get clamped down just simply because a bunch of people came in at the end and decided to ride the wave? howard: i woke up this morning and got yelled at. generally only my family yells at me. today the consumer was yelling at me. so in trying to decipher the noise, i would suggest that bad decisions are made early in the morning. that again, that is over my pay grade. all people can do is understand what you own. understand what you are doing. of course there was great research, but supposedly an incredible hedge fund manager rode it from 4 to 10. even he got it that this was

insane. again, pick your poison. i'm sure great research was done. there is a lot of sloppy behavior. and when is your money, people can walk into a walmart store and buy bullets. i get it, i want this country to have -- let people have choices and do things. i get that part. this is upsetting to someone like me. it's ok if people yell all day as long as they follow certain rules. joe: with this attention that you think about open platforms, it's fantastic for education and learning. i learned so much from the people on twitter who post about the markets throughout my career. indispensable. but on the other hand, we see it outside of markets as well. there aren't manias in group behavior and misinformation and people might call them mobs, figurative and literal, that get whipped up by social media. as a platform, how do you think about the pluses and minuses of

that? howard: great question. because we've been doing this for a long time. this is all i think about is what is the responsibility? i don't think these hedge fund managers at citadel or even robinhood, see this traffic daily. but hedge funds have never seen anything like this. they have not seen or understood 21 million people knew in the united states opening brokerage accounts focused on one little ticker. there are 400 million more millennials in china coming on board. the stock market is a complex thing. so many new players have decided to do one thing at the same time and push the same button. i guess we are lucky it was gamestop on many levels. and it wasn't just sell the s&p. that is kind of what i'm trying to worry about with my money and people that follow me. i'm trying to decipher what that means because this is not going

away. what robinhood did right or wrong, i can't argue with. i feel terrible for people because i've been on the others of bad trades. and i know how badly that feels. so when people are yelling at me, i understand why. what at the same time, the bigger issue is, this is a game. there's so many more people playing in these flash mobs are here to stay. fontaine: howard, we will have to leave it there. we did get some breaking news from bloomberg reporters, reporting that robinhood is said to have drawn on credit lines from banks amid all the turmoil there including j.p. morgan chase and goldman sachs. we did reach out to robinhood for comment but have not heard back. we should point out again, this is bloomberg reporting based on a person familiar, people familiar with the situation.

what we don't have all the details here. we talked earlier about while we saw these trading curves put in by the brokerage platforms. there's a lot of questions here about what this was to protect the actual trader, the people making the traits, or whether there was something else that needed protecting. caroline: and the brokerages themselves, because his credit lines are at least several hundred million dollars. we've got to start questioning who were the clearinghouses behind this? this is what interactive brokerage was saying, a lot of people are standing to lose an awful lot of money. joe: i think we will learn more in the days ahead about the mechanics of this, what the exposure is.

this is bloomberg.

fontaine: it's going to be a while before we learn everything that went down with regard to the trading in all the stocks over the last few days. robinhood temporarily shut down access to some of those trades. now learning based on bloomberg reporting that robinhood has drawn down some of its credit lines with banks according to people familiar with the matter. we have reached out to robinhood for comment and have yet to hear back. again, the reporting right now saying they have tapped at least several hundred million dollars, according to people familiar with the situation. joe: bob, thanks for joining us. what do we know about what it was about the trading over the last several days that put such a strain on robinhood? >> for robinhood in familiar, the other retail comedies make their money in a lot of

different ways. for robinhood, a lot of the money comes from the order front. beyond that, customer service needs, margins, there's a lot of things in this while market that they need money for. what do we know about their existing financial position? they have revolving credit lines and they have drawn on their credit lines. we don't know all the reasons why, but they know they have significant financing needs at moments like this. caroline: and unlike the likes of interactive brokers or e*trade, we interviewed the interactive brokers chairmen and he said any things, but one of the things he felt a set some brokerages like his would be like -- be left caring for the baby here. >> it's really hard to insinuate right now because counterparty risk and making sure everyone is stepping up, these are the

utmost concerns to all the brokerages, let alone robinhood. fontaine: we heard in the earlier statement that starting tomorrow they will allow some of those restrictions to be lifted. i made a point of making it clear that they were not being forced to do that by the market makers and this was a decision i made on their own. we heard a similar comment earlier from interactive brokers that this was something they did on their own. have we heard from the counterparties here as to what they have had to say about this? sonali: actually, we did hear of citadel, the hedge fund who said they did not have much to do with this. that they are not responsible for any retail brokerage decision about the trading. citadel securities which is the biggest market maker in u.s. equity markets and also works closely with robinhood are many

filings, said citadel securities has not instructed or otherwise caused any brokerage firm to stop, suspend, or limit trading. these were unilateral decisions made by the retail brokerages. it's not that the sec told robinhood to stop trading. they were worried about the clients and their money and whatnot. joe: we hear this ferocious stock market rally that has never really taken a breather since last spring. sometimes you get hiccups eventually. on your bingo card, did you have the volatility coming because the stock went up too much? sonali: what is funny about this, yes. four days here, the ceos were not looking back just at 2000 and 1999. they were saying this reminds them of every history book they've ever read. there have been gamestop's in the past before.

so the question is, was robinhood's executives ready for a moment like this? caroline: i'm not sure i had it on my bingo card that we would start to see a twitter fight break out between the founder of one of the biggest hedge funds versus portnoy of barstool. from your perspective, what are the losses here? everyone seems to be trying to feel the shoe should be on the other foot and we would have seen a closure of these sorts of trading opportunities. sonali: that was not on my bingo card. the other interesting thing for me is there is a major hedge fund here that has recently invested a lot of money and robinhood itself. it's one of the hedge funds that have gotten burned by a lot of moves. beyond that, the hedge funds

i've talked to today are happy. caroline: thank you so much. we could talk about this forever and we probably will again tomorrow. that's it for "what'd you miss?" fontaine: daybreak australia is up next if you are in asia. have a great day here and around the world. this is bloomberg.

emily: i'm emily chang in san francisco and this is "bloomberg technology." what goes up did indeed come down. stocks boosted by day traders idly tumbling, wiping out a sizable chunk of the gamestop rally and more. i'll speak to the reddit co-founder about the power of the people but also the