IG Group Holdings PLC blocks trading of small-cap shares amid GameStop Corp

IG Group Holdings PLC (LON:IGG) has restricted its clients from trading over 1,000 smallcap stocks as the fallout of the retail trading frenzy sparked by GameStop Corp (NYSE:GME) last month reached trading platforms in the UK.

The UK broker has reportedly withdrawn trading on around 8% of the equities covered on its platform, including shares in clothing retailer Superdry PLC (LON:SDRY), insurer Hiscox Ltd (LON:HSX) and shopping centre owner Hammerson PLC (LON:HMSO).

READ: IG restricts trading of GameStop and AMC shares

According to the FT, IG has said customers must supply enough capital to cover any positions they have on the affected stocks by the end of the week, and to close their positions by the end of March.

Clients can still buy stock in the affected companies, however, they will not be able to make leverage trades with them, such as spread bets or margin trading, which require traders to borrow money from the broker.

IG’s move follows actions taken by US peer Robinhood and other trading apps during GameStop’s trading frenzy last month to block users from buying new shares in the video game retailer and fellow buying target AMC Entertainment Holdings Inc (NYSE:AMC) as the surge in buying activity strained its balance sheet.

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The move sparked a furious backlash from several politicians and the wider retail trading community, with some accusing Robinhood of caving to pressure from hedge funds with short bets against GameStop to prevent buying of the shares to avoid further losses on their positions.

IG was one broker to block AMC and GameStop share trading during the frenzy, however the latest move may mark a shift in approach by retail trading apps to shift the risk burden of volatile stocks to customers rather than their own bank balances.

Shares in IG were down 0.6% at 765.5p in lunchtime trading on Tuesday.