During the recent months, there has been unprecedented market activity and volatility worldwide, including microcap penny stocks. These stocks are especially risky due to the lack of liquidity, public information, and extreme volatility. Many microcap companies are new and don’t have any proven track record. That said, the recent trading frenzy has triggered concerns and investigations from regulators and liquidity providers.
When there’s a sudden influx of orders for certain microcap security, it triggers an investigation for market manipulation and could lead to a potential suspension of the stock. Even when there’s no evidence for misconduct, brokers have to take care that the traded volumes are not disproportionate to the normal activity.
Based on the above, we have to temporarily suspend the purchasing of penny stocks that are highly illiquid and have a market cap in the tens of millions. If we don’t do so, we risk being suspended by both the relevant exchanges and market makers.
The above is beyond our control, and we have to comply with the regulations.
The huge inflow of new retail investors is an unprecedented phenomenon for the financial markets. Brokers, market makers, regulators, and even exchanges are still trying to navigate this new environment. We will continue pushing forward to provide as much trading freedom as is possible within the regulatory framework.
A notice indicating that the purchasing is suspended will be placed on each of the affected stocks.
UPDATE (As of 20.08.2021):
We’ve reactivated purchasing of the following securities although with limited quantities, initially at least.
- Frontier Lithium - 100 shares
- Heritage Southeast BankCorp - 12 shares
- NanoXplore - 30 shares
- Texas Mineral Resources - 160 shares
- Perpetual Federal Savings Bank - 2 shares
- Sysorex - 115 shares
The number of shares indicates the maximum position size one can accumulate. If you have a position equal to or larger than the limit, your position will not be closed or reduced, you just will not be able to purchase any additional shares. We’re in the process of reactivating buying additional securities that have a market cap of above $50 mln.
Additionally, the buying limits currently in place will not be constant, they’ll likely increase over time although slightly.