Investing.com -- The U.S. stock market was set for another showdown between retail traders and hedge funds on Friday, as an army of small-scale investors prepared to resume the squeeze on short positions held by Wall Street professionals.
The tug-of-war has generated extreme high trading volumes all week, culminating in the decision of various online brokerages to restrict trading in a handful of particularly hot stocks - notably video games and hardware retailer GameStop (NYSE:GME) and movie theater operator AMC Entertainment (NYSE:AMC) - on Thursday.
The restrictions triggered intense anger among retail traders, many of whom interpreted them as evidence of a system rigged against them by high finance. The brokerages responded mainly by citing margin and capital requirements from their clearing houses. Many of this week's movements have been amplified by the use of options and other forms of leverage; the high volatility has triggered big and frequent adjustments to margin requirements from clearing houses.
The brokerage attracting the most censure was Robinhood, whose commission-free trading platform has become synonymous with the retail day-trader community. It was accused of putting the interests of its hedge fund backer and trading partner Citadel ahead of those of its customers. Citadel - which helped rescue Melvin Capital, a hedge fund squeezed out of its short position on GameStop, earlier this week - denied any impropriety. according to reports.