Abstract
ABSTRACT We examine changes in market liquidity when several popular U.S. retail brokers restrict client trading in GameStop stock over a six-day period in early 2021 due to higher clearinghouse deposit requirements. When retail investor participation in a high-attentionstock becomes restricted, trading activity declines and trading venue shifts occur – there is less trading in dark markets and more fragmented trading across U.S. stock exchanges. We also find that when a stock order flow mix becomes comprised of fewer retail investors and a higher concentration of institutional investors, the quoted bid-ask spread widens, and trading cost measures rise significantly.
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