Macro strategist Jim Bianco of Bianco Research has put forth a "bold theory" suggesting that trading restrictions imposed during the January 2021 GameStop short squeeze were aimed at protecting brokerage firms like Charles Schwab from potential collapse. This claim was highlighted by journalist Laura Shin, who tweeted, "> Did GameStop almost break Schwab? 😱 @biancoresearch drops a bomb on @Unchained_pod," referencing Bianco's appearance on the Unchained podcast.
The GameStop short squeeze saw the stock of the American video game retailer, GME, experience an unprecedented surge in price. Driven largely by retail investors on the Reddit forum r/wallstreetbets, the phenomenon forced significant losses for hedge funds holding short positions, as they scrambled to cover their bets, further inflating the stock's value. Approximately 140 percent of GameStop's public float had been sold short, creating extreme market volatility.
During this period of intense trading, multiple brokerage firms, including Charles Schwab, its subsidiary TD Ameritrade, and Robinhood, reported disruptions and imposed restrictions on trading certain volatile stocks, including GameStop. These actions led to widespread criticism and federal lawsuits alleging that these platforms unfairly prevented retail investors from trading, effectively forcing them to sell at a loss.
On the Unchained podcast, Jim Bianco presented his hypothesis that these trading halts were not merely about protecting individual investors or managing liquidity, but rather a critical measure to prevent major financial institutions from facing systemic issues. His theory posits that the immense pressure from the short squeeze could have destabilized the operational capabilities of large brokers like Charles Schwab.
While Charles Schwab has publicly addressed the GameStop saga through internal analyses, focusing on "lessons learned" for retail investors and market dynamics, they have not confirmed or denied the specific claim made by Bianco. The events of early 2021 brought unprecedented scrutiny to market infrastructure and the roles of brokerages and clearinghouses, sparking ongoing debates about market transparency and fairness.