The phenomenon behind the rise and fall of GameStop’s stock has been latched onto by the mass media, including the Swiss press. Some Swiss investors also participated in the GameStop investment spree. moneyland.ch inquired at major Swiss online stock brokers about key questions and shares the answers to these questions here.
What exactly was the hype around GameStop about?
GameStop is a US retailer which is specialized in video games, consoles and gaming paraphernalia. The company has thousands of stores around the world, including a fair number of outlets in Switzerland. GameStop’s brick-and-mortar business model and the increasing digitization of the gaming retail industry led many hedge funds to go short on the company’s stock. That means hedge funds bet on the company’s decline and a subsequent decline in the value of its stock.
The Reddit forum Wallstreetbets host millions of members who exchange opinions about possible stock market deals. Many forum members invest using free online trading apps like Robinhood and report their gains and losses to other forum members.
Having realized that hedge funds had gone short on GameStop’s stock, the Wallstreetbets crowd set out to buy as many GameStop shares as possible in order to drive the price of the stock sky high and force the hedge funds to buy back stock at a huge loss. Their united effort paid off, at least in the short term. Within a month, the stock’s price shot up from less than 20 US dollars at the start of 2021 to peak at 480 dollars on January 28, 2021.
The phenomenon turned some Wallstreetbets traders into millionaires while generating massive losses for some hedge funds. Many small investors who got into the game too late incurred losses when the stock’s price dove following its short-lived climb.
There are several reasons why the GameStop phenomenon gained worldwide attention:
- The Internet and social media has, possibly for the first time, enabled small investors to compete against Wall Street hedge funds on equal terms. The power of online communities allows groups of small investors to coordinate their efforts in order to impact the stock market in a targeted way.
- The controversial practice of short selling practiced by hedge funds has returned to the spotlight.
- The role of popular free online trading apps is another aspect which has gained attention. Robinhood, the trading app used by a large portion of the traders, temporarily blocked purchases of GameStop stock while still allowing sales of the stock. Germany’s favorite free trading platform Trade Republic took similar measures.
Naturally this angered the investor community which was trying to push the price of the stock up. Robinhood has been accused of collaborating with hedge funds. The fact is that Robinhood’s business model is largely built around selling customer orders to hedge funds. At least one of Robinhood’s partner hedge funds had a vested interest in driving the price of GameStop’s stock down.
Did Swiss brokers block trading in GameStop stock at any time?
Free online trading platforms like Robinhood and Trade Republic have become the target of criticism because they temporarily blocked purchases of GameStop stock.
Swiss online trading platforms, on the other hand, never blocked purchases of GameStop shares. This was confirmed to moneyland.ch by Bank Cler, Cash Zweiplus, Credit Suisse, Raiffeisen, Swissquote, TradeDirect (BCV) and the Zürcher Kantonalbank. PostFinance stated that while it never blocked purchases in GameStop stock, it did experience trading delays caused by its stock broker.
Like many online trading platforms around the world, some Swiss brokers did temporarily block the creation of short positions for GameStop stock CFDs.
Can Swiss banks block purchases of specific stocks?
It is possible for Swiss banks to block specific stocks, but this normally only happens due to regulations or sanctions.
The Raiffeisen Bank says sales of specific stocks can occur as a result of restrictions on trade with certain countries or markets. According to the Zürcher Kantonalbank, there are scenarios in which trade in specific securities or market sectors may be restricted due to regulatory measures or sanctions.
PostFinance told moneyland.ch that a moratorium on trade can occur if relevant Swiss or foreign market supervisory authorities require it. Trade in penny stocks, for example, has become more restricted in the US and increasingly in other countries as well due to the implementation of more stringent anti-money-laundering measures.
Bank Cler says that developments in the price of a stock alone are not a reason to block new orders from customers. Blocking would only happen if there is a suspicion that the rules applicable to relevant markets have been broken.
According to Swissquote, it will only deny access to a stock if it is instructed to do so by a stock exchange.
How much does buying GameStop shares using Swiss stock brokers cost?
The cost of buying and selling GameStop shares on its primary exchange (the New York Stock Exchange) varies depending on which Swiss online trading platform you use.
If, for example, the price of GameStop stock sat at 50 US dollars per share, you would pay between 9.90 and 95 Swiss francs for each purchase or sale – depending on which Swiss broker you used. Depending on the Swiss bank you trade with, other costs like currency exchange costs, account fees, custodial fees and stock exchange fees may also apply. You also pay a government stamp duty (10 centimes in this example). Comparing Swiss stock brokers based on all possible fees and your specific investment needs is recommended.
| Swiss Bank |
Brokerage Fee for a GameStop Share |
| TradeDirect (BCV) |
CHF 9.90 |
| Cornèrtrader |
CHF 12 (CHF 75’000 or more in custody) |
| Swissquote |
CHF 15.85 |
| Cornèrtrader |
CHF 25 (up to CHF 75’000 in custody) |
| PostFinance |
CHF 25 |
| Cash - banking by bank zweiplus |
CHF 29 |
| Migros Bank |
CHF 40 |
| Credit Suisse (Invest Compact) |
CHF 45 |
| ZKB Onlinebank |
CHF 50 |
| Bank Cler (E-Depot) |
CHF 60 |
| Raiffeisen |
CHF 60 |
| UBS |
CHF 60 |
| Credit Suisse (Direct Net) |
CHF 95 |
Do Swiss trading platforms forward customer orders to third parties?
The business model used by Robinhood and other free brokers is largely based on passing on customer orders to third-party market makers like hedge funds in exchange for sales commissions. This business model is known as payment for order flow, and is particularly problematic.
All of the Swiss banks contacted by moneyland.ch stated that they do not pass on orders to third parties in exchange for commissions.
Do Swiss stock brokers lend out their customer’s shares to third parties?
Most Swiss banks do not practice securities lending. That is also the case with Bank Cler, Cash Zweiplus, Migros Bank, Raiffeisen, PostFinance, Swissquote and TradeDirect.
The Zürcher Kantonalbank and Credit Suisse offer securities lending as an option, but primarily to institutional investors.
Do Swiss stock brokers offer short selling?
Most Swiss banks do not give you the option of shorting stocks. This applies to Bank Cler, Cash Zweiplus, Migros Bank, PostFinance, Raiffeisen, Swissquote, TradeDirect and the Zürcher Kantonalbank. Credit Suisse offers the option of going short on a stock, but only if it is actually able to borrow the shares in question (no naked short selling). Some Swiss brokers which do not provide short selling do offer contracts for difference (CFDs) and/or options, and these instruments can be used to gain from negative stock performance.
How much influence do investor communities have over Swiss stock prices?
Stock forums, investment newsletters and media reports about stocks have been around for a long time. Stock prices have been manipulated since the dawn of the stock market.
PostFinance has stated that stocks of companies which appear in the media frequently are also traded more frequently. There are no organized Swiss communities of small investors which are comparable to the Wallstreetbets Reddit forum.
Swissquote CEO Marc Bürki says he can imagine that other investor communities will try to copy the Wallstreetbets phenomenon.
Members of these forums who set out to influence stock prices are operating in a legal grey zone. According to Bank Cler, this kind of activity can, under some circumstances, even be punishable as market or price manipulation.
At least in the near future, it is not likely that Swiss stocks will hit by this phenomenon. According to Raiffeisen Bank, Swiss stock exchanges lack the penny stocks which are exceptionally easy to manipulate. The high market capitalization of the big stocks making up the SMI makes it unlikely that small investors would be able to make any significant impact on stock prices. Another factor is that many of the most popular free online trading platforms do not offer free trading in Swiss stocks.
“But with the rise in social media and online communities, the increased influence of the crowd over the stock market is basically preprogrammed,” says moneyland.ch CEO Benjamin Manz.
How are Swiss stock brokers different from free trading apps?
The online trading platforms offered by Swiss banks are typically more expensive than those of international free online trading platforms. In some cases, the apps offered by Swiss banks are not as intuitive as popular trading apps like Robinhood.
But Swiss stock brokers do offer a number of advantages.
The Swiss banking licenses held by the banks which operate Swiss trading platforms provide significantly better security than that offered by many foreign trading apps – the operators of which are often poorly regulated. Swiss online trading platforms also generally provide more comprehensive trading and banking services.
Because orders are not passed on to hedge funds, investors are not at risk of trading at unfavorable rates. As Swissquote CEO Mark Bürki puts it: “Orders go straight to the stock exchange – there are no conflicts of interests.”
More on this topic:
Free online trading platforms explained
Compare Swiss online trading platforms now
