Jim Cramer, host of Mad Money on CNBC and the head of the CNBC Investing Club, poked financial services platform Robinhood Markets (HOOD) (7KY). Robinhood seems to be behind the bizarre trading volumes of billionaire Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B).
Cramer’s tweet follows the revelation of a CNBC report, which stated the reason behind a mysterious trading surge in stocks like Berkshire Hathaway.
The Financial Industry Regulatory Authority (FINRA) issued a new ruling in 2017 that required brokers to report the trading of fractional shares. In effect, even if a fraction of a share of BRK.A was traded, it would result in being reported as one whole trade. Irrespective of the value of the shares traded, each trade needed to be reported as a whole.
This rule was particularly amplified in 2021 when the meme stock frenzy and general trading craze by retail investors led to a large number of fractional trades. Berkshire’s trading volumes have caught the eyes of authorities since each BRK.A share trades at a very high value, currently at $429,200.00, and has had very low trading volumes historically. But since 2021, there has been an unusual spike in BRK.A’s trading volumes due to fractional trades.
Cramer’s tweet was flooded by replies stating no one uses Robinhood’s platform anymore. A few even quipped and reminded him of the time when he loved the HOOD stock post its IPO.
HOOD stock, at its end, has crashed about 73% since its listing and is in the run of being acquired, probably by crypto exchange FTX. Meanwhile, FINRA is working on finding an apt solution to the issue.