Here's what Reddit-fueled trading means for the broader market

CNBC's Mike Santoli explains the broader moves in the market in relation to the Reddit trade. Subscribe to CNBC Pro to access our live Pro Talk “How to Navigate the Reddit Market Mania” with Fundstrat’s Tom Lee and CNBC’s Mike Santoli: https://cnb.cx/3r7vPrJ

GameStop mania took Wall Street by storm, thanks to a legion of retail traders glued to the WallStreetBets message board on Reddit.

Shares of the struggling brick-and-mortar video game retailer skyrocketed 400% in the past week, closing out January with a whopping 1,625% gain. A band of amateur traders in WallStreetBets forum, whose members have tripled to 6.5 million in just a week, aimed to bid up heavily shorted stocks “to the moon,” creating massive short squeezes that some believe caused a turmoil in the broader market.

The rally backfired on Robinhood, the free-trading pioneer and popular app. The young broker that wants to go public this year had to tap credit lines, raise new funds and throttle back trading in a list of the short-squeeze names. We learned Saturday morning in a new post from Robinhood why, with the broker explaining that the central Wall Street clearinghouse mandated a ten-fold increase in the firm’s deposit requirements on the week in order to ensure smooth settlement in trades involving the securities experiencing unprecedented volatility.

The reckless retail buying frenzy drew attention from high-profile investors including Elon Musk and Chamath Palihapitiya as well as a slew of lawmakers calling on regulators to intervene.

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