Analysis: How Wall Street gains from ‘populist’ trading movement

Analysis: How Wall Street gains from ‘populist’ trading movement

Other beneficiaries include market-makers and trading systems that profit from huge volumes.

Many investors have not yet realized their profits by selling shares, and some platforms could later face disillusioned retail customers who bought into the rally too late, said Larry Harris, a former chief economist for the US Securities and Exchange Commission and now a finance professor at the USC Marshall School of Business.

But for now, big, traditional investors that already held GameStop shares have the advantage, Harris said. "Long institutions are the big winners,“ he said.

That contrasts with the short sellers who have bet against GameStop in expectations that the share price will fall, borrowing shares in hopes they can later buy shares at a lower price to repay their loans and pocket the difference.

Shares of GameStop and other heavily shorted stocks such as AMC Entertainment and BlackBerry shot up this week as they were pushed by traders on Reddit and other social media platforms, although they fell back on Thursday.

Hedge funds betting against the stocks were forced to cover their positions, costing them billions of dollars and adding fuel to the rally.

That was good for funds like the Fidelity Low-Priced Stock Fund. It held two million shares of