Important Notice: Trading restrictions on certain U.S. micro-cap stocks

At Moomoo, we aim to provide clients with broad access to global investment opportunities while also maintaining a responsible approach to market integrity and investor protection.

Our US executing and clearing broker, Futu Clearing Inc., has introduced enhanced risk controls on certain US-listed micro-cap securities. As Moomoo uses Futu Clearing as our U.S. upstream executing broker, trading access in affected securities through our platform will be subject to the same controls.

Click here to read the full notice published by Futu Clearing Inc.

Why are these controls being introduced?

Certain smaller U.S.-listed stocks, particularly low-priced or thinly traded micro-cap securities, may present elevated risks, including:

• Low liquidity, where there may be limited buyers and sellers

• Extreme volatility and sudden price swings

• Large price gaps between trades

• Greater susceptibility to market manipulation, including pump-and-dump activity

• Trading halts or other market disruptions

These conditions can create a higher risk of significant losses and disorderly trading outcomes.

How will this impact my trading?

Depending on the security and prevailing market conditions, some affected stocks may become "Reduce-only", meaning you may close or reduce an existing position but cannot open new buy positions. A smaller cohort of micro-cap stocks may be subject to even tighter controls, where new orders in both directions may be restricted which means transfering out to another broker-dealer becomes the only solution to dispose of those stocks.

Without further prior notices, these controls may be introduced, changed, varied or removed based on market conditions, liquidity, trading restrictions or clearing requirements.

How do I find out if a stock is restricted?

If a stock is subject to trading restrictions, a notification banner will be displayed on the stocks's quote and chart page in the Moomoo App.

Why this matters?

While we fully recognise that some clients seek opportunities in smaller growth companies, certain micro-cap securities may carry risks that are significantly higher than more established and liquid stocks.

These measures are intended to help manage risks associated with illiquid or disorderly markets while maintaining access to trading opportunities where appropriate.

Important reminder for investors

Please exercise caution when trading securities promoted through social media advertisements, unsolicited messaging groups, “hot stock tips”, or claims of guaranteed returns. Smaller stocks can be particularly vulnerable to hype-driven manipulation and scams.

You may also wish to read our separate awareness article on pump-and-dump scams.

Need help?

If you have questions regarding an affected security or your trading access, please contact our customer support team through "Me" tab -> "Customer service" in the Moomoo App, or by emailing support@au.moomoo.com.

What are penny stocks and micro-cap stocks?

1. Penny stocks

A penny stock typically refers to the stock of a small company that trades for less than $5 per share. This type of stock normally has high price fluctuation, low liquidity, and facing a higher chance of quit the market. Normally we do not suggest public investors trade this kind of stock.

1.1 How to trade penny stocks in the United States?

Penny stock is a type of stock, and its trading process, trading hours, and order type are the same as those of common stock.

Warm reminder: Because of the high risk of trading penny stocks, customers need to confirm the risk disclosure before trading it for the first time. They may continue trading only after completion of confirmation.

1.2 If the share price falls below $5, can it be traded?

When the price of US stocks falls below $5, they are considered penny stocks. When customers open new positions in these US stocks, they need to confirm the risk, but there are no restrictions on closing positions.

1.3 What are the risks of penny stocks?

1.3.1 Due to their nature of high volatility, Penny stocks may experience high price fluctuation.

1.3.2 Penny stocks lack a liquid market with few buyers, perhaps even after their price has increased.

1.3.3 There is limited information available on the company's financial soundness or track record.

1.3.4 Penny stocks have a high probability of fraud and bankruptcy of the underlying company.

2. Microcap Stocks

Microcap refer to stocks with a market capitalization of US$300 million or less. These stocks typically exhibit low liquidity, wide bid-ask spreads, limited information transparency, and sparse media or analyst coverage. Due to potential financial irregularities or fraud risks—especially among OTC stocks—microcaps are frequent targets for market manipulation.

2.1 Common Manipulation Tactics for Microcap Stocks

2.1.1 Pump and Dump

• Process: Market makers or insiders accumulate shares at low prices -> generate artificial demand through false advertising, social media hype, or spam emails to drive up the stock price -> attract retail investors to follow the trend -> sell off at the peak, causing the stock price to crash.

• Common Scenarios: The OTC market (especially Pink Sheets) and certain Nasdaq microcaps are prime targets.

2.1.2 False Information Manipulation

• Spreading fake positive news (e.g., fabricated contracts, technological breakthroughs, or M&A rumors).

• Using social media, forums, and paid promoters to entice retail investors into buying.

2.1.3 Wash Trading

• Manipulators frequently trade shares among multiple accounts to create a false impression of high trading volume and active market interest, luring in unsuspecting investors.

2.1.4 Corners and Squeezes

• Due to a very small float, market makers may secretly accumulate and control the majority of tradable shares. They then drive up the price through rumors or technical buying, forcing short sellers to cover or momentum buyers to purchase at inflated prices.

Why are Microcap Stocks Easily Manipulated?

• Low Liquidity: Average daily trading volume may be only tens of thousands of shares, meaning a small amount of capital can significantly impact the stock price.

• Low Institutional Participation: Institutions generally avoid microcaps. The market is primarily driven by retail investors and a few market makers, making regulatory oversight challenging.

• Information Asymmetry: Corporate disclosures are often inadequate, allowing market makers or insiders to act ahead of the public.

• Weak Regulatory Coverage: Regulatory standards for the OTC market are lower than those of major exchanges, and resources for investigation and enforcement are limited.

2.2 Trading restrictions

Liquidity trading restrictions for microcap stocks are as follows:

• On each trading day, the aggregate trading volume for any single microcap stock across all clients at Futu (buy and sell orders combined) is capped at 10%-30% of the stock's 30-day Average Daily Volume (ADV). Orders exceeding this limit will not be executed.

• On each trading day, the total trading volume for any single microcap stock by any individual client (buy and sell orders combined) is capped at 5%-15% of the stock's 30-day ADV. Orders exceeding this limit will not be executed.

• The restrictions above also apply to Algo orders.

• These parameters are subject to change. Please refer to the order page for the most current information.