(Updates with increase in trading limit on GameStop)
Feb 3 (Reuters) - Online brokerage app Robinhood, which is at the center of a Reddit-fueled rally in a handful of stocks heavily shorted by hedge funds, said on Wednesday it would allow investors to buy fractional shares in GameStop Corp and AMC Entertainment Holdings Inc.
The move allows buying parts of shares, often to encourage participation from smaller investors by reducing the size of the amount they have to bet.
Robinhood’s website showed on Wednesday trading restrictions were placed only on GameStop and AMC’s stock, while restrictions on others had been lifted.
Trading limit on GameStop’s shares was increased to 500 from 100. For AMC, the limit was set at 5,500 shares.
Last week, Chief Executive Officer Vlad Tenev said the app had temporarily curbed some transactions because a clearinghouse had asked for $3 billion in collateral.
The demand forced Robinhood to seek emergency funding from investors who poured in $2.4 billion on Monday, over and above the $1 billion the online brokerage raised last week.
Clearinghouses are intermediaries which ensure the completion of a stock trade even if one side of the deal goes bust. (Reporting by Niket Nishant and Juby Babu in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta)