Yellen seeks to ‘understand deeply’ GameStop frenzy as market regulators meet - Financial Markets Worldwide

No results matched your search

Economy6 hours ago (Feb 04, 2021 09:00PM ET)

© Reuters. FILE PHOTO: U.S. President-elect Joe Biden announces members of his economic policy team in Wilmington, Delaware
© Reuters. FILE PHOTO: U.S. President-elect Joe Biden announces members of his economic policy team in Wilmington, Delaware

By David Lawder

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen on Thursday vowed to protect investors, but said financial market regulators needed to fully understand the recent trading frenzy involving GameStop Corp (NYSE:) and other retail stocks before taking any action.

The core infrastructure of financial markets had proven resilient during the high volatility and heavy trading volume around GameStop and other stocks, Yellen said after a high-level meeting with other top regulators to discuss recent market volatility.

But a timely study of the events by the Securities and Exchange Commission was important, Treasury said, adding the SEC and Commodities Futures Trading Commission were reviewing whether the trading practices were consistent with investor protection and fair and efficient markets.

Yellen told ABC’s “Good Morning America” earlier Thursday it was critical to ensure “that our financial markets are functioning properly, efficiently and that investors are protected.”

In her first media interview, Yellen said President Joe Biden’s $1.9 trillion federal stimulus plan was needed to alleviate the economic pain caused by the coronavirus pandemic, which has left millions of Americans jobless.

“We never had anything so large even during the Great Recession. We need to make sure people have jobs, if they don’t have jobs, that they’re supported,” Yellen said, referring to the 2007-2009 economic contraction in the United States.

She said Biden still wanted Congress to pass the plan on a bipartisan basis and “is looking to cooperate” with Republicans.


Yellen convened the heads of the SEC, CFTC, the Federal Reserve Board and the Federal Reserve Bank of New York to discuss retail trading and “whether or not the recent events warrant further action,” she told ABC. “We need to understand deeply what happened before we go to action, but certainly we’re looking carefully at these events.”

She did not specify what potential actions could be taken by regulators to respond to the situation.

Many on Wall Street have been stunned this past week by the sharp gyrations in shares of video-game retailer GameStop, headphone maker Koss Corp, cinema chain AMC Entertainment (NYSE:) and other stocks and commodities favored on the Reddit social media site’s Wall Street Bets forum.

Traders had bid the shares to dizzying heights in an effort to punish shortsellers – who profit when shares fall – forcing some hedge funds to close their positions at heavy losses. But the so-called “Reddit Rally” later collapsed, exposing many individual traders to huge losses themselves.

GameStop shares closed Thursday down 42% at $53.50, far from their peak of $483 a week ago. AMC Entertainment has lost about two-thirds of its value after two weeks of wild swings.

Regulators likely discussed the online forums where mass buying of the stocks of those two companies was discussed last week, and the ever-larger role played by hedge funds in financial markets.

“Any kind of market distortion by investors agreeing to cause the distortion goes against the smooth and transparent functioning of markets,” said Andrea Cicione, head of strategy at TS Lombard, adding that such activity has not been previously scrutinized by regulators.

The SEC is reviewing social media posts for signs of potential fraud, Bloomberg News reported.

Before calling the meeting, Yellen sought and received permission from Treasury ethics lawyers to do so and ensure that she was in compliance with her ethics agreement. Reuters reported on Monday that such an ethics waiver might be necessary because of the over $700,000 in speaking fees Yellen was paid by Citadel LLC, a hedge fund that has been at the center of the GameStop trading saga.

Citadel, whose trading arm profits from processing trades on the Robinhood commission-free trading app favored by many retail investors, had provided a $2.75 billion lifeline to Melvin Capital, a hedge fund that had suffered major losses in the GameStop short-squeeze.

Related Articles

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Read More

Spread the love
Nicholas ‘Nick’ Statman entered the property industry in 2001 and set up a property buying company that quickly established itself as one of the biggest in the sector. During this time the Company successfully transacted on thousands of residential properties across the UK. Nicholas Statman was an early pioneer of the ‘quick sale’ niche market which has since grown considerably with a multitude of companies now operating in the sector. Nicholas Statman has strategically built a sizeable residential and commercial property portfolio with a view to holding for optimum capital growth and a long term passive income. Nicholas Statman has been involved in almost every aspect of the property sector over a 20 year period – this includes buying and selling, development, letting and management and is now involved in the fast growing online/ hybrid Estate Agent industry.

Latest articles

Tinubu launches agric empowerment programme in Yobe

President Bola Ahmed Tinubu has launched the Yobe State Agricultural Empowerment Programme in Damaturu, the state capital. A statement by Senior Special Assistant to the President on Media and Information, The post Tinubu launches agric empowerment programme in Yobe appeared first on The Nation Newspaper...

Five EPL clubs starting 2024/2025 season with new managers

As the countdown to the 2024/2025 English Premier League (EPL) season begins, several clubs have made significant changes at the managerial helm. Others are preparing for massive changes on the The post Five EPL clubs starting 2024/2025 season with new managers appeared first on The Nation Newspaper...

EPL: Ragnick was right about Man Utd problems –...

Manchester United manager Erik ten Hag says former interim boss Ralf Rangnick was “absolutely right” about the club needing “open-heart” surgery. Ten Hag, 54, was appointed manager in 2022 after The post EPL: Ragnick was right about Man Utd problems – Ten Hag appeared first on The Nation Newspaper...

DSS kills kidnapper of mother of Hausa singer Rarara

Operatives of the Department of State Service (DSS) have reportedly killed one of the kidnappers of the mother of famous Hausa singer, Dauda Rarara. After a sustained gun duel with The post DSS kills kidnapper of mother of Hausa singer Rarara appeared first on The Nation Newspaper...

Similar articles


Please enter your comment!
Please enter your name here

Subscribe to our newsletter

Spread the love