As one of the consequences of the GameStop affair, U.S. Treasury Secretary Janet Yellen called for a meeting Tuesday, February 2, with financial regulators to discuss the recent “Market volatility”. According to the statement, she “Believes that market integrity is important and called for a discussion of the recent volatility in financial markets and the compatibility of recent activities with investor protection and fair and efficient markets”.
Three bodies were called upon: the Securities and Exchange Commission (SEC, the federal regulator of financial markets), the Federal Reserve and the Commodities Futures Trading Commission (the federal agency responsible for the regulation of stock exchanges). Republicans and Democrats have been calling for a review of trade regulations for a few days, following the slinging of stock marketers against large hedge funds that rocked Wall Street last week.
“Game rigging” and “scandalous behavior”
These investors, communicating in particular on a forum on the Reddit site, had launched a battle against the giants of Wall Street having bet down on poorly performing companies, such as the video game store chain GameStop or that of cinemas AMC, in practicing short selling. This process, which allows betting on a stock price to fall, has led to the creation of apps for retail investors, such as Robinhood, which claims “Democratize finance for all” and halted trading in these securities last week to stem the rout.
Progressive US Senators Bernie Sanders and Elizabeth Warren have called for action this weekend. “We need an SEC investigation”said Mme Warren on CNN Sunday. “It’s a rigged game, and it’s a bunch of players who come in and manipulate the market. “ Bernie Sanders, meanwhile, told ABC channel that it was necessary “Take a very close look at the type of illegal activity and outrageous behavior of hedge funds and other Wall Street players”. The SEC assured to monitor the situation.
After rising more than 400% last week, GameStop shares fell on Tuesday, losing nearly 50% at the start of the day and taking their two-day drop to over 65%.
