Janet Yellen, the Treasury Secretary, will meet on Thursday with officials from financial market regulators including the Securities and Exchange Commission to discuss the market volatility created by retail traders, the Treasury Department said, after the remarkable rise in prices of “meme stocks” such as GameStop.
The meeting, which will also include the heads of the Federal Reserve, the Federal Reserve Bank of New York and the Commodity Futures Trading Commission, is a sign of heightened scrutiny in Washington toward the frenzy in trading.
Shares in GameStop, a video game retailer, surged last week but have since fallen from their dizzying heights, testing the will of investors who joined in the fervor as a challenge to Wall Street investors. It shares soared 1,600 percent in January alone. Since Friday, the price of GameStop stock has plummeted to about $90 from $325.
The scrutiny in Washington comes as Gary Gensler, President Biden’s nominee to head the S.E.C., the principal overseer of capital markets, awaits Senate confirmation.
The S.E.C. said in a statement on Friday that it was “closely monitoring” the situation and that it would “act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws.”
The S.E.C. and, to a more limited extent, the C.F.T.C. have the most jurisdiction over the issues at hand, but the Fed has a financial stability mandate and market insight. The New York Fed’s trading desk constantly talks with Wall Street. Massachusetts regulators are also investigating the work history of one of the cheerleaders of the GameStop stock’s run-up.
Fed officials have consistently struck a watchful but unworried tone when asked about GameStop in recent days.
“I’m glad that Janet Yellen is getting all the regulators together to look at what happened,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said Thursday morning on CNBC. “We should be monitoring to make sure that volatility doesn’t spill over into other parts of the financial market, but at this point this is not one of those kinds of situations.”
Even if GameStop is not a risk to the financial system, its saga could prod regulators to look into new rules, especially given the concerns of lawmakers who have already called for the S.E.C. and others to address the situation.
Securities lawyers said much of the response will depend on what the regulators determine drove the market volatility around GameStop, including the role that retail investors played, whether there was any market manipulation and if there was adequate disclosure by market participants — like Robinhood — that eased the trading.
Source: Read Full Article