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In the case of GameStop, regulators may end up looking for market manipulation, although that can be a difficult thing.
Davidtran07 / Dreamstime
The Securities and Exchange Commission said on Wednesday that it is monitoring options and stock markets following the volatility of recent days. Shares of companies with a high short position such as Bed Bath & Beyond,
National drink,
and
AMC Entertainment
have risen alongside
GameStop
in recent trade.
“We are aware of and actively monitor ongoing market volatility in the options and equity markets and, in line with our mission to protect investors and maintain fair, orderly and efficient markets, we are working with our fellow regulators to address the situation to judge. and assess the activities of regulated entities, financial intermediaries and other market participants, ”Allison Herren Lee, acting chairman of the SEC; Pete Driscoll, Exam Department Director; and Christian Sabella, acting director in the trade and markets division, said in a press release on Wednesday.
Professor John Coffee of Columbia Law School, an expert in securities law, said Barron’s that the SEC statement in itself meant very little.
“This is just a marker,” he said. This says nothing in particular. I think it says we don’t sleep behind the wheel. We’re not going to tell you what we’re doing, but we want you to know we’re watching. “
In the case of GameStop, regulators may end up looking for market manipulation, although that can be a difficult thing. “There’s nothing more difficult to prove than manipulation,” said Coffee. “You have to get the needle out of the haystack.”
The agency is currently in a difficult position given the change in administrations, he added.
“They just appointed a new enforcement director two days ago. The new chairman has not yet been confirmed and has not heard any hearings yet. So we have people who are not really in complete control and are wondering who is going to make the decision, ”he said.
GameStop stock rose another 135% on Wednesday to $ 347.51. In the past five trading days alone, the stock is up 788%. GameStop shares retreated 9.1% in out of hours trading shortly after the SEC announcement. The action in GameStop stock prompted William Galvin, the Secretary of the Commonwealth of Massachusetts, to call on regulators to temporarily suspend trading in the stock.
“There is no rational basis for this run-up,” Galvin said. “And it is not only a run-up, it is also a run-up. It’s extremely erratic. There is clearly a problem here with the way options are used in this case. And it needs some regulatory intervention. And I think it would be wiser if trading is suspended for 30 days. “
Senator Elizabeth Warren of Massachusetts, citing the frenzy, called on regulators to “wake up and do their job.” White House press secretary Jen Psaki also said on Wednesday that the Biden administration is paying attention. “Our economic team, including Secretary Yellen and others, is monitoring the situation,” she said.
Even a former GameStop bull, Michael Burry of Scion Asset Management, has called for legal and regulatory fallout. The investing celebrity whose subprime mortgage wager played a part The Big Short movie and book, said, “This is unnatural, insane and dangerous.”
Burry confirmed that Barron’s Wednesday that he is no longer in GameStop for long.
Write to Connor Smith at [email protected] and Avi Salzman at [email protected]