(Bloomberg) – The United States Securities and Exchange Commission said it is “actively monitoring” volatility in the options and stock markets amid an increase in GameStop Corp. and other companies last week that prompted Democratic Senator Elizabeth Warren to demand action from regulators.
“Consistent with our mission to protect investors and maintain fair, orderly and efficient markets, we are working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries and other market participants,” said the SEC in a statement Wednesday.
Retail investors have rapidly increased GameStop’s stock in the past few days, squeezing hedge funds with large short positions in the company, in a turnaround that drew attention on Wall Street and Washington.
The video game retailer’s stock more than doubled on Wednesday, causing at least two volatility stops as it reached its biggest intraday advance of all time. GameStop increased eight-fold in the past week, adding almost $ 20 billion to its market value.
The measures prompted Warren to pressure financial regulators to crack down on Wall Street, citing frantic activity.
In a harsh statement earlier Wednesday, the Massachusetts Democrat and longtime corporate opponent expressed surprise at the demonstration, while criticizing hedge funds and others with short positions in the company.
‘Personal Casino’
“For years, the same hedge funds, private equity firms and wealthy investors dismayed by the GameStop deal have treated the stock market as their own personal casino, while everyone else pays the price,” said Warren. “It is past time for the SEC and other financial regulators to wake up and do their jobs – and with a new government and Democrats in Congress, I intend to ensure that they do.”
Warren’s comments came after White House press secretary Jen Psaki said Treasury Secretary Janet Yellen and Biden’s economic team were watching the stock market activity around GameStop and other companies heavily shorted.
“Our team, of course – our economic team, including Secretary Yellen and others – is monitoring the situation,” Psaki told reporters at the White House on Wednesday. She called the negotiation at the video game retailer “a good reminder, however, that the stock market is not the only measure of the health of our economy.”
A Treasury Department spokesman declined to comment. Federal Reserve Chairman Jerome Powell also declined to comment on the activity surrounding GameStop.
“I don’t want to comment on a particular company or market activity of the day or things like that. It’s just not something I would normally comment on, ”he told reporters at a news conference on Wednesday afternoon.
Read more: GameStop Rally reaches new extremes with the surrender of short sellers
GameStop’s meteoric rise has captivated Wall Street as an army of small traders spurred on by Reddit posts has raised the company’s stock price to unprecedented levels. The company’s shares started the year at just $ 19. Hedge funds that held short positions at GameStop, such as Melvin Capital, closed their deals with the continued rise, suffering billions of dollars in losses.
Congressman Alexandria Ocasio-Cortez, a Democrat from New York, said in a tweet that Wall Street and those who post online have taken a similar approach to the economy and markets.
“I have to admit it is really something to see people on Wall Street with a long history of treating our economy like a casino complaining about a message board that also treats the market like a casino,” she wrote.
While some commentators see the frenzy as a populist revolt against Wall Street institutions, others see a dangerous move that could eventually leave investors exposed to huge losses. Some wondered if this was the result of intentional market manipulation.
Previously: Michael Burry calls GameStop Rally ‘Unnatural, Insane’
Investor Michael Burry, who previously defended GameStop in 2019, called the current phenomenon “unnatural, insane and dangerous”.
“What’s happening now – there must be legal and regulatory repercussions,” tweeted Burry, who made his name for his bet against mortgage-backed securities before the 2008 financial crisis.
Burry’s tweet identified the SEC’s Enforcement Division.
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