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In the case of GameStop, regulators may end up looking for market manipulation – although this is a difficult case to do.
Davidtran07 / Dreamstime
The Securities and Exchange Commission said on Wednesday that it is monitoring options and stock markets after the volatility of the past few days. Shares of highly sold companies, such as Bed Bath & Beyond,
National Drink,
and
AMC Entertainment
appeared next
GameStop
in recent negotiations.
“We are aware of and actively monitoring ongoing market volatility in the options and stock 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 assess the situation and review the activities of regulated entities, financial intermediaries and other market participants, ”Allison Herren Lee, acting chairman of the SEC; Pete Driscoll, director of the exams division; and Christian Sabella, acting director of the trade and markets division, said in a press release published on Wednesday.
Columbia Law School professor John Coffee, a specialist in securities law, said Barron’s that the SEC statement meant very little in itself.
“This is just a marker,” he said. “This is not saying anything in particular. I think it says we’re not sleeping at the wheel. We will not say what we are doing, but we want you to know that we are watching. “
In the case of GameStop, regulators may end up looking for market manipulation – although this is a difficult case to do. “There is nothing more difficult to prove than manipulation,” said Coffee. “You have to separate the needle from the haystack.”
The agency is in a difficult position now, due to the change in administrations, he added.
“They just appointed a new inspection director two days ago. The new president has yet to be confirmed or even heard. So we have people who are not really in full control, wondering who is going to make the decision, ”he said.
GameStop shares rose another 135% on Wednesday to $ 347.51. The stock rose 788% in just the last five trading sessions. GameStop’s shares fell 9.1% in trading after the exchange closed, following the SEC’s announcement. The action on GameStop’s shares prompted William Galvin, the Massachusetts Commonwealth Secretary, to ask regulators to temporarily suspend stock trading.
“There is no rationale for this race,” said Galvin. “And it’s not just an increase, it’s also decreasing. It is extremely erratic. Obviously, there is a problem here with the way options are being used in this case. And it needs some regulatory intervention. And I think the most prudent thing is to suspend trading for 30 days. “
Senator Elizabeth Warren of Massachusetts, citing the frenzy, asked regulators to “wake up and do their job”. White House press secretary Jen Psaki also said on Wednesday that the Biden government was 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, called for legal and regulatory repercussions. The investing celebrity, whose bet against subprime mortgages was presented in The Big Short film and book, said, “This is not natural, insane and dangerous.”
Burry confirmed for Barron’s on Wednesday that he is no longer on GameStop.
Write to Connor Smith at [email protected] and Avi Salzman at [email protected]