(Bloomberg) – The U.S. Securities and Exchange Commission has said it is “actively monitoring” volatility in options and stock markets amid a rise in GameStop Corp. and other companies over the past week, who have asked Democratic Senator Elizabeth Warren to demand action from regulators.
“In line with our mission to protect investors and maintain fair, orderly and efficient markets, we work with our co-regulators to assess the situation and review the activities of regulated entities, financial intermediaries and other market participants, “The SEC said in a statement Wednesday.
Small investors have been pushing up GameStop’s shares rapidly over the past few days, squeezing hedge funds with large short positions in the company, in a twist that has attracted attention on Wall Street and in Washington.
Shares in the video game retailer more than doubled on Wednesday, resulting in at least two volatility as it made its biggest intraday advance ever at some point. GameStop has increased eightfold in the past week, adding nearly $ 20 billion to its market value.
The move prompted Warren to put financial regulators under pressure to enforce Wall Street, citing wild activity.
In a sharply worded statement earlier Wednesday, the Democratic Massachusetts and longtime corporate enemy expressed their surprise at the rally, while also criticizing hedge funds and others with a short position in the company.
‘Personal casino’
“For years, the same hedge funds, private equity firms and wealthy investors who were shocked by the GameStop traders treated the stock market like their own personal casino while everyone else paid the price,” Warren said. “It’s been a long time since the SEC and other financial regulators woke up and did their job – and with a new government and Democrats running Congress, I intend to make sure they do.”
Warren’s comments come after White House press secretary Jen Psaki said Finance Minister Janet Yellen and Biden’s economics team were monitoring stock market activity in GameStop and other heavily short-circuited companies.
“Our team is, of course – our economic team, including Secretary Yellen and others – are monitoring the situation,” Psaki told reporters at the White House on Wednesday. She calls trading in the video game retailer “a good reminder 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 GameStop activity.
‘I do not want to comment on a specific business or the day’s market activity or anything like that. It’s just not something I would normally comment on, ‘he told reporters at a news conference Wednesday afternoon.
Read more: GameStop rally hits new extremes as short sellers
GameStop’s meteoric rise has enchanted Wall Street as an army of small traders spurred by Reddit posts pushed the company’s share price to unprecedented levels. Shares in the company started the year at just $ 19. Hedge funds that held short positions in GameStop, such as Melvin Capital, closed them as the rally continued and suffered billions of dollars in losses.
Representative Alexandria Ocasio-Cortez, a New York Democrat, 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 that it’s really something to see Wall Streeters with a long history of their economy as a casino complaining about a billboard of posters that also treats the market as a casino,” she wrote.
While some commentators have expressed the madness as a populist revolt against Wall Street institutions, others see a dangerous play that could eventually expose investors to huge losses. Some have wondered if this was the result of purposeful market manipulation.
Earlier: Michael Burry calls GameStop Rally ‘unnatural, insane’
Investor Michael Burry, who was champion for GameStop earlier in 2019, calls the current phenomenon ‘unnatural, insane and dangerous’.
“What’s going on now – there must be legal and regulatory implications,” tweeted Burry, who made his name for his commitment to mortgage lending before the 2008 financial crisis.
Burry’s tweet marked the SEC’s Enforcement Division.
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