Washington is investigating and launching congressional hearings on Wall Street following a spate of social media-driven trading activities that raised GameStop and several other previously obscure stocks this week.
The trading app Robinhood, which on Thursday bought or traded shares of GameStop shares and other stocks caught in the wave of activity, is under particular scrutiny. The popular stock trading app informed users that they could close positions in the very volatile stocks, but that they could not buy additional stocks.
Robinhood, which has about 13 million users, was a major tool in the efforts of a group of Reddit users of the subreddit WallStreetBets who planned to push the shares of GameStock and several other companies higher in an effort to outperform the traditional To undermine Wall Street hedge funds. curtailed the companies. Several hedge funds have already suffered huge losses as a result of the chaos, including Citron Research and Melvin Capital, which were forced to receive a cash injection of almost $ 3 billion to cover the losses.
House Financial Services Chair Maxine Waters and incoming Senate Banking Committee chairwoman Sherrod Brown, both Democrats, said their committees would each hold hearings to investigate the situation.
The Securities and Exchange Commission said on Friday that it was reviewing brokers’ measures that could harm investors or otherwise unnecessarily hamper their ability to trade certain securities. ‘
“We will act to protect retail investors when facts show offensive or manipulative trading activities prohibited by federal security laws,” the SEC said.
Online broker Interactive Brokers also restricted trading for GameStop, AMC, BlackBerry, Express and Koss to ‘liquidation only’, the company said in a statement on Thursday.
GameStock shares sank rapidly in response to news of the restrictions. The company’s shares soared this week to more than $ 400, from less than $ 19 at the end of 2020.
‘I am deeply concerned that this casino-like swing in the value of GameStop and other shares in the company is yet another example of the gaming manpower interfering with the’ fair, orderly and efficient ‘function of the market, which raises obvious questions. About the trust of the public. in the market and those who trade in it, ‘Democratic Senator Elizabeth Warren (Mass.), a longtime Wall Street critic, wrote in a Friday letter to the Securities and Exchange Commission.
“There are rich people on both sides of this, people who are apparently trying to manipulate this market,” she told CNBC. “And that’s what we do not know the details of.”
A day earlier, Charles Schwab and TD Ameritrade also restricted trading on GameStop and AMC.
Later on Thursday, Robinhood was hit with a federal lawsuit from its users over the suspension of GameStop stock trading.