Reddit commercial frenzy fades as Yellen summons agencies
A social media-driven trading frenzy cooled further on Wednesday when US Treasury Secretary Janet Yellen called a meeting of senior officials that could result in tighter market regulation for hedge funds, small investors and brokers.
Mass buying by amateur traders over the past two weeks caused fierce price swings at companies that US fund managers had bet against, including video game retailer GameStop and movie theater operator AMC Entertainment. .
GameStop’s US-listed shares, which hit $483 last week, fueled by posts on the popular Reddit WallStreetBets forum, fell this week to $90 as free brokerage apps, including Robinhood, imposing purchase restrictions.
They fell another 5% on Wednesday, while AMC shares rose 3.8% after falling 41% a day earlier. GameStop’s Frankfurt-listed shares continued to fall, falling 36% at 3:10 p.m. GMT.
Silver, which briefly jumped on Monday as smaller traders bought the metal, leveled off about 10% below its recent high.
The flow is obvious, said Oriano Lizza, a high-end sales trader at CMC Markets brokerage in Singapore, adding that it would be easy for agile small investors to come together and target new companies.
“I think from a regulatory point of view the concern is that they could continue to do this,” he said.
The head of the US Securities and Exchange Commission, which regulates the markets, will meet with Yellen and the heads of the Federal Reserve and the Commodity Futures Trading Commission, possibly as early as Thursday, a treasury official told Reuters.
Yellen asked to discuss recent volatility and whether trading has been consistent with fair and efficient markets.
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It was not clear whether a meeting could result in actions, but experts expect that the focus will also be on the increasingly important role played by non-bank companies such as hedge funds on the financial markets, while small traders prepare for a confrontation.
Final boss fight. It’s happening tomorrow with Yellen, the SEC and the Federal Reserve, a Wednesday post read on Reddit. “They’re either going to try to stop the party, or they’re going to look for some money to pay us and not crash everything at once.”
Robinhood said on Wednesday it was allowing the purchase of fractional shares in GameStop and AMC, five days after restricting the practice that has encouraged small traders to downsize to the amount they need to invest.
