Yellen seeks to understand GameStop frenzy
US Treasury Secretary Janet Yellen has vowed to protect investors but said financial market regulators needed to fully understand the recent trading frenzy involving GameStop Corp and other retail stocks before taking any action.
The core infrastructure of financial markets had proven resilient during the high volatility and heavy trading volume around GameStop and other stocks, Yellen said after a high-level meeting with other top regulators to discuss recent market volatility.
But a timely study of the events by the Securities and Exchange Commission was important, Treasury said, adding the SEC and Commodities Futures Trading Commission were reviewing whether the trading practices were consistent with investor protection and fair and efficient markets.
Yellen told ABC's Good Morning America earlier on Thursday it was critical to ensure "that our financial markets are functioning properly, efficiently and that investors are protected".
Yellen convened the heads of the SEC, CFTC, the Federal Reserve Board and the Federal Reserve Bank of New York to discuss retail trading and "whether or not the recent events warrant further action".
"We need to understand deeply what happened before we go to action but certainly we're looking carefully at these events," she said.
Many on Wall Street have been stunned this past week by the sharp gyrations in shares of video game retailer GameStop, headphone maker Koss Corp, cinema chain AMC Entertainment and other stocks and commodities favoured on the Reddit social media site's Wall Street Bets forum.
Traders had bid the shares to dizzying heights in an effort to punish short-sellers - who profit when shares fall - forcing some hedge funds to close their positions at heavy losses. But the so-called "Reddit Rally" later collapsed, exposing many individual traders to huge losses themselves.
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