Newly appointed Treasury Secretary Janet Yellen has summoned U.S. financial regulators to discuss recent volatility in financial markets revolving around GameStop (GME) - Get Report, AMC Entertainment (AMC) - Get Report and other disparate companies caught up in a trading frenzy kicked off by investor chatter on Reddit message board WallStreetBets.
Yellen called a meeting with the Securities and Exchange Commission, the Federal Reserve Board, the Federal Reserve Bank of New York and the Commodity Futures Trading Commission, the Treasury said in a statement late Tuesday.
It is Yellen’s first public effort to address the tumult surrounding the proverbial battle between retail investors pushing the likes of GameStop, AMC, Express (EXPR) - Get Report, BlackBerry (BB) - Get Report and others higher in an en masse, on-screen battle to unseat short positions held by hedge funds and other institutional players - and make money in the process.
Yellen sought and received permission from ethics lawyers before calling the meeting, according to a document seen by Reuters and confirmed by the Treasury, along with clearance to engage on wide-ranging issues in the financial services industry.
GameStop, a video-game retailer, was one of a handful of companies whose shares began soaring in late January, driven by an army of retail investors active on the online forum WallStreetBets hosted by Reddit. Some investors openly called on others to bid up the shares of certain names in order to trigger losses for hedge funds that had bet their prices would fall.
GameStop shares went from $19.95 to a peak of $347.51 on Jan. 27 in just 10 trading days - with no meaningful change in the company’s profit outlook. It has since swung wildly and fell 60% to close at $90 on Tuesday, suggesting the frenzy may be easing.
The episode has raised questions about whether broader risks for the financial system are brewing. As Treasury secretary, Yellen is chair of the Financial Stability Oversight Council, which was set up in the wake of the global financial crisis to monitor systemic risks.
Shares of GameStop were up 14.4% at $103.52 in trading on Wednesday. Shares of AMC were up 8.31% at $8.47, while shares of Express were up 6.8% at $3.61.
Silver, meantime, also caught the attention of retail investors, though the gains and losses paled in comparison to the whipsaw activity seen in stocks like GameStop. The precious metal surged to an eight-year high on Monday that went into reverse on Tuesday, with futures on the Comex exchange dropping by 9.5% in afternoon trade to $26.65 an ounce after CME Group hiked margin requirements.