It's not just the trading platform Robinhood, a not-so-merry group of retail traders and a series of crazy stock-price moves among the likes of GameStop (GME) - Get Report, AMC Entertainment (AMC) - Get Report and more than has raised the ire of regulators in Washington.
The entire 'cast of characters' and beyond – ranging from hedge funds to issuers, exchanges, broker-dealers and security lenders – will all be in the limelight as regulators take a closer look at the recent Robinhood-Reddit trading frenzy, former SEC regulator and FrontLine Compliance founder and CEO Amy Lynch tells TheStreet's Corey Goldman.
"There are several players in the game, pardon the pun, and there are a lot of pieces to the puzzle that need to be unravelled, and the SEC, FINRA and the CFTC are all involved in looking at those various entities to see what their role was," Lynch says.
GameStop’s sudden surge last month, from around $20 to over $400, forced hedge funds that had bet against the stock to either put up more margin or buy the stock to close out their positions, which sent the stock soaring even higher.
Regulators now must piece together data from brokerages to understand which asset managers were most vulnerable to the short squeeze, which accelerated as many smaller traders gathering on Reddit message board WallStreetBets and on other forums urged one another to buy GameStop, AMC and other stocks.
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