When the head of the U.S. Treasury summons the regulatory troops in Washington to discuss the goings on involving retail traders pushing stocks up, down and sideways, you know it's serious.
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.
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. In early trading Wednesday the stock was up a more moderate 8.3% at $97.50.
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.