Their unity was revealed this week by a growing group of prominent lawmakers, including Senator Elizabeth Warren (D-Mass.). The GameStop mania was even mentioned repeatedly on Wednesday in a press conference held by Federal Reserve Chairman Jerome Powell, who refused to comment.
“We need more regulation and equality in the markets,” said Rep. Ro Khanna (D-Calif.) In a statement to the press on Thursday morning criticizing the favorable treatment of hedge funds. This was followed by a tweet from Warren on Wednesday saying it was “a long time since the SEC and other financial regulators woke up and do their job”.
Nobody formulated what exactly the authorities should do because it was not clear that something illegal was taking place. But some parties have taken action.
Broker dealers, who offer retail investors popular trading apps to buy stocks on Thursday, are temporarily blocking access to stocks that have seen rapid rallies in recent days, including GameStop and cinema operator AMC, both of which have been particularly hard hit by the pandemic .
Both Robinhood Financial and Interactive Brokers said they are restricting access to certain stocks and taking other steps to curb trading in response to the rallies driven by users of an exchange-related sub-community of users on Reddit “r / WallStreetBets.”
Ocasio-Cortez and Trump Jr. were in an unusual encounter of the ghosts among those cheering the Reddit phenomenon.
“I have to admit that when Wall Streeters, with a long history of treating our economy as a casino, complain about a message board with posters treating the market as a casino, it really is something,” said Ocasio-Cortez wrote in a tweet.
Trump Jr. added: “It took less than a day for big tech, big government, and the corporate media to take action and make arrangements to protect their hedge fund friends on Wall Street. This is what a rigged system looks like, folks! “
“This entire episode has demonstrated the power of technology to democratize access to American financial institutions and ultimately give far more people a say in our economic structures,” said Khanna. “This also showed how the cards are stacked against the little guy in favor of the billionaire Wall Street dealer.”
The White House and the Securities and Exchange Commission responded more carefully, saying only they would be monitoring the situation.
After years of falling stock prices, which fell below $ 3 at one point in 2020, purchases by Reddit users caused GameStop stock to skyrocket in January. On Thursday morning, stocks hit a high of nearly $ 470 per share. By noon, the stock had whipped wildly, dropping below $ 130 within hours after broker-dealers announced their restrictions on customer access before recovering slightly.
Broker-dealers who provide the trading apps can restrict retail investors’ access to certain stocks and other investment options such as options or futures. This is because they must follow federal regulations to protect retail investors, such as: For example, the requirement that brokers must not offer their customers investments that they do not understand.
Brokers can also limit stock activity due to volatility.
The exchanges and the SEC are empowered to stop trading in stocks if they suspect illegal activities, including market manipulation, are taking place. So far, however, they haven’t done this for these stocks.
Robinhood told users in a blog post on Thursday “Given the recent volatility, we are restricting trades on certain securities to only closing positions” on a wide range of stocks including GameStop, AMC, BlackBerry Ltd., Nokia Oyj, Express, and household goods retailer Bed, Bath & Beyond. In addition, Robinhood will also increase the margin requirements for “certain securities,” added the popular broker-dealer, without going into detail.