US Securities and Exchange Commission (SEC) has issued official statement On last week’s surge in the public stock market. It is a relatively brief description and does not mention any of the major players by name (aka Gametop, Reddit, Robinhood and others), but acknowledges that “extreme stock price volatility has investors increasingly and It has the potential to expose serious losses “It can” undermine market confidence “and basically states that the Commission is watching closely to ensure that it does not.
The SEC statement specifies that it believes that the “core market infrastructure” remains intact despite heavy trading volumes from the previous week in concert through the organization at r / WallStreetBets by activity primarily conducted by retail investors Was inspired by active activity, dedicated to a subreddit. day trading. These retail investors collectively pledged to buy and hold GME shares (and later, shares of other companies such as the movie theater chain AMC) to bid out hedge funds with significant short positions in them.
The high volume of trading activity from individual retail investors led to a variety of functions from platforms that provide free trading to these individuals, including Robinhood, Weibull, Public and M1. Robinhood initially cited its users as “protecting the borders”, but later found that lack of funds to cover trade clearances was likely due to temporary measures, as it was tapped $ 500 million to $ 600 million in credit facility and $ 1 billion in overnight funding.
The SEC statement includes a callout that seems specifically directed at entities such as Robinhood, and it is appropriate to interpret this as a warning:
In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by federal securities laws. Market participants should be careful to avoid such activity. Likewise, issuers must ensure compliance with federal securities laws for any securities offers or sales of their securities.
Robinhood was already run-in with financial regulator Unrelated business practices. During this, Legislators from both the House and Senate, as well as NY AG Letitia James All have expressed their intention to review the event and all the activities surrounding it, with the possibility that the week’s events will include trading forums with roles such as Robinhood.