US federal regulatory agencies, including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) could soon launch a probe of recent activity on the New York Stock Exchange centered on commonly shorted stocks.
“Secretary Yellen has called a meeting with the SEC, FRB [Federal Reserve Bank], FRBNY [Federal Reserve Bank of New York], and CFTC. Secretary Yellen believes the integrity of markets is important and has asked for a discussion of recent volatility in financial markets and whether recent activities are consistent with investor protection and fair and efficient markets,” Treasury spokesperson Alexandra LaManna told Fox Business on Wednesday. Yellen is a former chairperson of the Federal Reserve.
The move follows weeks of outcry demanding investigations and regulations in response to upheavals in US stocks caused largely by a group of amateur online investors who organize their purchases of commonly shorted stocks on the subreddit WallStreetBets. However, who should be investigated and regulated changes depending on who is doing the demanding.
As Sputnik has reported, those who take the side of the professional hedge funds that have lost billions betting incorrectly that certain stocks would fall in value are calling for investigations of WallStreetBets on grounds of market manipulation, while those who take the side of the small-time traders want investigations of brokerage firms and trading apps like Robinhood, which took it upon themselves to block traders from buying stocks in firms like GameStop, AMC, and Nokia.
Some, like Sen. Elizabeth Warren (D-MA), progenitor of the Consumer Financial Protection Bureau, have called for regulation of both.
Last week, the SEC said it was “closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices,” but has made no further comment. The agency presently has no permanent chairperson, nor does the CFTC, which has not commented on the affair. However, the CFTC did say on Sunday it was monitoring the silver market, into which some of the buying frenzy has spilled in recent days after investors were blocked from buying certain stocks.
Cryptocurrencies like Dogecoin and bitcoin have also benefited from the investment rush, although as Sputnik reported, because they don’t obey the same forces governing their rise and fall in value, such rushes are prone to becoming “pump-and-dump” schemes, which the CFTC investigates on the grounds of fraud.