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The future chairman of the United States Senate banking committee, Sherrod Brown, announced a hearing “on the current state of the stock market” on Thursday (local time). It’s time for the SEC and Congress to make the economy work for everyone, not just Wall Street. “People on Wall Street only care about the rules when it hurts,” Brown’s statement said.
The background of this is the great annoyance of investors by the restrictions on the trading of papers by GameStop and other companies, through which they are slowed down on the path of profits. Online broker Robinhood in particular was the target of massive criticism and suspected of discriminating against small investors compared to large Wall Street investors. At companies such as GameStop or the AMC theater chain, hedge funds have recently lost a lot of money betting on falling prices, not least because hobbyist traders organized in online forums and managed to successfully boost shares in the company. .
The fact that Robinhood restricted the trade of newspapers so that they can only be sold but can no longer be bought now could become a political issue and generate a broader debate on regulation. According to the US media, the chair of the Finance Committee of the US House of Representatives, Maxine Waters, is planning a hearing. It should be about the recent turmoil in the financial market and the role of hedge funds in it. Other high-ranking Democratic Party politicians like Elizabeth Warren and Alexandria Ocasio-Cortez also asked for clarification. Republican Party officials also did not understand Robinhood’s decision.
After the storm of outrage and the first complaints from investors being pushed out of price gains, Robinhood announced in the evening that it would once again ease trading restrictions on securities. Robinhood boss Vlad Tenev told US financial broadcaster CNBC that the trade restrictions had been decided to protect his own company and his clients.
The GameStop hype is entering the next round
After a record 44 percent daily loss, GameStop is facing another triple-digit percentage price jump.
Gamestop’s stock eventually rose 67.87 percent to $ 325.00 on the NYSE. Several brokerages had previously relaxed their restrictions on newspaper trading in response to public pressure.
In the past two weeks, GameStop’s rate increased by a total of about 2,000 percent. The rally was triggered by concerted buyouts by retail investors. They forced the big hedge funds to largely liquidate their bets on paper deterioration. This brought stocks higher and some funds to the brink of ruin.
“Unfortunately, this is not an isolated incident,” said Randy Frederick, manager of brokerage Charles Schwab. “People will try to repeat that with different values.” Andrea Cicione, chief investment strategist at research firm TS Lombard, made a similar statement. “Such things usually come in waves.”
In recent days, companies such as the German biotech company Evotec, the American cinema chain AMC or the Finnish network provider Nokia had registered huge price increases for the same reasons as GameStop. What these companies have in common is that hedge funds speculate on a large scale on falling prices. Bank JPMorgan experts have identified 45 stocks that are prone to similar price volatility. The American chain of restaurants Cheescake Factory belongs to this list.
Bundestag Member on GameStop Turbulence: Don’t Discriminate Against Small Investors
The stock market turmoil surrounding American video game retailer GameStop calls financial politicians from the Bundestag to the scene.
“Trading platforms must be open to all market participants. It cannot be that a large number of small investors are excluded from trading in a volatile phase and large hedge funds continue to have access to the market,” said Florian Toncar from the FDP on Friday to the Reuters news agency. “Our regulators must rigorously enforce these principles, they are part of the core of open capital markets.”
Small investors recently bought shares of GameStop and other companies in concert, forcing hedge funds to cancel their bets on falling prices for these stocks. This even brought some funds to the brink of bankruptcy. Then the brokers partially restricted the trading of these papers. Politicians in the US Congress announced that they would make the state of the stock market a problem in parliament. The target is online broker Robinhood, which is popular with small investors and has blocked purchases from GameStop but continued to allow sales.
Robinhood’s approach raises questions about the culture of the stock market, said SPD financial politician Jens Zimmermann. Derivatives and other financial products could increase the efficiency of markets. “But we have to follow this development very closely.”
Fabio De Masi, left, spoke of a scandal: “When brokers suspend operations to protect institutional investors, it shows how sensitive financial sharks react when a swarm hinders them. This is where the supervisory authority of the stock exchange values have to intervene “.
/ hbr / DP / stk
WASHINGTON (dpa-AFX)
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