US lawmakers begin a hearing on Thursday to uncover answers surrounding the recent stock market frenzy that caused unpredictable prize hikes in the value of little-known shares and caused reasons for tougher Wall Street regulations.
The US House Financial Services Committee was to hear from witnesses potraying a vital part in the volatilitywhich drastically affected video game retailer GameStop and other big companies in recent weeks.
The hearing,Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collides,the hearing included testimonies from the head of online bulletin board Reddit, which hosted online chat rooms that promoted the acclaimed meme stocks and of the popular trading platform called Robinhood, which grants access to small investors to partake in the frenzy.
The unpredictable volatility with moves of up to 400 percent just a week for GameStop resulted in cries for US regulatory officials to review the role of social media, hedge funds, and trading platforms that may have a role in the current market manipulation.
The present conditions has slammed Wall Streets hedge funds which often take short positions on shares it deems as likely to fall against a social media-driven move to squeeze the big institutional investors.
Punish the hedge funds?
In prepared the testimony, Robinhood CEO Vladimir Tenev supported the acts his company carried out which enables free trades to small investors.
Any claims that Robinhood actions was intended to support hedge funds or other special big companies interest and to go against the interest of our customers is definitely not true and market-distorting rhetoric, Madimir Tenev stated.
Gabriel Plotkin, founder, and chief investment officer at Melvin Capital Management, stated in his testimony that the fund couldn’t have possibly manipulated the trading results or outcomes.
He also noted that Melvin left its short positions on GameStop with heartbreaking losses when the shares skyrockted from $17 to a peak of $483.
Plotkin stated that people on Reddit forums were encouraging trade in GameStop as a way to get back at hedge fund and that many of the posts online were linked with antisemitic slurs aimed at me and others.
Plotkin stated he was shocked by what happened in January and was taking precaution to protect our investors from similar events in the future.
YouTube sensation Keith Gill, one of the top traders at the center of the mania, told the authorities that he believes GameStop has the potential to reposition itself as the number 1 spot for gamers.