‘You’ve got to have a cop on the beat’: Elizabeth Warren slams SEC over GameStop chaos

Investors on the irreverent WallStreetBets Reddit led an effort to “squeeze” short sellers to cover their bets in such stocks and, as a result, have sparked a frenzy of volatile trading in recent sessions. Many of those retail investors sparked the short squeeze through Robinhood’s popular trading app.

Video game retailer GameStop is up about 200% so far this week, AMC has risen 145% and headphone maker Koss, another “squeeze” target, has surged a whopping 1,100%.

Robinhood’s decision, which it says was motivated by “extraordinary volatility in the markets,” sparked criticism from both sides of the political aisle.

For her part, Warren said she is skeptical of a narrative that would relate the current trading to a classic “David versus Goliath” story that pits a scrappy group of retail investors against a colossal, hedge fund empire.

“That’s the problem: How do you know who’s manipulating the stock at this point?” she asked. “Are you entirely sure that there aren’t wealthy people on both sides? That hedge funds haven’t moved in on the side of the people who bid up the price of GameStop?”

Rep. Ro Khanna, D-Calif., a progressive who represents Silicon Valley, called for “more regulation and equality” and questioned the fairness of preventing individuals from buying.

“While retail trading in some cases, like on Robinhood, blocked the purchasing of GameStop, hedge funds were still allowed to trade the stock,” Khanna said.

By buying GameStop or AMC equity or call options, retail investors have forced investors betting against the stock, known as short sellers and oftentimes hedge funds, to cover their positions by buying back shares in an effort prevent further losses.

When this occurs en masse, it can lead to a feedback cycle and a spike in a stock’s price.

Article source: https://www.cnbc.com/2021/01/28/elizabeth-warren-gamestop-robinhood-market-manipulation.html