Lawmakers are quick to respond to the madness surrounding Gamestop and AMC stocks and the hedge funds that sell them short.
On January 28, Maxine Waters, chairman of the House Financial Services Committee, announced an upcoming hearing on short selling. Sherrod Brown, the new chair of the Senate Banking Committee, said the same way called for a re-examination of the stock exchange rules.
Short selling has been the subject of this widespread controversy since the past two days have seen tremendous volatility for certain securities, notably Gamestop (GME). Retailers, communicating via Reddit and buying on Robinhood, have been busy buying up GME in light of the short exposures of several major hedge funds.
Earlier today, Robinhood and a number of other platforms targeted retail investors canceled buy on GME, in what many have called unfair collusion with the hedge funds involved. Waters said:
“I will convene a hearing to examine recent activity around GameStop (GME) stocks and other impacted stocks, with an emphasis on short selling, online trading platforms, gamification and their systemic impact on our capital markets and private investors.”
Alexandria Ocasio-Cortez and Rashida Tlaib, who are both members of the House Financial Services Committee, both announced they were strongly opposed to Robinhood’s move, with AOC also requesting a hearing.
This is unacceptable.
We need to know more about it now @Robin_Robin‘s decision to prevent private investors from buying shares, while allowing hedge funds to trade the shares freely as they see fit.
As a member of the Financial Services Cmte, I support a hearing if necessary. https://t.co/4Qyrolgzyt
– Alexandria Ocasio-Cortez (@AOC) January 28, 2021
Sherrod Brown expressed a similar sentiment in his announcement: “People on Wall Street only care about the rules when they’re the ones who get hurt.”
Robinhood is already in the legal hot seat for its practice of diverting orders to market makers who paid back the company for the company. They charged costs with the Securities and Exchange Commission for $ 65 million.
The current chaos in the market appears to have attracted enough attention to warrant a turnaround in securities laws, as it applies separately to retail and institutional investors.