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Several lawmakers have expressed dissent by Robinhood’s trading ban decision on Thursday stating that more stern regulatory measures are required in such a situation.
Thursday’s trading session on Wall Street was nothing less than dramatic. The madness around GameStop Corporation (NYSE: GME) stock provoked by the Reddit community led to popular trading app Robinhood ultimately banning users from putting new orders but later allowing it in a limited mode. The app only allowed users to have withdrawals or sell the stock.
Well, this led to a major backlash by retail investors who said that the app had been colluding with hedge funds. In the entire episode, the hedge funds have faced severe losses as retailers took the GME skyrocketing northwards. The Reddit community of stock investors drove the stock against the massive short calls by hedge funds and led to the decision of Robinhood and others to stop trading.
The result was GameStop stock gained more than 800% in just the last five trading sessions. This vertical price swing has drawn the attention of several lawmakers. On Thursday, Maxine Waters, Chairwoman of the House Financial Services Committee said:
“I will convene a hearing to examine the recent activity around GameStop (GME) stock and other impacted stocks with a focus on short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors.”
New York’s democratic representative Alexandria Ocasio-Cortez has expressed firm opposition to Robinhood’s decision. The AOC also called for a “hearing” in this case.
This is unacceptable.
We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
Even other lawmakers joined the AOC extending their support. Ohio’s Democratic Sen. Sherrod Brown, also the incoming chairman of the Senate Committee on Banking, Housing, and Urban Affairs, said:
“People on Wall Street only care about the rules when they’re the ones getting hurt. It’s time for SEC and Congress to make the economy work for everyone. As Incoming Chairman of the @SenateBanking Committee, I will be holding a hearing on the current state of the stock market”.
Need for Regulations in Space
Sherrod Brown, the incoming chairman of the Senate Banking Committee, has also called for a re-examination of the stock market rules. Progressive Sen. Elizabeth Warren (D-MA) said:
“It’s long past time for the SEC and other financial regulators to wake up and do their jobs — and with a new administration and Democrats running Congress, I intend to make sure they do”.
Silicon Valley progressive Rep. Ro Khanna (D-CA) put out a statement Thursday saying, “We’re done letting hedge fund billionaires treat the stock market like their personal playground, then taking their ball home as soon as they lose,” he continued. “We need more regulation and equality in the markets”. Rep. Rashida Tlaib referred to Robinhood’s actions as an attempt of “market manipulation”.