Friday, 16 April, 2021

Treasury’s Yellen to call regulator meeting on GameStop volatility By Reuters

Yellen summons regulators to discuss financial market volatility Live Updates: Treasury Secretary calling meeting to discuss market volatility amid GameStop trading frenzy
Ginger Lawrence | 04 February, 2021, 11:39

David Lipton, an economist who served as a senior official at the International Monetary Fund and U.S. Treasury, will return to government service as a senior adviser to Treasury Secretary Janet Yellen, six sources familiar with the matter said.

Yellen called a discussion with the Securities and Exchange Commission, the Federal Reserve Board, the Federal Reserve Bank of NY and the Commodity Futures Trading Commission, Bloomberg said citing the Treasury.

Yellen asked to discuss recent volatility and whether trading has been consistent with fair and efficient markets.

The SEC last week warned that "extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence".

Robinhood, the app-based broker that sparked outrage when it restricted trading in so-called meme stocks, is paid by Citadel Securities for privileged access to its users' trades.

But GameStop crashed back to earth, closing down 60 percent at $90 on Tuesday, leaving many traders with huge losses.

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"This is the first test for the Biden administration in the reorientation of consumer and investor protections", said Christopher Campbell, a former assistant secretary of the Treasury for financial institutions from 2017 to 2018. This week's meeting about GameStop is not a formal FSOC session, but more of an ad hoc gathering of top financial regulators.

"We haven't seen anything to indicate anything that suggests it would bring down the market", Lee told NPR in an interview.

Griffin runs a hedge fund and controls Citadel Securities, a giant market making firm that executes trades for customers of broker-dealer Robinhood Markets Inc. House Financial Services Committee Chair Maxine Waters is planning a hearing February 18, while incoming Senate Banking Committee head Sherrod Brown said he'll hold a hearing but hasn't set a date.

Reports also suggest that Yellen took the advice of an ethics lawyer before calling for the meeting owing to her $700,000 paycheck she received in the recent past from Citadel LLC, a hedge fund that reportedly lent almost $2.75 billion to Melvin Capital.

"Both are potentially financial stability issues", he said. "Trust in markets and market integrity is absolutely critical for markets to function and for people to engage in them".

The Federal Reserve Board declined to comment and the SEC, New York Fed and CFTC did not respond to queries about the meeting late on Tuesday.