Sen. Elizabeth Warren, D-Mass.
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Senator Elizabeth Warren on Thursday criticized the Securities and Exchange Commission, blaming the regulator and its failure to act on a chaotic explosion during the days of market speculation.
“We need an SEC that has clear rules on market manipulation and that has the backbone to go in and enforce those rules,” Warren said. “To have a healthy stock market, you have to have a policeman at your pace.”
“This should be the SEC,” he added. “They have to strengthen themselves and do their job.”
The SEC did not immediately respond to CNBC’s request for comment.
The Massachusetts senator joined CNBC after the wild moves of a handful of stocks forced the popular commercial app Robinhood to restrict access to high-flying stocks at the center of the controversy.
Warren, a longtime Wall Street critic, spoke to CNBC’s “Closing Bell” as traders went to Reddit, Twitter and other social media platforms to protest Robinhood’s move to curb trade. But he made it clear that he’s not a big Robinhood fan either.
“Dresses like Robinhood that say, ‘We’ll give you prizes for coming to join us,'” but then force your clients to sign arbitration clauses. “[don’t] created a healthy market.
He said these arbitration clauses protect Robinhood “if it turns out this is so [it] it really fooled you. It will never be made public, you will be able to do very little. “
Public outrage over Robinhood came after the California-based broker announced Thursday earlier that it would ban customers from buying additional shares from companies like GameStop and moving theater operator AMC Entertainment. It still allows customers to sell these shares from their current portfolio.
Investors at the irreverent WallStreetBets Reddit led an effort to “squeeze” short sellers to hedge their bets on these stocks and, as a result, have caused a volatile trading frenzy in recent sessions. Many of these retail investors caused the small squeeze through Robinhood’s popular trading app.
Video game retailer GameStop has risen 250% so far this week, AMC has risen 145% and headset maker Koss, another “squeeze” target, has risen 1,100%.
Robinhood’s decision, which he says was motivated by “extraordinary volatility in the markets,” sparked criticism from both sides of the political corridor.
For his part, Warren said he is skeptical of a narrative that would relate the current negotiation to a classic story of “David vs. Goliath” pitting a sparse group of retail investors against a colossal hedge fund empire.
“That’s the problem: how do you know who’s handling the stock right now?” she asked. “Are you completely sure there aren’t rich people on both sides? That hedge funds haven’t changed on the side of the people who have offered the GameStop price?”
Representative Ro Khanna, D-California, a progressive representing Silicon Valley, called for “more regulation and equality” and questioned the fairness of preventing individuals from buying.
“Although retail in some cases, such as Robinhood, blocked the purchase of GameStop, hedge funds were still allowed to trade the shares,” Khanna said.
When buying equity options or buying GameStop or AMC, retail investors have forced investors to bet on stocks, known as short sellers and often hedge funds, to hedge their positions by buying stocks in an effort to avoid new ones. losses.
When this happens en masse, it can lead to a feedback loop and a rise in stock prices.
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