US regulators launch review of stock market turbulence in wake of GameStop rise and fall

WASHINGTON: Top financial markets regulators in the US say they will look into whether recent stock market turbulence is an indication that current trading practices are not doing enough to protect investors.

The Treasury Department said on Thursday (Feb 4) that regulators believe the core infrastructure of the markets has proved to be “resilient during high volatility and heavy trading volume”.

But it said regulators also believe the Securities and Exchange Commission should investigate what happened during the recent market upheaval that pitted smaller, online investors against massive hedge funds.

LISTEN: GameStop’s rollercoaster - What really went down and could it happen here?

The department issued the statement after a meeting of regulators convened by Treasury Secretary Janet Yellen.

The market battle, led by traders gathered on Reddit, sent shares of severely damaged companies like GameStop and AMC soaring. They have since shed much of their gains.

The Treasury statement said that both the SEC and the Commodity Futures Trading Commission were reviewing whether trading practices were consistent with “investor protection and fair and efficient markets”.

READ: Commentary - GameStop insanity has painful lessons on short-selling and more for retail investors

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The meeting on Thursday included officials from Treasury, the SEC and CFTC and officials from the Federal Reserve Board and the Fed's New York regional bank, which serves as a link for the Fed to Wall Street.

In comments earlier Thursday, Yellen said in an ABC television interview that she had convened the meeting because it was important “to make sure that our financial markets are functioning properly and efficiently and that investors are protected”.