Shivdeep Dhaliwal , 27 January 2021
There is something “systemically” wrong in the options trading of the stock of GameStop Corporation GME 0.1%, according to Massachusetts securities regulator, Barron’s reported Tuesday.
What Happened: The Secretary of the Commonwealth of Massachusetts William Galvin told Barron’s that he has kept an eye on the stock. “I’m concerned, because it suggests that there is something systemically wrong with the options trading on this stock.”
The publication is awaiting further clarification from Galvin on the specific nature of the problems in options trading. GameStop shares soared over 134% in regular and after-hours trading and have risen over 678% since 2021 began fueled by a Reddit forum.
Why It Matters: Last month, Massachusetts Securities Division wrote a 24-page complaint alleging that the online securities broker Robinhood exposed investors to unnecessary trading risks. The state alleged Robinhood indulged in gamification of its platform.
“It’s presented as some sort of game that you might be able to win,” Galvin said at the time.
Regulators, including the United States Securities and Exchange Commission, monitor trading for market manipulation and scan public forums in the process, according to Amy Lynch, a former SEC regulator, as reported by Barrons.
Lynch thinks that the SEC would be more interested in larger investors or a group of investors working in sync to manipulate stock prices rather than in novice traders looking to profit on minor bets.
On Tuesday, “Big Short” fame investor Michael Burry dubbed the GameStop rally as “Unnatural, Insane and Dangerous.”