Financial Regulation After GameStop: The Game Will Go On!
Ariadna Dumitrescu, 10 June 2021
vThe Covid-19 crisis came at the end of more than two decades that witnessed a significant transformation of financial markets with main catalysts such as financial innovation, technology adoption, and financial regulations. The 2020 stock market’s roller coaster (record price levels and volatility) exposed the financial system’s fragility. This year, the increased volatility in so-called ‘meme’ stocks – i.e., stocks whose trading volume increases not because of the company’s good performance, but because of hype on social media –, has highlighted several problems in financial markets. Although seemingly unimportant, the risk that these events could pose to the entire financial system opens the door for discussions on the implementation of new regulations (or the improvement of older ones).
The GameStop (GME) short squeeze in January 2021 was a strategy by retail investors – specifically, users of the Reddit forum r/wallstreetbets –, to coordinate buying the stock and drive up the price. The dramatic increase in its price, from $18.84 on December 30, 2020, to $347.51 on January 2021, had major consequences for the financial markets and, in particular, for financial intermediaries that were short-selling the stock (a strategy consisting of betting the stock will fall). Thus, Melvin Capital Management, a hedge fund that had publicly announced it was short-selling GME, lost 53% of its value in January and needed a private bailout.
South Korean leaders have been mulling ways to release him early from jail. Samsung, whose exports of chips, display panels and tech products buttress the local economy, needs him back at its helm to navigate through a new global economic war raging over chip leadership, those calling for his early release say.
“A public consensus seems to be building on the need for Lee’s release,” Rep. Song Young-gil, leader of the ruling Democratic Party said recently, heightening the expectation for Lee’s release. The politician suggested granting him parole, if not a presidential pardon, to let him out.
While the right to grant a pardon lies solely with the president, a parole can be decided by the justice minister.
