GameStop Frenzy Forces a Look at Zero-Fee Options
The Fed doesn’t want to touch Regulation T margin requirements, and the SEC doesn’t have a clear case against Reddit’s day traders. It’s up to call option prices to self-correct.
You can only hope to contain it.
Photographer: Alessia Pierdomenico/Bloomberg
Perhaps the most remarkable part of the stunning, Reddit-fueled surge in shares of GameStop Corp. and other companies is just how powerless the top U.S. regulatory bodies are to do anything about it.
The past week has shown that a group of individual investors banding together can drive up the price of specific stocks, most notably heavily shorted companies like GameStop and AMC Entertainment Holdings Inc. At first, Federal Reserve Chair Jerome Powell simply dismissed this phenomenon, noting in his press conference Wednesday that “I don’t want to comment on a particular company or day’s market activity.” When pressed about whether he and other officials would consider adjusting Regulation T, which sets initial margin requirements, he seemed outright irritated, saying point-blank it wasn’t something they were thinking about “at all.”