US watchdog vows to defend investors during volatility

The US' securities watchdog vowed Friday to protect small retail investors against high market volatility amid skyrocketing share values of GameStop and similar stocks.

The Securities and Exchange Commission (SEC) said in a statement it will work "to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation," adding it is "closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days."

"We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity," it added.

The watchdog also hinted a potential investigation, as it noted it will "closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities."

The SEC's decision came after American broker application RobinHood put some limits on Bitcoin and other cryptocurrencies early Friday, a day after restricting its users from trading stocks that were in high demand by individual retail investors on Thursday.

RobinHood users earlier reported that the broker firm has frozen deposits related to cryptocurrencies. While seconds are significant for customers in flash trading, users' deposits may now take as long as five business days to clear in RobinHood.

"Due to extraordinary market conditions, we’ve temporarily turned off Instant buying power for crypto," the firm said in a statement early Friday.

"Customers can still use settled funds to buy crypto. We’ll keep monitoring market conditions and communicating with our customers," it added.

On Thursday, the broker app has become a center of controversy when it restricted transactions for certain stocks, such as GameStop, BlackBerry and AMC, which have seen record high levels in recent days as small investors from a subReddit forum named WallStreetBets started taking long positions in such cheap securities.

After RobinHood lifted some of the trade restrictions on securities late Thursday, GameStop and AMC stocks started to surge again. They were up by more than 50% shortly after US stock market opened on Friday.

RobinHood CEO Vlad Tenev argued late Thursday the restrictions were introduced to protect the company and its users.

"We have lots of financial requirements. We have SEC net capital requirements and clearing house deposits. So that’s money that we have to deposit at various clearing houses," he told CNBC.

"Some of these requirements fluctuate quite a bit based on volatility in the market and they can be substantial in the current environment where there’s a lot of volatility and a lot of concentrated activity in these names that have been going viral on social media," he added.

RobinHood's latest move on cryptocurrencies, however, came after a less known virtual money named Dogecoin has soared more than 300% in 24 hours, and it became even more popular after business mogul Elon Musk tweeted about it.

As a criticism against large Wall Street hedge funds that have bet on such stocks would decline and fail, Musk wrote late Thursday on Twitter "this is bs – shorting is a scam legal only for vestigial reasons."

Crypto rally gained even more momentum earlier Friday led by heavyweight Bitcoin soaring 20% to $38,700, closing on to its all-time high of $41,600.

Source: Anadolu Agency