Tags: Financial Markets | Money | pat toomey | gamestop | stock market | hedge funds | short squeeze

Toomey: Hope GameStop Probe Doesn't Damage Markets

(CNBC's "Squawk Box")

By    |   Monday, 01 February 2021 03:56 PM

Sen. Pat Toomey, R-Pa., said Monday he hopes lawmakers, who are planning meetings on the state of the stock market in the wake of the GameStop trading frenzy, will not end up doing something that damages the nation's capital markets.

"What bothers me the most is my colleague think we have to run out and pass a new law, have more regulations, and somehow limit the freedom of people to participate in the stock market," Toomey, a member of the Senate Banking Committee, told CNBC's "Squawk Box."

The Banking Committee and the House Finance Committee are both planning meetings, and the Securities and Exchange Commission said in a statement Friday it is also looking at the uptick in trades, as "extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence."

"We can have our hearing, but I hope it doesn't reinforce a tendency to do things that we haven't made the case for about why they need to be done," Toomey said.

Phone apps are making it easy for everyday people to do trades at no cost and even fractional shares, and "this is a great thing," the senator added. "This helps to democratize our markets. It allows people of ordinary means to participate as investors."

The owners of the Robinhood app came under fire for shutting down trading on GameStop and other volatile stocks, but Toomey said clearinghouses require brokers to have the capital to meet their obligations, and that rule is "generally understandable and sensible."

"It's quite possible to me that it was a need to bring additional capital that caused a temporary suspension in certain trading stocks on the platforms," Toomey said. "That would be an understandable reason driven by the regulatory requirements. If there's some other reason, it would be interesting to know."

Meanwhile, it is legal to short sell stocks, Toomey said, but if hedge funds were deceiving people by sending out false information, "that would be a different matter."

He added he is not aware if people were using social media to coordinate buying GameStop and other stocks, and it is not clear they did anything illegal, no matter what one thinks of their motivation.

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Sen. Pat Toomey, R-Pa., said Monday he hopes lawmakers, who are planning meetings on the state of the stock market in the wake of the GameStop trading frenzy, will not end up doing something that damages the nation's capital markets.
pat toomey, gamestop, stock market, hedge funds, short squeeze
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2021-56-01
Monday, 01 February 2021 03:56 PM
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