Yellen summons USA financial regulators to discuss market volatility

Democratic presidential hopeful Massachusetts Senator Elizabeth Warren gestures as she speaks during a campaign rally at Eastern Market in Detroit Michigan

Feb 3 (Reuters) - A social media-driven trading frenzy cooled on Wednesday as U.S. Treasury Secretary Janet Yellen called a meeting of top officials that could result in tougher markets regulation for hedge funds, small investors and stockbrokers.

Yellen called a meeting with the Securities and Exchange Commission, the Federal Reserve Board, the Federal Reserve Bank of NY and the Commodity Futures Trading Commission, the Treasury said in a statement late Tuesday.

"Secretary Yellen believes the integrity of markets is important and has asked for a discussion of recent volatility in financial markets and whether recent activities are consistent with investor protection and fair and efficient markets", the department said in a statement.

The meeting is to discuss GameStop-related market volatility.

Progressive US senators Bernie Sanders and Elizabeth Warren over the weekend called for action against what they said were Wall Street abuses by hedge funds revealed by the recent frenzy over GameStop shares. The SEC already said Friday it's seeking to identify potential misconduct and will scrutinize brokerages' decisions to halt buying that triggered a retail-investor revolt.

Investors organized on Reddit forums to target shares of companies that had been short-sold by hedge funds, which have bet that the price of the company would fall.

Euro zone GDP falls less than expected at end of 2020
During the fourth quarter, the GDP in the whole 27-member European Union was down by 0.5 percent from the previous quarter. Eurostat also said that the regional GDP for the whole of 2020 shrank 6.8 percent.

The Treasury official said Yellen was looking for an update from the top US financial regulators. House Financial Services Committee Chair Maxine Waters is planning a hearing February 18, while incoming Senate Banking Committee head Sherrod Brown said he'll hold a hearing but hasn't set a date.

Yellen has requested an ethics waiver to hold the meeting, a Treasury spokeswoman said, confirming a Reuters report.

Reports also suggest that Yellen took the advice of an ethics lawyer before calling for the meeting owing to her $700,000 paycheck she received in the recent past from Citadel LLC, a hedge fund that reportedly lent almost $2.75 billion to Melvin Capital.

"We might see other similar events more regularly, but make sure that regulators look to curb any market (volatility) or manipulation", he said. The Treasury chief has other influential roles, however, including as head of the Financial Stability Oversight Council and as the cabinet's senior-most economic official.

While the SEC is the main overseer of equity markets, not the Treasury, President Joe Biden's nominee for chair - Gary Gensler - hasn't been confirmed.

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