ESMA addresses retail investors in EU GameStop fear

Europe
On the 02/17/21 at 4:12PM

by

Adrien Paredes-Vanheule

The European Securities and Markets Authority (ESMA) cannot not rule out that similar circumstances to those of the GameStop episode in the US “may occur in the EU as well,” it acknowledged on Wednesday.

The battle between the retail investor coalition formed on US social network Reddit and some Wall Street hedge funds around GameStop shares and other US stocks has left the EU watchdog worried because of the very high level of volatility it has sparked in the US market.

Hence, ESMA is trying to curtail a potential EU GameStop case. While pushing for more retail investor participation in the European stock markets, ESMA urged retail investors “to be careful when taking investment decisions based exclusively on information from social media and other unregulated online platforms, if they cannot verify the reliability and quality of that information.”

The regulator called on retail investors for special care regarding social media posts in connection with investment information. It told them to look after investment information from reliable sources and to bear in mind certain investment and market volatility mechanisms prior to investing. Esma clearly warned retail investors that “organising or executing coordinated strategies to trade or place orders at certain conditions and times to move a share’s price could constitute market manipulation.”

ESMA said that it will continue analysing market events alongside national financial market regulators and they will “consider adopting further initiatives aimed at preserving investor protection and market integrity as appropriate.”