Retail frenzy stalls as focus falls on regulator meeting

LONDON (Reuters) – Stocks at the heart of a recent buying frenzy driven by social media slipped in thin European trade on Thursday, adding to the sense that their spectacular rallies might be fizzling just as U.S. regulators meet to discuss last week’s wild ride.

The Frankfurt-listed shares of videogame retailer GameStop fell 12% and cinema operator AMC Entertainment dropped 9%, and the losses put their prices more or less in line with where they had settled in U.S. after-market trade.

U.S. Treasury Secretary Janet Yellen will meet financial regulators on Thursday to discuss GameStop and the recent market volatility, the Department of Treasury said.

Focus could fall on the online forums where mass buying of GameStop and AMC was discussed last week, and on the ever-larger role played by hedge funds in financial markets.

“It’s about making sure that the playing field is level and also making sure that … retail investors are protected and making sure that the types of accounts, the types of trading, and the types of products they use are certainly suitable,” said Ben Slaven, global head of exchange-traded funds asset servicing at BNY Mellon.

Yellen will meet with the heads of the U.S. Securities and Exchange Commission, Federal Reserve Board, Federal Reserve Bank of New York, and Commodity Futures Trading Commission.

Along with others targeted by the retail crowd, the stocks rose soared last week, as buying triggered a “short squeeze,” and funds that had bet against the companies scrambled to close their positions by purchasing the stocks at high prices.

Thursday posts on Reddit implored investors to hang on, although many analysts think the squeeze is probably over and broader market attention has begun to turn to the possible fallout.

“The FOMO was too strong. Nothing to do but hold now,” wrote one user, who said he had bought in to GameStop shares at $370. GameStop last traded in Frankfurt at 80.80 euros ($97.05) and AMC at 7.40 euros. U.S. premarket trading begins at 0900 GMT.

Fee-free online broker Robinhood, which has been at the centre of the phenomenon, has further relaxed trading restrictions on the hottest retail-trader stocks before U.S. markets open on Thursday.

Traders can now buy as many as 500 GameStop shares, up from a limit of 100. The limit on AMC shares was set at 5,500 and buying limits on other stocks were removed.

Robinhood had imposed the limits and has been raising billions of dollars in capital because clearing houses, which mediate stock-market trades, had demanded extra collateral.

Broader markets slipped on Thursday amid worries about Sino-U.S. tensions and tightening monetary policy in China.

(Reporting by Joice Alves in London, Aleksandra Michalska in New York and Tom Westbrook in Singapore; editing by Jason Neely, Larry King)