EXCLUSIVE – Yellen Treasury to convene meeting of top regulators on GameStop volatility

(Add details on market volatility, ethics note)

WASHINGTON, Feb. 2 (Reuters) – U.S. Treasury Secretary Janet Yellen convenes a meeting of top financial regulators this week to discuss market volatility caused by retail trading in GameStop Corp. and other stocks.

Yellen will convene the heads of the Securities and Bank Commission, the Federal Reserve, the Federal Reserve Bank of New York and the Commodity Trading Commission, a Treasury official said on Tuesday.

Yellen sought and received permission from ethics attorneys before convening the hearing, according to a document seen by Reuters, and engaging in major issues in the financial services industry.

Yellen’s decision to resign was followed by a Reuters report that he was paid by a key player in the GameStop saga, hedge fund Citadel LLC, due to speech fees, and may have to seek an ethical waiver to deal with issues involving the firm.

The Treasury official, who refused to be identified by name, said the meeting would take place this week, possibly as early as Thursday.

“Secretary Yellen believes that market integrity is important and called for a discussion on recent volatility in financial markets and whether recent activities are in line with investor protection and fair and efficient markets,” said Treasury spokeswoman Alexandra LaManna. a statement to Reuters.

Yellen’s action comes after a few days of turnaround in the actions of video game retailer GameStop, led by retail investors who have gained or lost billions of dollars for hedge funds and other investors in recent weeks. Retail activity has also raised silver prices in recent days.

GameStop shares rose half in value on Tuesday, and silver prices retreated as Reddit-based trading frenzy eased, at least for now.

GameStop shares closed 60% at $ 90. They are now worth less than a fifth of their $ 483 high last week.

The saga is likely to accelerate a regulatory review of the growing role played by non-banking firms in the financial markets, regulatory experts say.

Treasury ethics advocates have given Yellen the flexibility to work on any related issues that arise, with no limits in current or future markets, the Treasury official said.

In a note granting permission to Yellen to convene a meeting of regulators, Treasury Ethics official Brian Sonfield said it would be “difficult, if not impossible” for Yellen to back down from issues involving market volatility.

“You are the Secretary of the Treasury, whose responsibilities require involvement in a wide range of issues focused on these sectors,” Sonfield wrote.

“Problems related to these sectors could arise at any time without the opportunity to consult the ethics office. These circumstances make it difficult, if not impossible, for you to drop issues related to these sectors and also to advocate for prior authorization. ”