March 4, 2024

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Nasdaq CEO Friedman claims the exchange will halt trading in a stock if they url uncommon action to social media chatter

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Adena Friedman

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  • Nasdaq CEO Adena Friedman explained to CNBC the exchange tracks social media chatter. 
  • She said the Nasdaq will halt buying and selling if they link chatter to unconventional exercise in a distinct inventory.
  • Friedman stated it really is unclear no matter if recent Reddit activity would be regarded as unlawful by the SEC. 
  • Signal up here our everyday publication, 10 Matters Just before the Opening Bell.

Nasdaq CEO Adena Friedman told CNBC Wednesday that the trade screens social media chatter, and will halt buying and selling if they match the chatter with strange activity in a stock. 

Her feedback appear as a flurry of action on Reddit has sparked earth-shattering price rises in stocks like GameStop, AMC, and Nokia, with no fundamental moves powering the inventory actions. 

Those people stocks are mentioned on the New York Stock Exchange, not the Nasdaq, while Friedman’s CNBC appearance delivers into problem what a industry exchange’s purpose is in regulating excessive stock activity. 

Friedman mentioned the Nasdaq’s purpose as a “self-regulatory organization” is to make positive exercise in the marketplace is “respectable” and to root out manipulation in the market place. She did not element what kind of know-how the Nasdaq utilizes to “assess social media chatter,” but she mentioned if the Nasdaq can match unconventional investing with social media exercise, the trade will halt the stock and perhaps engage with the SEC to consider and investigate. &#13

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One illegal market place manipulation exercise that the SEC goes following is a “pump-and-dump” scheme. 

An investor buys a inventory, and then publicly “pumps” it, by spreading a rumor or a different catalyst for the stock go up. Other men and women see the rumors and invest in the stock, triggering the value to increase. The particular person who originated the rumor sells the stock to them at a higher price in a “dump,” and requires the gains. 

Friedman said the Nasdaq collaborates with the FINRA and SEC to establish and investigate pump and dump techniques, but she mentioned it is unclear no matter whether the current Reddit exercise qualifies as a pump and dump plan.

“Regulators variety of have to capture up with the technological innovation which is now accessible,” Friedman reported. 

Read more: ‘We’re very astonished we didn’t underperform in the 4th quarter’: Cathie Wood and her analysts break down their stock-assortment process and the major 10 picks that contributed to the outperformance of ARK ETFs in Q4 2020

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