Friedman, CEO of Nasdaq, says stock market will stop trading in a stock if it associates unusual activity with social media chatter



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Adena Friedman
  • Nasdaq CEO Adena Friedman told CNBC the exchange followed discussions on social media.
  • She said the Nasdaq would stop trading if it associates the gossip with unusual activity in a particular stock.
  • Friedman said it was not clear whether recent Reddit activity would be considered illegal by the SEC.
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Nasdaq CEO Adena Friedman told CNBC on Wednesday that the exchange is monitoring social media discussions and will halt trading if it matches chatter with unusual activity in a stock.

His comments come as a flurry of activity on Reddit has caused shattering price hikes in stocks like GameStop, AMC and Nokia, with no fundamental movement behind the stock moves.

These stocks are listed on the New York Stock Exchange, not the Nasdaq, although Friedman’s appearance on CNBC calls into question the role of a market exchange in regulating extreme stock market activity.

Friedman said the role of Nasdaq as a “self-regulatory organization” is to ensure that activity in the market is “legitimate” and to root out manipulation in the market. She did not detail the type of technology used by the Nasdaq to “assess social media chatter,” but said that if the Nasdaq could associate unusual trading with social media activity, the exchange would shut down. ‘action and potentially engage with the SEC to assess and investigate. .

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One illegal market manipulation activity that the SEC pursues is a “pump and dump” scheme.

An investor buys a stock and then “pumps” it publicly, spreading a rumor or other catalyst for a rise in stocks. Other people see the rumors and buy the shares, which drives the price up. The person behind the rumor sells the shares to them at a higher price in a “dump” and takes the profits.

Friedman said the Nasdaq was working with FINRA and the SEC to identify and investigate the pump and dump systems, but said it was not clear whether Reddit’s current activity could qualify as a system. pumping and discharging.

“Regulators have to sort of catch up with the technology that is now available,” Friedman said.

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