Will halt trading if unusual activity in stock matches social media chatter: Nasdaq CEO

(Reuters)

Nasdaq Chief Executive Officer (CEO) Adena Friedman said on January 27 that the US exchange would halt trading in a stock if they matched unusual activity with social media chatter.

Friedman's comments came after a sharp rally in two stocks listed on the New York Stock Exchange (NYSE) - video game retailer GameStop and Movie theater chain AMC Entertainment.

Speaking to CNBC, she said Nasdaq had the technology to evaluate social media chatter.

"If we see a significant rise in the chatter on social media channels...and we also match that up against unusual trading activity, we will potentially halt that stock to allow ourselves to investigate the situation, to engage with the company, and give investors a chance to recalibrate their positions," Friedman told the news channel.

Also read: 'Dumb Money' is on GameStop, and it’s beating Wall Street at its own game

If the exchange suspects that there is manipulation of a stock's price, they would then engage with the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) to investigate the matter, the Nasdaq CEO said.

Shares of GameStop jumped 135 percent on January 27, raising their total gain since January 12 to about 1,700 percent, Reuters reported.

AMC Entertainment's share price surged 300 percent, gaining 800 percent year-to-date.

The rally in the stocks was fuelled by retail investors, and squeezed out short-selling hedge funds. According to media reports, the surge in the stock prices was possibly driven by activity on the "Wallstreetbets" Reddit chat room.