Global regulators have fired warning shots on the GameStop (GME) saga, as feverish trading took place over the last week.
Watchdogs on both sides of the Atlantic said they are monitoring activity and potential lawbreaking, warning traders they could face huge losses.
Online brokerage platforms Robinhood Markets and Interactive Brokers sparked an outrage on Thursday after the platforms restricted its users from trading GameStop and other stocks.
Reddit-inspired investors bought up shares in a war on hedge funds, that have long been shorting the stocks.
Shares in the video game retailer soared more than 60% in early trade in the US on Friday. GameStop and other shorted stocks face continued volatility, after broker Robinhood lifted restrictions.
On Friday, analysts said concerns over this week’s drama had rattled wider markets, despite the far more limited squeezes and levels of short interest in European stocks versus the US. The VSTOXX volatility index for European leading stocks hit its highest level since November.
The UK’s regulator warned that traders should make sure they are familiar with all the rules “including market abuse.”
The UK's Financial Conduct Authority (FCA) said: "The FCA is aware of the situation and continues to closely monitor trading in UK markets. UK investors should take care when trading shares in highly volatile market conditions that they fully understand the risks they are taking. This applies to UK investors trading both US and UK stocks.
The US’s Securities and Exchange Commission (SEC) said: "Extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence."
It warned against “manipulative” and illegal trading and said it would review actions that might disadvantage investors, such as the stop on trading on Thursday.
Watch: GameStop frenzy shows frustration with system