Exchange Leaders Say GameStop Saga Highlights Regulatory Challenges

NEW YORK (Reuters) – The recent trading frenzy around GameStop Corp and other so-called “meme” stocks highlights shortcomings and challenges in US markets as retail investors gain a greater presence, stock market leaders said Tuesday. .

FILE PHOTO: A GameStop store is shown in the Manhattan borough of New York City, New York, USA, January 29, 2021. REUTERS / Carlo Allegri

“The regulatory structure of the US equity markets, in my opinion, is flawed,” said Jeff Sprecher, CEO of Intercontinental Exchange Inc, owner of the New York Stock Exchange, on a panel at the FIA ​​virtual conference. Mouth of the Future Industry Association.

Regulators have focused on competition between market intermediaries, such as brokers and exchanges, rather than between buyers and sellers looking to get the best prices, and the GameStop event exposed problems with that structure, he said.

In January, retail investors coordinated through social media forums in an attempt to punish hedge funds by buying shares of GameStop and other very short names, pushing up their prices and forcing short sellers to close positions with big losses.

At the height of the trading mania, several retail brokers restricted the purchase of GameStop after the collateral requirements necessary to liquidate trades increased, infuriating many traders.

The saga has sparked congressional hearings, regulatory investigations and has put short selling under scrutiny.

“I hope that in the future the regulators will repeal some of the punitive rules and allow the market itself to take care of the intermediate structure,” Sprecher said.

The challenge now is to determine what constitutes unacceptable business behavior when retailers coordinate online, said Loh Boon Chye, CEO of Singapore Exchange.

Market manipulation, when it comes to online activity by retail investors, has not been defined, which is “concerning,” said CME Group CEO Terry Duffy.

He pointed to the legalization of gambling and marijuana in most US states as examples of regulators taking a more hands-off approach.

“People want to be in charge of their own destiny,” he said.

Reporting by John McCrank; Edited by Richard Chang


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