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Exchange leaders say GameStop saga highlights regulatory challenges

Reuters2021-03-17

By John McCrank

NEW YORK, March 16 (Reuters) - The recent trading frenzy around GameStop Corp and other so-called "meme" stocks highlights shortcomings and challenges in the U.S. markets as retail investors become a bigger presence, exchange leaders said on Tuesday.

"The regulatory structure of the U.S. equity markets, in my mind, is flawed," Jeff Sprecher, chief executive of New York Stock Exchange owner Intercontinental Exchange Inc , said on a panel at the Future Industry Association's virtual FIA Boca conference.

Regulators have focused on competition between market intermediaries, like brokers and exchanges, rather than between buyers and sellers seeking to get the best prices, and the GameStop event exposed issues 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 heavily shorted names, driving up their prices and forcing short sellers to close out positions at big losses.

At the height of the trading mania, several retail brokers restricted the buying of GameStop after collateral requirements needed to clear the trades spiked, angering many traders.

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

"I'm hoping that in the future regulators will roll back some of the punitive rules and allow the market itself to deal with the intermediary structure," Sprecher said.

The challenge now is to determine what constitutes unacceptable trading behavior as retail traders coordinate online, said Singapore Exchange CEO Loh Boon Chye.

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

He pointed to the legalization of gambling and marijuana in most U.S. 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; Editing by Richard Chang)

((john.mccrank@thomsonreuters.com Twitter @jmccrank; 1 646 223-6643; Reuters Messaging: john.mccrank.thomsonreuters.com@reuters.net))

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Comment5

  • trojan1337
    ·2021-03-17
    Wow.. they mentioned retail investors 'manipulate market', 100 million people with $1, vs 100 person with 1million dollar, who has a greater capacity to manipulate the market....? 
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  • SSMH
    ·2021-03-17
    Diamond hands baby
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    • Bulbul
      Apes unite, to the moon!
      2021-03-17
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  • Cinnamoon
    ·2021-03-17
    It's only legal of they win. Authoritarian nonsense. Since when was it allowed to naked short companies over 100% of its shares?
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  • YK_
    ·2021-03-17
    Haha
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  • StormsRiders
    ·2021-03-17
    SEC is a joke.
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    • YK_
      Yes
      2021-03-17
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