Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

EU targets online platforms after Wall Street short squeeze

Stock MarketsFeb 23, 2021 11:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: European Union flags flutter outside the European Commission headquarters in Brussels

By Huw Jones

LONDON (Reuters) - Online platforms like Robinhood in the United States that offer commission-free share trading to retail investors would be illegal in the European Union, officials from the bloc said on Tuesday.

Online trading came to the fore last month after retail investors following the Reddit forum WallStreetBets piled into GameStop Corp (NYSE:GME) shares via the Robinhood platform, sending the retailer's stock rocketing more than 1,000% at the expense of prominent investors who had bet against the stock.

Ugo Bassi, a senior official in the European Commission's financial services unit, said the EU executive had looked at "payment for order flow" under three aspects of the bloc's securities law.

This refers to a broker rewarding an online platform for funnelling trades to it.

"The preliminary conclusion that we came to is that the combination of these three sets of rules would prevent a payment for order flow as it was described in GameStop and Robinhood from being legal and authorised in Europe," Bassi told the European Parliament.

Steven Maijoor, chairman of the European Securities and Markets Authority, the EU's markets watchdog, added it was difficult to reconcile payment for order flow "with putting the client first".

Holders of a short position in stocks must disclose it to EU regulators and Bassi said potential changes could include publishing which stocks have short positions on a weekly or fortnighly basis.

"We could think of rules clarifying the duties of brokers or investment advisors and their firms when they participate in online chat rooms," Bassi said.

Maijoor said there were only 20 stocks in Europe with net short positions of above 10%, limiting the risk of a GameStop-style short squeeze.

Online communities of retail investors were still mainly national in the EU, giving them less clout than in the far bigger U.S. market, Maijoor said.

He cautioned about going too far in penalising short-sellers, saying they can help markets work well, referring to collapsed German payments company Wirecard.

"In the Wirecard case, there were short-sellers wanting to get the accounting fraud to the surface," Maijoor said.

EU targets online platforms after Wall Street short squeeze
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email