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Exchange leaders say GameStop saga highlights regulatory challenges

Published 03/16/2021, 03:49 PM
Updated 03/16/2021, 04:40 PM
© Reuters. FILE PHOTO: A GameStop store is pictured in New York

© Reuters. FILE PHOTO: A GameStop store is pictured in New York

By John McCrank

NEW YORK (Reuters) - The recent trading frenzy around GameStop Corp (NYSE:GME) 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 (NYSE:ICE) 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 (OTC:SPXCY) CEO Loh Boon Chye.

Market manipulation, when it comes to retail investors' online activity, has not been defined, which is "concerning," said CME Group (NASDAQ:CME) 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.

© Reuters. FILE PHOTO: A GameStop store is pictured in New York

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

Latest comments

When millions of individuals want to buy a stock and the price soars, that is not market manipulation but just free market. period. When a small group of conniving financial firms do it at expense of the average citizen, that is market manipulation
what about the big sell last Wednesday .1 billions value from 6 sellers at the same time and very low under the price market???is not a coordinate sell from by money funds???
lol, The problem is not some retail investors "coordination" but rather illegal naked shorting and the miniscule sanctions for large entities that are knowingly and intentionally braking the rules, since the fines that follow are tiny next to the profits.
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