In particular, the commission wants to consider the phenomenon of the gaming approach to investment.
The rules that are used for trading on American exchanges are outdated, and it is necessary to look for ways to update them to meet modern realities. This was announced on Wednesday by the head of the Federal Securities and Exchange Commission (SEC) USA Gary Gensler.
“Today, we often rely on rules that were written in an earlier era. The rules, which were approved 16 years ago, no longer fully meet modern technologies. I believe that it is now reasonable to look for ways to update the SEC rules so that our stock markets are guaranteed to perform their functions, namely, maintaining fair, orderly and efficient markets while protecting investors and simplifying capital formation,” he said on the website of the financial regulator.
In particular, the commission wants to consider the phenomenon of the gaming approach to investment. It leads to the increased daily activity of investors, who, thanks to modern technologies, can quickly sell or buy shares using mobile applications. Easy access to the markets provokes some investors to make more transactions, which leads to an increase in the income of brokers, but, according to research, reduces the income of players in the market.
Gensler also noted that most of the orders for the purchase or sale of shares currently first pass through alternative trading platforms; this can lead to a concentration of operations for a particular company or segment, which in turn leads to increased market volatility and disruption of their functioning. In January, some small-company stocks were hit by a wave of explosive growth. In particular, the value of GameStop’s securities soared by more than 2,000% in a month. The reason for this was a short squeeze (rapid increase in the price of an asset), organized with the help of an online forum Reddit by private traders, who often used the Robinhood mobile app for betting. As a result, hedge funds that play the short market have suffered billions of dollars in losses. Shares of AMC Entertainment Holdings, which owns the movie theater chain, also rose significantly and fell in price. Manipulations with these securities caused sharp fluctuations in the US stock market.