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The top stock market regulator in the United States is seeking to change the rules of stock trading, including the fees paid by large Wall Street groups to process customer orders. The explosive growth of “memetic stocks” previously highlighted what he called “inefficiency” in the market.
US Securities and Exchange Commission Chairman Gary Gensler said on Wednesday that he has asked the agency’s staff to propose changes to a series of market structure rules-an announcement that caused the trading company Virtu Financial’s share price to fall by 7.7%.
The review will cover controversial issues Order flow payment, Where retail brokers charge fees from market makers such as Virtu and Susquehanna to process their transactions. In return, they promise to execute the transaction at or better than the current market price.
Gensler said the SEC will also study applications that encourage “gamification” of transactions through email alerts, reminders, and moving images to attract investors.
“The question is whether our stock market is as efficient as it should be in light of technological changes and recent developments,” he said at a conference held by Piper Sandler in New York.
Many issues caught the attention of regulators and policymakers in January, when day traders exchanged ideas on the social media site Reddit and used the trading platform Robinhood to push up the stock prices of GameStop and other companies.
The huge move has drawn attention to the dominance of order flow payments and a group of privately held Citadel securities, which executes nearly half of all retail transactions in the United States.Vitu is Second largest Market maker.
The new rules may also have an impact on the business model of brokers—especially Robinhood, which is preparing for an IPO—because they receive subsidized order flow payments for zero-commission equity transactions for customers.
“When investors trade, the broker makes a profit,” Gensler said. “For those brokers with these arrangements-not everyone does it-higher trading volume will generate more payments for order flow. The difference in the current zero-commission brokerage environment is that investors are executing trades They didn’t see the cost, so they might think they’re free.”
In a statement after Gensler’s remarks, Robinhood stated, “I look forward to getting in touch with the SEC through a formal rulemaking process, as it is considering changes to the current market structure, which is important for an increasingly diverse investor base. very effective”.
Gensler once said concern Since becoming chairman of the US Securities and Exchange Commission in April, he has repeatedly discussed the issue of order flow payments, but his comments on Wednesday indicated that he intends to conduct a comprehensive review of the market structure.
He said that the staff will also study the minimum price increment of stocks and the rules to ensure that customers get the best trading prices. These rules are loaded into a system called “best buying and selling prices in the country.”
He also questioned whether the U.S. system to ensure that customers get the best price is comprehensive enough, because existing rules do not include transactions conducted on the bank’s internal transaction books and private markets called dark pools.
After some market participants, including retail broker Robinhood, listed it as a key factor in the January decision to restrict certain meme stock trading, the chairman of the US Securities and Exchange Commission supported shortening the settlement time for US stock trading from the current two days Call. .
“I remembered an old saying in the market,” Gensler said. “Time equals risk.”
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