Gensler Says Scrutinizing Trading Apps Would Be Focus at SEC
(Bloomberg) — Gary Gensler, President Joe Biden’s pick for the U.S. Securities and Exchange Commission, said ensuring retail investors are protected when using trading apps that have exploded in popularity would be a focus if the Senate confirms him to lead Wall Street’s top regulator.
Both topics have gotten attention on Capitol Hill amid January’s frenzied trading in GameStop Corp. and other stocks. Lawmakers have asked questions in particular about Robinhood Markets, which operates one of the most widely used apps, and Citadel Securities, a giant market maker that engages in payment for order flow.
In response to the recent volatility, Gensler said he’s been contemplating “how to protect investors using trading applications with behavioral prompts designed to incentivize traders to trade more.”
Gensler, an ex-Goldman Sachs Group Inc. partner who led the Commodity Futures Trading Commission during the Obama administration, also said he’d take a fresh look at whether brokers accepting payments from market makers benefits customers. While such arrangements have enabled retail investors to trade for free, critics contend they are rife with conflicts of interest.
The SEC is leading Washington’s effort to get the bottom of the wild surge for GameStop, in which day traders banded on social media to hype up so-called Meme stocks. The episode has fueled concerns over the fairness of markets and whether stock prices detached from reality pose a threat to financial stability.