New York, Jun. 9, (dpa/GNA) - Following market turmoil caused by so-called meme stocks – stocks that gain popularity among investors through social media – the head of the US Securities and Exchange Commission (SEC) Gary Gensler has said he wants to introduce new trading rules.
Securities transactions need to be both transparent and fair, Gensler argued at an industry conference on Wednesday, adding that small investors should not be put at a disadvantage.
At the centre of Gensler’s plans is the controversial business model some online brokers use for orders to big Wall Street trading houses, allowing them to offer their services cheaply. Whether this benefits the client is still a subject of debate.
To ensure small shareholders are not placed at a disadvantage and to avoid conflicts of interest, the SEC chief said options he was considering include an auction model.
This would involve large trading firms competing directly for orders from smaller private investors, guaranteeing them the best price. Such a far-reaching rule change could however put online brokers in a bind.
Online broker Robinhood’s chief legal officer Dan Gallagher was defensive in his response to Gensler’s plans at the conference, arguing that Robinhood’s commission-free model had “saved investors billions” and opened up the stock market to many small investors.
GNA