Exchange leaders say the GameStop saga highlights regulatory challenges

NEW YORK (Reuters) – The recent trading frenzy around GameStop Corp and other so-called “meme” stocks highlights shortcomings and challenges in US markets as retail investors become a bigger presence, exchange leaders said. Tuesday.

“The regulatory structure of US stock markets, in my view, is flawed,” said Jeff Sprecher, chief executive officer of Intercontinental Exchange Inc, owner of the New York Stock Exchange, in a panel at the Future Industry Association’s FIA Boca virtual conference. .

Regulators have focused on competition between market intermediaries, such as brokers and exchanges, rather than between buyers and sellers trying to get the best prices, and the GameStop event exposed problems with that structure, he said.

In January, retail investors coordinated through social media forums in an effort to punish hedge funds by buying shares of GameStop and other names heavily short, raising their prices and forcing short sellers to close positions in case. of great losses.

At the height of the trading craze, several retail brokers restricted the purchase of GameStop after the collateral requirements needed to cancel trades increased, angering many traders.

The saga sparked Congressional hearings, regulatory investigations, and put short selling under scrutiny.

“I hope that in the future the regulators will nullify some of the punitive rules and allow the market itself to take care of the intermediate structure,” Sprecher said.

The challenge now is to determine what constitutes unacceptable trading behavior as retail traders coordinate online, said Loh Boon Chye, CEO of Singapore Exchange.

Market manipulation, when it comes to online retail investor business, has not been defined, which is “worrying,” said Terry Duffy, CEO of CME Group.

He pointed to the legalization of gambling and marijuana in most US states as examples of regulators taking a more straightforward approach.

“People want to be responsible for their own destiny,” he said.

Reporting by John McCrank; Editing by Richard Chang