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Securities and Exchange Commission Chairman Gary Gensler remained focused on releasing new regulations for commission-free trading platforms rather than the cryptocurrency price crash in June, which on Monday evening resulted in the ‘evaporation of about $ 1.3 trillion in wealth, two public appearances on Wednesday suggest.
The US regulator is worried about commission-free trading platforms that send orders from retail clients to market makers in exchange for so-called payment for order flow, a controversial system that critics say , creates a conflict of interest between these brokers and their clients. Although the practice has been around for some time, it became more and more prevalent after online broker Robinhood started offering free trades in 2014.
Read more: As crypto crash wipes out $ 1.3 trillion, here’s what some pros advise on buying bitcoin, dogecoin, other assets
This practice, Gensler said at the London City Week virtual conference on Wednesday morning, led to around 40% of retail stock transactions going to market makers rather than exchanges like the New York Stock Exchange or the Nasdaq. NDAQ, + 0.31%.
So, the significant commercial interest in these platforms is not necessarily reflected in commonly cited trading systems, which include dark pools, and by over-the-counter wholesalers, he said, referring to the data collected. by enlightened exchanges, like the NYSE. With about half of all stock purchase orders excluded from these calculations, it’s actually difficult to know what prices retail investors are entitled to, he added.
A commission-free trade is not free. That’s just not the case, Gensler said in a later interview on Bloomberg TV. It may be zero commission, but below that some of those brokers then sell your orders to another company, he added. Why is someone paying for it, is it because there is an inherent conflict, even if it’s a dime or two or a small fraction, it’s you, the retail audience? So it’s not free.
See Also: SEC Chairman Says Americans Need Cop On The Ground To Protect Investors From Crypto Fraud
Gensler also questioned the usefulness of Special Purpose Acquisition Companies (SPACs), which raise funds through an initial public offering, after which the shell company has two years to use the funds. funds raised to buy a private company, making that company public. Recent academic research has shown that SPACs are a much more expensive way to get a business listed on the stock exchange and that these additional costs are passed on to the end retail investor.
These are very expensive and dilutive products, he told Bloomberg TV. The sponsor takes some out at first, and then there’s more to take out later when they merge with a private company.
The SEC chairman also focused on his continued efforts to create a new regulatory disclosure regime that would require public companies to disclose the risks posed by climate change. Such a regime is strongly opposed by Republicans in Congress who say it is an attempt to force state-owned companies to tackle climate change, rather than an honest attempt to educate investors.
In a June 14 letter to President Gensler and his predecessor, Commissioner Allison Herren Lee, 12 Republicans on the Senate Banking Committee said we don’t believe new securities regulations aimed specifically at combating Global warming is either necessary or appropriate, and will only serve to discourage more companies from becoming publicly traded, thereby denying important investment opportunities to retail investors.
On Wednesday, Gensler firmly believed that climate information is important for investors to make informed decisions in the market. I have deep respect for the senators who wrote this letter, he told Bloomberg TV. However, he added, investors want to know more about this very important risk, climate risk, how companies are dealing with any future transition, regardless of the physical risks they face and how. do they manage them.
It should be noted that Gensler has not expressed his thoughts on investor protection as it relates to cryptocurrencies, given his past statements about the need for more rules affecting the digital asset market, as well as the recent volatility of the digital asset market.
In May, before the House Appropriations Committee, Gensler said there were gaps in the regulation of cryptocurrencies, like bitcoin BTCUSD, + 1.93% and ether ETHUSD, + 2.37%, noting that ‘there are thousands of them, many of which work as titles. We were only able to bring 75 actions and there are others currently that are not compliant.
See Also: SEC Chairman Says Americans Need Cop On The Ground To Protect Investors From Crypto Fraud
Gensler added that he would like to work with Congress to ensure investor protection on the platforms, where these commodities, sometimes these securities are traded on the platform.
He gave the example of the practice of front running, whereby an exchange could share order information so that another investor could trade ahead of a crypto trade, making it more expensive to buy or sell other investors. , noting that Without a cop with a pace and a few rules of the road, market participants can then execute your orders upfront.
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