By Moynihan
Gary Gensler, the new chairman of the Securities and Exchange Commission, told the House Financial Services Committee on Thursday he is weighing fresh enforcement measures as he and SEC staff complete a review of recent market meltdowns related to the GameStop trading saga.
In his first appearance on Capitol Hill since he took the helm of the SEC last month – this time through video teleconferencing – Gensler raised concerns that apps which “gamify” trading – a criticism that has been leveled at Robinhood, in particular – could lure rookie investors into bad situations.
“The SEC must remain attuned to rapidly changing technologies with an eye to freshening up our rules,” Gensler told lawmakers. “If we don’t address this now, the investing public, those saving for retirement, and education may shoulder the burden later.”
More broadly, Gensler said he plans to review new policy approaches aimed at increasing transparency. At issue is the lack of disclosures around key market functions including short selling (or betting against a stock), equity swaps (a type of derivative), and market structure—namely that Citadel Securities executes almost half of all retail trades. Gensler also added he would consider changing the length of time it takes to clear and settle trades.
The hearing follows an unusual bout of market volatility in recent months. In January, shares of GameStop surged as day traders snatched up low-performing stocks like Blackberry and AMC that massive hedge funds were shorting. In March, the over-leveraged family office Archegos left banks with roughly $10 billion in losses as its bets on ViacomCBS and Discovery went south.
“Archegos shows that systemic exposures aren’t being disclosed,” Gensler said. “Transparency is at the heart of efficient markets.”
Asked about the rising popularity of cryptocurrencies including bitcoin, Gensler said he believes Congress should examine a “regulatory framework” for crypto exchanges in order to protect investors and that the “crypto-asset market is one that could benefit from greater investor protection.”
Democrats are eager for Gensler to crack-down on the financial industry after four years of lax regulation under the Trump administration. Sen. Elizabeth Warren earlier this year called Gensler a “tenacious” regulator, a reference to his years as chairman of the Commodity Futures Trading Commission in the Obama administration.
