US SEC May Significantly Revise Stock Trading Regulations

Gary Gensler Chairman "Extensive Review of Securities Trading Regulations"

[Asia Economy Reporter Yujin Cho] Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), has hinted at the possibility of significantly revising stock trading regulations, according to the Wall Street Journal (WSJ).

On the 9th (local time), Gary Gensler, SEC Chairman, stated, "Given technological changes and recent developments, I question whether our current stock market is sufficiently efficient," adding, "It is appropriate to find ways to renew SEC regulations to reflect this."

He first raised concerns about the business practice of payment for order flow (PFOF) used by stock trading apps primarily utilized by individual investors.

This business practice involves stock trading apps not charging customers commissions but instead routing their trade orders to firms like Citadel or Virtu, receiving compensation from these companies in return, which could cause harm to individual investors.

This appears to be directly targeting Robinhood, which was at the center of the GameStop incident.

Chairman Gensler criticized, "Brokers profit when investors trade. The more trading volume, the more PFOF is generated," adding, "Investors do not see the costs incurred when their trades are executed. So they really think it’s free."

Many individual investors’ stock trade orders are sent not to formal exchanges but to large securities firms such as Citadel Securities or Virtu Financial.

As of January, when GameStop’s stock price surged, only 53% of total stock trades were conducted on official exchanges.

However, Chairman Gensler pointed out that official exchanges need to handle more trades for individual investors to benefit from better pricing.

Official exchanges disclose both bid and ask prices and aggregate multiple orders to announce optimal prices, whereas dark pools do not disclose quotes before trades are executed.

Additionally, Gensler mentioned that regulations related to stock index calculation methods and the processes by which exchanges and brokerages determine stock prices could be revised.

This content was produced with the assistance of AI translation services.