NEW YORK (Reuters) – The recent commercial frenzy surrounding GameStop Corp and other so-called “meme” actions highlights shortcomings and challenges in U.S. markets as retail investors become a bigger presence, market leaders said on Tuesday.
“The regulatory structure of the US stock markets, in my opinion, is flawed,” said Jeff Sprecher, chief executive of Intercontinental Exchange Inc, owner of the New York Stock Exchange, on a panel at Future’s FIA Boca virtual conference. Industry Association.
Regulators focused on competition between market intermediaries, such as brokers and exchanges, rather than between buyers and sellers looking to get the best prices, and the GameStop event exposed problems with this structure, he said.
In January, retail investors coordinated through social media forums an attempt to punish hedge funds by buying GameStop shares and other heavily sold names, raising their prices and forcing short sellers to close positions with big losses.
At the height of the trading craze, several retail brokers have restricted the purchase of GameStop after the warranty requirements needed to clear the trades have increased, angering many traders.
The saga sparked congressional hearings, regulatory investigations and put the short sale under scrutiny.
“I hope that in the future, regulators will reverse some of the punitive rules and allow the market itself to deal with the middle structure,” said Sprecher.
The challenge now is to determine what constitutes unacceptable business behavior while retailers coordinate online, said Singapore Exchange CEO Loh Boon Chye.
Market manipulation, when it comes to retail investors’ online activity, has not been defined, which is “worrying,” said CME Group CEO Terry Duffy.
He pointed to the legalization of gambling and marijuana in most U.S. states as examples of regulators taking a more indirect approach.
“People want to be in charge of their own destiny,” he said.
Reporting by John McCrank; Richard Chang edition