SEC's GameStop Report Investigates Role of 'Game-Like' Brokerage Apps
A report by the SEC released Monday that investigated the trading controversy surrounding GameStop earlier this year has challenged the role of "game-like" trading apps.
A report by the Securities and Exchange Commission (SEC) released Monday that investigated the trading controversy surrounding GameStop earlier this year has challenged the role of “game-like” trading apps that may urge investors to trade stocks too frequently.
GameStop experienced a surge of activity in January following social media chatter that led to the term “meme stocks.” Some brokerage apps temporarily banned some trades as a result of the volatile activity, with the SEC pursuing an investigation (pdf).
“January’s events gave us an opportunity to consider how we can further our efforts to make the equity markets as fair, orderly, and efficient as possible,” SEC Chair Gary Gensler said in a press release.
“Making markets work for everyday investors gets to the heart of the SEC’s mission. I would like to thank the staff for bringing their expertise to this important report, and for their ongoing work on to address the issues that January’s events raised,” he added.
The New York Stock Exchange halted trading of the stock of video game retailer GameStop on Feb. 25 as its price surged above $100 per share in overnight trading. The stock had been favored by small investors in online outlets like the Reddit forum r/Wallstreetbets.
The halts were triggered by the stock price increasing or decreasing too quickly, the exchange stated on its website, citing the Limit Up-Limit Down (LULD) rule. The rule was adopted by major exchanges in 2012 to trigger a 5- or 10-minute trading halt on an individual stock in some circumstances, such as when its price abruptly shifts up or down.
Two months after the controversial online trading spike, the video game retailer announced it would sell up to 3.5 million of its shares.
The shares were sold through an “at-the-market” offering, which let companies place their stock on the market over a period of time.
The new report emphasized that the role of online brokerage firms to encourage investors to trade more frequently needs further review.
“Consideration should be given to whether game-like features and celebratory animations that are likely intended to create positive feedback from trading lead investors to trade more than they would otherwise,” the SEC said in the report.
The controversial trades have had strong consequences across the industry. In addition to temporary trading by some online brokerage apps, companies have been fined for their involvement.
Massachusetts regulators fined MassMutual $4 million and ordered it to overhaul its social media policies after accusing the company of failing to supervise an employee whose online cheerleading of GameStop’s stock helped launch the frenzy that shook Wall Street earlier this year.
By Christopher Burroughs
Written By
The Epoch Times
The Epoch Times is the fastest-growing independent news media in America. We are nonpartisan and dedicated to truthful reporting.
We are free from the influence of any government, corporation, or political party—this is what makes us different from other media organizations. Our goal is to bring our readers accurate information so they can form their own opinions about the most significant topics of our time.
We don’t follow the unhealthy trend of agenda-driven journalism prevalent in today’s media environment. Instead, we use our principles of Truth and Tradition as our guiding light. We highlight in our reporting the best of humanity, the valuable lessons of history, and traditions that are beneficial for society.
The Epoch Times was founded in the United States in the year 2000 in response to communist repression and censorship in China. Our founders, Chinese-Americans who themselves had fled communism, sought to create an independent media to bring the world uncensored and truthful information.
The Epoch Times has received numerous awards for our reporting and design, including from the New York Press Association, the Society of Professional Journalists, and the Society for News Design.
The Epoch Times’ media network currently covers 21 languages and 33 countries.
