Expansion of Short Selling Disclosure Information
Indication of Robinhood's Trading Data Sales Regulation
[Asia Economy New York=Correspondent Baek Jong-min] The U.S. Securities and Exchange Commission (SEC) plans to expand transparency on short selling and strengthen regulations on free stock trading apps to protect individual investors.
Gary Gensler, SEC Chairman, expressed this view in a prepared opening statement released ahead of his scheduled appearance before the House Financial Services Committee on the 6th (local time).
He explained that the SEC is preparing countermeasures regarding the confrontation between institutional investor-centered short selling forces and individual investors over GameStop shares, which shook the U.S. securities market and political circles earlier this year.
Chairman Gensler mentioned that the SEC has instructed to develop measures to expand disclosure not only on each investor's short selling status but also on the stock lending and borrowing system.
Gensler pointed out that individual investors' stock trading through the free stock trading app Robinhood turned stock investment into a ‘game’ through flashy graphics, ultimately resulting in unfavorable outcomes for investors, emphasizing the need for regulation.
He added that since the regulations to protect individual investors were created before the launch of smartphone apps, new protective regulations should be introduced to keep pace with changing times.
He also raised concerns about Robinhood's main revenue source, ‘payment for order flow’ (PFOF). PFOF has been criticized as a conflict of interest practice where securities firms sell customer information to large investment institutions. Robinhood secured more than triple the PFOF revenue in the first quarter of this year compared to the same period last year due to a surge in individual trading.
Regarding the Archegos incident, which caused losses of about $10 billion to major large investment banks, Gensler stated that the SEC is also considering strengthening oversight of total return swaps (TRS) between Archegos and investment banks.
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