Why did the SEC release a report on GameStop?

The full version of the article, along with thousands like it, can be found here: Why did the SEC release a report on GameStop?

Platform Economy: SEC

The The SEC has released a report examining the frenzied trading in shares of retailer GameStop Corp, and other 'meme' stocks, in January, and recommended some areas for further regulatory consideration.

The report could have implications that affect where retail stock orders are executed and how that service is paid for, when brokers can restrict trading, and the amount of transparency around short sales.

Here are some key details from the GameStop saga:

WHAT HAPPENED?

Shares of GameStop surged more than 1,600% in January as retail investors colluded in online forums like Reddit's WallStreetBets to try to bid up the heavily shorted stock and force hedge funds to unwind their bets against it, with the hope the short squeeze would drive the price even higher.

The extreme volatility in GameStop shares, along with other popular meme stocks, prompted the clearinghouse that guarantees trades before they are completed to raise the collateral from brokers to clear the trades.

That led several brokerages, including Robinhood Markets, to temporarily restrict trading in the red-hot stocks, helping curb the rally, infuriating retail traders and rattling market confidence. Others, like Charles Schwab Corp, adjusted margin requirements and limited advanced options strategies on the affected stocks.

WHY THE SURGE IN RETAIL TRADING?

In late 2019, large retail brokers like Schwab and Fidelity followed Robinhood's lead and eliminated trading commissions.

Then, in early 2020, with COVID-19 lockdowns keeping people at home, major entertainment and sporting events cancelled, and government stimulus checks sent to many US households, retail trading levels soared.

While the main narrative around the GameStop frenzy was retail investors taking on big hedge funds, institutional investors were also major players in the buying and selling.

WHO WAS HURT?

Hedge fund Melvin Capital required a $2.75 billion lifeline when it had to close out its short position in GameStop at a huge loss in January.

Anybody who bought GameStop shares at $482.95 on Jan. 28 and then sold them since would have lost money.

GameStop shares are currently at $183.28, around 1,275% higher than they were a year ago.

WHAT HAS HAPPENED SINCE?

  • Congress held several hearings on the GameStop episode
  • The SEC has asked for public comments on the effects of the "gamification" of trading apps and whether the public is at risk
  • The main post-trade utility for US stocks has recommended shortening the settlement cycle for stock trades to one day after the trade happens, from two days
  • Various companies and industry groups have made recommendations on improving transparency around the execution of retail orders

The team at Platform Executive hope you have enjoyed the '[post_title]' article. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by John McCrank. Editing by Rosalba O'Brien.

You can stay on top of all the latest developments across the platform economy, find solutions to your key challenges and gain access to our problem-solving toolkit and proprietary databases by becoming a member of our growing community. For a limited time, our subscription plans start from just $16 per month.

This news article was published by Platform Executive, the home of the platform economy.

If you enjoy the content then please post a link on your website, or share on social media to help us get the word out.



Why did the SEC release a report on GameStop? posted first on https://www.platformexecutive.com/

Comments

Post a Comment

Popular posts from this blog

4 tips for bouncing back from a business hardship

Image
The full version of the article, along with thousands like it, can be found on the following page: 4 tips for bouncing back from a business hardship Hardships can affect even the most successful businesses. If you’ve recently suffered a major setback within your company, it’s okay to feel discouraged. While hardships can be tough, they shouldn’t stop you from bouncing back. If you’re ready to pull your business out of a rough patch, read on for four tips to help you get back on your feet! #1 GO BACK TO YOUR COMPANY'S ROOTS If your business has come this far, there’s bound to be something you’ve done right. Sometimes hardship comes when you’ve strayed away from your original concept. If you’ve been testing out some new ideas that seem to miss the mark, try going back to your first business model and rework a new plan from there. It’s important to remember where the heart of your company truly lies, and what sets you apart from rivals , such as: Your minimum viable product
Read more

Duolingo enters ‘major leagues’ with $6.5 billion valuation in strong debut

Image
The full version of the article, along with thousands like it, can be found on the following page: Duolingo enters ‘major leagues’ with $6.5 billion valuation in strong debut Language learning app Duolingo notched a valuation of $6.5 billion after its shares surged nearly 40% in the company's Nasdaq debut, becoming the latest education technology start-up to impress Wall Street. Duolingo's stock opened at $141.4 per share, blowing past the IPO of $102 per share, which crossed the top end of its target range. The stock later pared some gains to trade at $130.92 in the afternoon. The company's flotation comes at a time of increased investor interest in the edtech space, after pandemic restrictions sent students and teachers from the classroom to the web. "Being a public company will allow us to operate at a higher level, and get going from the minor leagues to the major leagues," said Luis von Ahn, co-founder and CEO of Duolingo. Following the IPO, the compan
Read more

Lawsuit claims Apple monopolizes heart-rate technology for Apple Watch

Image
The full version of the article, along with thousands like it, can be found on the following page: Lawsuit claims Apple monopolizes heart-rate technology for Apple Watch A Silicon Valley company has filed an antitrust lawsuit accusing Apple of cornering the market for heart-rate monitoring technology for the Apple Watch, and endangering wearers' health. In a complaint filed late on Tuesday night, AliveCor Inc said Apple shut out rivals by changing the heart-rate algorithm on its watch's operating system, making rival technology incompatible. AliveCor sells KardiaBand, an Apple Watch wristband capable of recording an electrocardiogram, and SmartRhythm, an app that alerts users to irregular heartbeats. The privately held company accused Apple, whose market value exceeds $2 trillion, of quietly "working in the background" to copy its ability to record an ECG on the Apple Watch, and to provide a separate app for heart-rate analysis. "As it has done multiple ti
Read more