Gensler defends the Robinhood gang
The chairman of the United States Securities and Exchange Commission (SEC), Gary Gensler, wants to crack down on a whole series of practices on Wall Street. But Gensler SEC will give the same investment a pass.
The hordes of amateur investors who use Reddit and other social media aren’t the problem, Gensler said. This crowd has upset professional short sellers by bidding some of their favorite, albeit questionable, stocks skyward, including GameStop and AMC Entertainment Holdings. Memes investors use social forums to coordinate their attacks on shorts, typically hedge funds, via Robinhood.
Appearing on Jim Cramer’s CNBC show, Gensler said he found no problem with this investment coordinated by newbie investors. Cramer disagreed, saying all collusion is bad. “If 5 million people decide to break up a hedge fund that’s short, are you okay? Cramer asked, referring to the crowd itself, opposite GameStop. “What’s in the limits of what you can do to crush a short seller?” “
GameStop is at the heart of the anti-establishment memes investor war. They believe the shorts are unfairly attacking the video game seller by undermining its share price, in an attempt to shut down the already struggling chain of stores.
Although Gensler did not speak specifically about GameStop, he said there was nothing wrong with individuals contacting each other to discuss potential investments and enlisting others to adopt their trading ideas. . Namely, making a bid on heavily shorted stocks and thus hurting hedge funds during a short contraction.
“People come to your show and they advocate buying or selling a title,” Gensler told Cramer. “Before we had television, people did it on the radio. Now we have various social media platforms.
Such freedom of communication between disparate retail investors is not a sin, Gensler said. “It’s not just freedom of speech, but it’s part of what makes our capital markets robust, that people can disagree and disagree using the media of the day.” The greatest danger comes from the Wall Street sharpies, he argued. This is why, he continued, “we monitor the markets for fraud, manipulation, pump and dump systems and the like.”
Meanwhile, Gensler takes a wary eye on the free trade practice of Robinhood Markets and other memes favorite brokerage platforms. Free exchanges are a big draw for these Robinhood customers and the like. These companies send customer orders to outside trading companies, which pay a fee to brokers without a commission, a practice called Payment for Order Flow (PFOF). Critics say it can mean customers aren’t getting the best price on their transactions.
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Tags: Gary Gensler, hedge funds, Jim Cramer, meme investors, order flow payment, Robinhood, SEC, short sellers, commission-free brokers