The “gamification” of trading sparks the counter-offensive of the regulator

game-over for applications of trading ? As it had suggested before the summer, the Securities and Exchange Commission (SEC) opened on August 27, and for a period of 30 days, a public consultation on the online brokerage sector. In the crosshairs of the stock market policeman, the “gamification” of the markets, a phenomenon which has seen retail investors take the stock market by storm by replicating the codes of video games and artificially driving up the price of shares like that of GameStop.

The SEC is looking in particular at the means that platforms such as Robinhood use to push traders to multiply orders. With great reinforcements of notifications and use of algorithms, these applications highlight the most popular titles and allow neophytes to copy the portfolios of traders stars.

Conflicts of interest

In a video posted the same day, Gary Gensler, the president of the institution, believes that some of these marketing techniques could be considered in the future as recommendations to buy or sell a stock. Which would radically change the apps of trading categories, subjecting them to a much stricter framework.

Gary Gensler points out that the algorithms used “are often designed with an optimization feature in order to increase revenue, data collection, or customer time spent on the platform. This may lead to conflicts of interest between the platform and investors.” Several fines imposed on Robinhood by US authorities, including the SEC, have highlighted these conflicts of interest. The platform had thus hidden from its customers that it was remunerated through the practice of payment for order flow, which consists of routing their orders to certain market makers. Gary Gensler told Barron’s on Monday that the subject of a ban on payment for order flow was on the table. Robinhood was also punished for misleading certain individuals – one of them had committed suicide in 2020 – and allowing others to trade in the options market without being able to assume the risks. This did not prevent the neo-broker from signing a sensational entry on the Nasdaq this summer.

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