the stock market regulator proposes measures for more transparency and competition

Gary Gensler, the chairman of the American stock exchange authority, the SEC, unveiled on Wednesday June 8 a series of reform projects intended to make the stock market “more transparent and competitive», especially for small investors.

The aim of these changes, which would overturn 20-year-old rules, is “to ensure full competition between the various market players in order to provide the best prices to retail investors“said the boss of the SEC during a virtual conference organized by the investment bank Piper Sandler. As he had already hinted after the volatile episode of January 2021 where a battle around GameStop or AMC type viral actions had rocked the New York place, Mr. Gensler asks to take a closer look at the order flows which passed through a handful of powerful intermediaries concentrating extraordinary volumes.

Minimize» possible conflicts of interest

These wholesalers who by the volume of the orders obtain better prices, remunerate the companies which transmit to them these orders passed by their customers. Thanks to this remuneration, online brokerage platforms such as Robinhood can offer commission-free transactions to the public. But for the SEC, this practice of payments for order flows can create conflicts of interest and limit competition because intermediaries, such as Virtu Financial or Citadel, are few.

Without going so far as to ban this practice, Mr. Gensler wanted it to be amended to “minimize» possible conflicts of interest. At the same time, he repeatedly noted that in Europe he was “actively question of prohibiting the practice“. The SEC also wants to improve competition by instituting an auction mechanism, transaction order by transaction order, to allow retail brokers to obtain better prices. Market participants will also be asked to disclose more details on executed orders on a monthly basis.

Mr. Gensler also indicated that the SEC favors access for all – wholesalers and retail brokers alike – to fractional share prices below 1 cent (1 cent) to ensure that each transaction, and not only that of the wholesalers can take advantage of these infinitesimal price differences which, on large volumes, can amount to millions of dollars. The SEC is expected to formalize these proposals by the fall and seek comment.

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