WASHINGTON: US President Joe Biden's nominee to head a key market regulator promised on Tuesday (Mar 2) a thorough review of issues raised by the GameStop stock frenzy, including whether customers were best served by some retail trading practices.
Gary Gensler, the president's nominee to lead the Securities and Exchange Commission, said he would look into whether customers get the best prices when brokers are paid for their order flow and business practices that incentivise trading.
"Technologies change and markets change, but we should always evaluate new approaches to markets," Gensler said during a confirmation hearing before the Senate Banking Committee.
Shares of video-game retailer GameStop soared to dizzying heights in late January as retail traders on social media site Reddit championed the stock in the face of heavy bets by short sellers - who profit when shares fall.
GameStop shares plummeted about a week later, leaving some who had bought the stock at lofty levels with heavy losses and prompting calls for regulators to take action to protect investors.
Wall Street is keeping a watchful eye on the Biden administration's moves in the regulatory arena after a relatively easy four years under former President Donald Trump.
Progressives see the SEC and the Consumer Financial Protection Bureau as key to advancing policy priorities on climate change and social justice and expect Gensler and Rohit Chopra, who Biden nominated to lead the CFPB, to take a tough line on Wall Street and repeal Trump's regulatory changes.
Republicans have criticised Biden for bowing to leftists and have warned that Gensler and Chopra, both experienced corporate regulators, will be divisive if confirmed to the positions.
"These are both going to be key officials setting financial policy for Team Biden. For Gensler, the focus will be on investor protection and how the SEC should respond to GameStop-related market volatility. For Chopra, it will be about his vision for the agency and his enforcement priorities," said Jaret Seiberg, an analyst at Cowen Washington Research Group.
As head of the Commodity Futures Trading Commission, Gensler implemented new swaps trading rules created by Congress in 2010 in response to the global financial crisis, developing a reputation as a tough operator willing to stand up to powerful Wall Street interests.
Democrats also pushed Gensler on Tuesday to commit to new corporate disclosures on climate change risks and political spending, which he said he would study if confirmed. He similarly vowed to look into cryptocurrency, which he said can be a "catalyst for change" but pose investor protection concerns.
Currently a commissioner at the Federal Trade Commission, where he campaigned for tougher consumer privacy and enforcement penalties, Chopra helped establish the CFPB, which was formally launched in 2011.
Democrats pushed Chopra to revive the agency after the Trump administration weakened enforcement and several rules, while Republicans warned the CFPB overstepped its authority previously under Democratic control.
Chopra said one area he would like to focus on if confirmed would be on the entry of large technology companies into financial services, and what it could mean for consumers' privacy.
Progressives also may push Chopra to revisit payday lending and debt-collection rules that they say won't protect Americans. Gensler may be pressed on reviewing SEC rules governing investment advisers and shareholder voting rights.