In an interview with We The Investors, SEC Chairman Gary Gensler says he understands retail investors’ frustrations.
Hosted and led by Dave Laurer, a We The Investors panel had direct communication for the first time with Gary Gensler, representing the retail investor community as an entirety.
In this article, I break down key moments of the interview where the SEC Chairman answers questions retail investors have been yearning for.
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Gary Genlser on Predatorial Short Selling
One of the biggest concerns the retail investor community has had, not just over the past few years since the beginning of the ‘meme stock’ frenzy, but a decade back is that of predatorial short selling practices.
The SEC Chairman says that short selling is a challenging area where the SEC is still working and pursuing focus on.
One of the biggest challenges according to Chairman Gensler is that Wall Street powers will send stacks of reports highlighting rebuttals on proposals aimed at protecting retail investors.
This is primarily because certain proposals aimed to protect retail conflict with Wall Street money.
And because these firms are market participants, like retail investors, these documents must be legally reviewed.
The challenge only grows when Wall Street firms open lawsuits against the SEC when certain proposals become a direct hinderance to the way these companies perform.
Later in the interview, the retail community is strongly urged to fight back by directly addressing issues and concerns to the SEC, similar to Wall Street.
And I think We The Investors has officially opened that door.
But more on that below.
Here are two big proposals the SEC has in the works that aim at protecting retail investors.
T+1 Settlement Cycle
We are currently in a T+2 settlement, which is basically the number of business days it takes for orders to execute.
Faster settlement cycles such as T+1 gives retail investors faster order execution.
The SEC Chairman says about a year ago, the SEC put out a proposal on shortening the clearing cycle to protect market participants from getting locked out of trading, like how they did during the ‘meme stock’ frenzy.
Gensler says, “I’m not legally allowed to pre-judge where we’ll end up in all these things, but I’m really encouraged by the support we have to shortening the settlement cycle to 1-day.”
“I’m encouraged also about a lot of the support we have to bringing greater transparency to short selling.”
Conflicts of Interest Proposal
Gary Gensler also said in the interview with We The Investors that he is very hopeful that the SEC will put out some proposals about the inherit conflicts of interest that go into predictive data analytics that targets certain users with one set of props versus other props.
He’s very well aware about the conflicts of interest in the market, now it’s going to be up to retail investors to get involved and accept these proposals by writing back to the SEC once they have been made available.
Do Dark Pools Suppress the Price of a Stock?
Dave Laurer asked the SEC Chairman if dark pools suppressed the price of stock and whether retail investors could influence the price of a stock if majority of orders traded in the lit exchange.
While there was no direct answer to the suppression of price, the Chairman says that with so much trading happening off-exchange, he doesn’t think it’s a leveled playing field as dark pools give institutions an unfair advantage.
Retail investors as individuals don’t have the power to move the markets, but retail orders combined could have significant price impact.
Having worked in Wall Street for 18 years, Gary Gensler says he understands retail’s frustrations and understands the conflicts.
He is urging retail investors to weigh in heavily on SEC.gov.
The chairman almost empowers retail to fight back by submitting letters and comments to the SEC directly oppose to thinking change will happen merely from social media.
While social media is a great tool to raise awareness, the SEC Chairman urges the retail community to weigh in on the SEC’s website.
Final Words for Retail
Gary Gensler says his term isn’t up until 2026, but he hopes he and his team do right by the American public and are able to do the best they can for everyday investors.
His biggest encouragement for the community is to weigh in so that all commissioners gain broader perspective.
We The Investors, led by Dave Laurer, is opening the door for retail investors to have a respected place in the financial markets.
The interview marks a historic turning point for retail investors and establishes the retail community as a real organization with real ideas to battle fraud and corruption in our financial system.
You can watch the full interview with SEC Chairman Gary Gensler below.
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