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House Committee Hearing

The value of decentralised discussion

It is easy to be myopic in the 24/7 merry-go-round of highly accessible trading. Red and green Candlesticks, pumps, dips and product launches overwhelmingly command the scarce attention of the average retail punter. Regulatory discussions occurring in decision-making corridors certainly play second fiddle to the hype, and sometimes, barely get a look in.

With more and more individuals becoming active participants in decentralised markets, a trend which Tracer believes is desirable, there exists an increased need for sensible educational commentary on regulatory discussion. At least for the foreseeable future, all investors in the decentralised space are at the mercy of the regulator’s hand. It is on this basis that Tracer begins its commitment to being a consistent voice on the topic of regulation, providing credible information on which decentralised market participants can feast. This accords with a core philosophy of Tracer: that educated market participants are indispensable to the overall health of trading markets.

In early May the U.S. House Committee on Financial Services held a virtual hearing titled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide”. Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (“SEC”) was a notable member of the House Committee’s panel.

Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, Part III. May 6, 2021.

The hearing was the latest in a series examining the extreme market volatility witnessed in early 2021, much of which stemmed from a short squeeze on stocks, including GameStop, AMC, Koss, and others. Specifically, it contemplated the implications of retail investors using popular social media forums like Reddit’s “WallStreetBets” subchannel to collectively induce a short squeeze in stocks they identified as being heavily shorted by hedge funds.

A spattering of topics were covered in the hearing, including: the payment for order flow model, the market-dominance of a few powerful participants, gamification of retail investing, and the growing impact of social media and technology on America’s capital markets.

Some of these head-scratching issues are age-old, some are novel, but they are all genuine issues that warrant discussion. Tracer believes this discussion should not be relegated to a minority whose job it is to contemplate and regulate, but instead be shared throughout the market.

Keep an eye out for Episode 2 of the ‘Education in Regulation’ series to read our thought piece on increased market participation and whether increased regulation is necessary to manage that reality. Be sure not to miss it by following Tracer on Twitter and joining the discussion on Discord.

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