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GameStop Meme Stock Craze Prompted Market 'Plumbing' Changes, Says SEC Chair Gensler

Author: Content Editor
The Securities and Exchange Commission (SEC) Chair Gary Gensler emphasized the need to modernize equity markets, including embracing shorter settlement times, in a speech discussing the lessons learned from the GameStop short squeeze in 2021. The retail-led movement that caused GameStop's stock price to spike highlighted a lack of market efficiency and restrictions on everyday investors. Gensler suggested that shorter settlement times, which blockchain technology benefits from, can improve market mechanics. He also criticized crypto exchanges like Binance and Coinbase for fulfilling multiple roles without proper registration. The SEC has accused these exchanges of facilitating securities transactions without proper authorization. The adoption of shorter settlement times has reduced the risk for everyday investors and changed the relationship between brokers and clearinghouses. Gensler's remarks come after Federal Reserve Governor Christopher Waller discussed the potential of decentralized finance (DeFi) and blockchain technology to enhance recordkeeping and mitigate risks associated with settlement. He also mentioned tZERO, a company building blockchain-based marketplaces for private securities, which gained approval to operate as a custodian for digital assets. Additionally, BlackRock CEO Larry Fink believes tokenization could be the next generation for securities, offering instantaneous settlement and reduced fees. The rise of cryptocurrency has led financial firms to explore the qualities inherent to blockchain technology, such as 24/7 trading opportunities. The New York Stock Exchange is reportedly considering round-the-clock trading, a significant departure from its current trading window.

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