SEC's Gensler on next steps after GameStop trading frenzy

In a new interview with Yahoo Finance’s Brian Cheung, Securities and Exchange Commission Chair Gary Gensler discusses the next steps forward following GameStop's trading frenzy, after the agency's report was released last week.

Video transcript

BRIAN CHEUNG: And you mentioned you started in April. It's felt like a lifetime since then. But one other thing that you dealt with was the GameStop situation that happened in January, but the SEC just released that over 40-page report last week.

Now, there were no specific policy recommendations after that report. So I guess, can you just walk us through what might be the next steps for all these brokerages, wholesale market makers, clearinghouses, investors that are walking away from the events of January and wondering, what might the SEC do next?

GARY GENSLER: So we have a number of projects. Some of those highlighted in the report. There was a page or two at the end, caught additional considerations. One is related to equity market structure itself. Are we today in the 2020s appropriate using technology of the 2020s to look out for regular investors?

And nearly half of the market, the stock market, this is, doesn't trade on lit transparent exchanges, but in dark pools or off exchange. And instead of having orders compete, one by one compete so that the investing public, the retail public gets the best price or what's called best execution, right now a lot of this is flowing into the dark pools to the wholesalers through something called payment for order flow.

Secondly is a bit of the plumbing. I know it's not as exciting for your listeners, but it has to do with the clearing and settlement cycles and shortening those, so there's less risk. In the January events, people had been restricted from trading.

The third thing is something called digital engagement practices or what sometimes colloquially is part of that is called gamification. New digital analytics, new algorithms that are may be promoting more trading rather than investing, or promoting activity that is good for the applications, but not good for the individual. So these are some of the projects we're working on.