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May 17, 2021

Everything You Need to Know about the GameStop Frenzy and Key Players, including Robinhood, Citadel, Reddit, Roaring Kitty & Rigged Markets

House Financial Service Committee Chairwoman Maxine Waters held a third hearing on Thursday, May 6, to examine the recent market volatility involving GameStop and other stocks. The virtual hearing, “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, Part III” can be viewed here.

Also, Better Markets’ Dennis Kelleher recently discussed GameStop, rigged markets, the third hearing and other topics in this issue of the Fintech Beat podcast. In addition, Better Markets released a fact sheet with highlights of the third hearing that captured SEC Chair Gensler’s views on four key issues. In the fact sheet, Better Markets also provided our assessment on each issue and what we believe should be next steps.

Chairwoman Waters held the first hearing Feb. 18 which included the CEOs of Robinhood, Citadel and Melvin Capital Management as witnesses. Co-founder, President and CEO of Better Markets Dennis Kelleher testified before the House Financial Services Committee’s second hearing on Wednesday, March 17, to examine the recent market volatility involving GameStop and other stocks.

In his testimony, Kelleher addressed the immediate need for tougher regulatory oversight to reform our markets, end predatory and other harmful practices, and stop what too many in the financial industry continue to view as a game, among other topics. Read Mr. Kelleher’s written testimony here and his five-minute opening statement here. And see a Twitter recap of the conversation and watch video clips of him during the hearing.

The frenzied trading in GameStop, Bed Bath & Beyond and other stocks in early 2021 resulted in lots of media coverage, hearings on the Hill and international attention. The events raised critical questions about the fairness of our markets, the treatment of retail investors, the gamification of trading, the role of certain trading strategies, conflicts of interest, interconnectedness, and many related issues.

While some of these issues are new to the public, Better Markets has been working on them for many years. Because of our expertise, we have been in the forefront of explaining them to regulators, legislators, policymakers and the media.

To help inform the conversation, Better Markets developed various materials on these important issues (see below under Issue-and-Firm-Specific Fact Sheets and Resources).

From the beginning of the GameStop frenzy, Better Markets has provided insight into why/how these events occurred, who some of the players are and a break-down of many of the terms and activities relevant to this complex topic. We did this through fact sheets and other resources, which are listed below:ISSUE-AND

FIRM-SPECIFIC FACT SHEETS:

FACT SHEET on HIGHLIGHTS OF THE THIRD GAMESTOP HEARING: SEC Chairman Gary Gensler in his own words on four key policy issues.PAYMENT FOR ORDER FLOW FACT SHEETS: What is payment for order flow & how it rips off retail investors. Short Version and Long Version

SHORT-SELLING: 10 RECOMMENDATIONS FOR IMPROVING THE SEC’S REGULATORY FRAMEWORK

CAT FACT SHEET Stands for consolidated audit trail, a long overdue, transparency and accountability measure to protect investors and the integrity of the U.S. securities markets.FEB. 18 POST-HEARING FACT SHEET reviewing the highlights of the hearing.FACT SHEET OF THE KEY ISSUES raised by Robinhood, Reddit, Citadel, GameStop and rigged markets.CITADEL FACT SHEET:  Who is Citadel and why should you care?

OTHER RESOURCES:

WHITE PAPER: Detailed analysis on select issues raised by the speculative frenzy in GameStop and other stocks.

BLOG POST—MARKET STRUCTURE: A detailed blog post of Better Markets’ advocacy over the years on market structure.

PRESS RELEASE: Statement on Dennis Kelleher’s upcoming testimony before the House Financial Services Committee.

PRESS RELEASE: Better Markets’ Letter to House Financial Services Committee on Key Issues for the Feb. 18 Hearing on GameStop Trading and the Role of Robinhood, Citadel, Reddit.

LETTER to House Committee on Financial Services identifying key issues including ripping off retail investors; gamification; payment for order flow; conflicts of interest; transparency; short selling activities; high frequency trading; best execution; manipulation; capital and liquidity requirements; forced arbitration; and the consolidated audit trail.

LETTER to Treasury Secretary Janet Yellen and other financial regulators who met to review and address the issues raised by the frenzied trading in GameStop and other equities.

MEMO TO INTERESTED PARTIES: This memo was released in advance of the House Financial Services Committee hearing on Thursday, Feb. 18, 2021, and includes information on the key issues that should be discussed at that hearing as well as links to additional materials that provide greater detail.

HEARING HIGHTLIGHTS: The Feb. 18 HFSC hearing lasted more than 5 hours, but you don’t have watch it all to see some of the key highlights – we’ve got them here in just 23 minutes!  See Chair Maxine Waters, AOC, Jim Himes, Ritchie Torres, Al Green, Cindy Axne, Rashida Tlaib, Jesus “Chuy” Garcia and more!

 

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