The newly-appointed Securities and Exchange Commission (SEC) chair Gary Gensler will be among the senior figures to speak at the upcoming final hearing held by the financial services committee to dissect the aftermath of the GameStop market volatility in January.
Gensler took over the top job at the agency last month and the hearing, scheduled for 6 May, will allow him to set out his stall on how the US market regulator will approach controversial market events and periods of volatility during his tenure.
This week’s hearing will also be an opportunity for committee members to present their policy recommendations to the SEC for rule changes to mitigate the risks similar future events may pose to investors and market stability.
The SEC is still investigating the January event and the proposals from the final hearing may inform its conclusions on possible next steps for market oversight.
Short sellers in particular will be keen to get a read on whether Gensler will overtly support calls from politicians manoeuvring to bring greater oversight of hedge funds, with a particular emphasis on their bearish activities.
Retail brokers and asset managers are also awaiting news on whether concerns raised by committee members during earlier hearings around protection for retail investors and whether the practice of order flow, a service offered by Citadel to Robinhood, the retailer broker most used by meme stock investors, is appropriate.
Other witnesses scheduled to attend are Michael Bodson, president and CEO of the Depository Trust & Clearing Corporation and Robert Cook, president and CEO of Financial Industry Regulatory Authority, which oversees rules governing registered brokers and broker-dealers in the US.
The House Committee on Financial Services’ chair Maxine Waters set out plans for a trilogy of hearings immediately following the Q1 ‘meme stock’ craze, where several high street brands including GameStop, AMC and BlackBerry, saw their market values spike to record highs, apparently driven by a wave of retail investors coordinating activity through Reddit forum WallStreetBets.
The first hearing on 18 February included testimony from the CEOs of Robinhood and Reddit, who answered questions on the brief buy-ban on several stocks and the role of social media in financial markets, respectively.
The CEOs of Citadel and Melvin Capital, a hedge fund that suffered heavy losses from the GameStop short squeeze, also spoke on short selling and the prospect of a shorter settlement cycle.
The second hearing in March focused on the market volatility involving GameStop and other stocks to hear from experts and investor advocates regarding regulatory gaps illuminated by these events, and to assess possible legislative steps to protect investors.