Wall Street watchdog shortens time frame for stock trading, proposes new investment adviser rules | – #Wall #Street #watchdog #shortens #time #frame #stock #trading #proposes #investment #adviser #rules

Feb 15 (Reuters) – Wall Street’s top regulator on Wednesday adopted rules tightening the time frame for stock trading to reduce the kind of risk seen in the 2021 GameStop fiasco, in which retail investors suffered heavy losses.

USA The Securities and Exchange Commission (SEC) also announced changes to rules protecting client assets held by investment managers, in a move that would prevent cryptocurrency platforms from playing a major market role. offer did

In a 3-2 vote, the SEC opted to shorten the time between the time a securities order is placed and the end of a trade, potentially reducing the kind of “systemic risk” that has caused consumer electronics retailer GameStop Corp’s share price to fall in early 2021. (GME.N) fell sharply amid strong market volatility.

Trade groups widely welcomed the commission’s proposal to reduce the so-called settlement period from two business days to one business day, six years after an earlier SEC rule shortened the period from three days.

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Cornell University law professor Birgitta Siegel said in a filing with the SEC that market participants’ willingness to move to a shorter settlement cycle “will help speed the transition and remove any barriers such as costly system upgrades and industry-wide process changes.” .

Industry players since the SEC moved to require compliance very quickly complaint they did The new rule by May 28, 2024, earlier than they wanted, but tentatively offer shall enter into force no later than March 31, 2024.

Republican commissioners Hester Peirce and Mark Uyeda voted against the move, citing an insufficient transition period.

In a report on the events surrounding the GameStop trade in early 2021, SEC officials said the longer the trade goes on, the more likely it is that the buyer or seller will default by refusing to pay or surrender the shares being sold.

Clearinghouses often have such high risks dollars margin deposits, with costs that can increase rapidly during periods of volatility and market stress compensation requires trading platforms to do so.

GameStop’s share price fell after earlier volatility, with trading platform operators such as Robinhood Markets Inc ( HOOD.O ) heavily billion resulted in a dollar margin call. Robinhood and others responded by blocking users from buying stocks.

According to the SEC, a shorter settlement period should see fewer defaults and thus help reduce margin deposit costs, thus reducing the chance of such a scenario recurring.

SEC IS TARGETING CRYPTO ‘DEVELOPERS’

Commission votes 4-1, new requirements for investment advisers offer did, they may provide custody of client funds or securities only if they meet asset protection requirements.

The SEC’s draft proposal would extend these requirements to any client assets, such as cryptocurrencies.

Advisers must hold investors’ assets with a firm considered a “qualified custodian.” SEC enforcement officials are checking whether registered investment advisers are following existing rules regarding clients’ digital assets, Reuters previously reported.

The proposal would prevent many cryptocurrency platforms from serving as these custodians, require them to conduct independent audits, and ensure that clients’ assets are segregated and held in accounts in the event of bankruptcy.

This will make it difficult for hedge funds and private equity firms that invest in digital assets on behalf of clients to work with crypto firms.

SEC Chairman Gary Gensler said in a statement about the proposal, “Make no mistake. Because of how cryptocurrency platforms generally operate, investment advisors act as qualified custodians of them trust they can’t,” he said.

Reporting by Douglas Gillison; Edited by Megan Davies, Bradley Perrett and Nick Zieminski

Our standards: Thomson Reuters Trust Principles.

2023-02-15 21:58:10
Source – reuters

Translation“24 HOURS”