Europe’s leading market regulator says one of the lessons of Gamestop Corp.’s buying mania is is that social media exposes individual investors to potential losses and the risk of violating rules designed to prevent price manipulation.
“We are concerned that retail investors base their buying behavior on social media data, it is important that you get reliable information,” said Steven Maijoor, President of the European Securities and Markets Authority, in an interview with Bloomberg Television. risks for retail investors not to infringe the rules on market abuse.
Markets were gripped earlier this year by a buying frenzy by retail investors using new trading platforms, in some cases burning hedge funds and short sellers. Speaking to Anna Edwards of Bloomberg TV, Maijoor said the experience called for better enforcement of existing rules rather than updating the regulations.
Another point that regulators need to address following the wave around Gamestop is the role of online brokers who allow investors to buy securities without paying a commission, Maijoor said.
“We’re concerned here with the payments for the order flow. Affected brokers can of course get payouts, we know this happens for the way they increase their order flow, and this raises questions about prioritizing client interests. “
Maijoor also said:
- A reduction in bets on falling stocks, known as short positions, in Europe may be a “reaction to what we’ve seen in the US”.
- The European Union needs reassurance from the UK that its rules for the financial sector will remain aligned if it is to gain access to the bloc through a system known as equivalency
- “From a European point of view, there is the real and fundamental problem that there will be problems in terms of risk, there will be problems in terms of a level playing field if you give access to the internal market by a system that has different rules and different supervision. This indeed makes it very difficult to progress here. “