Tag: Alexander Osipovich

GameStop Frenzy, Archegos Meltdown May Prompt New SEC Rules, Chairman Says

Mary Pat Campbell

Link: https://www.wsj.com/articles/sec-studying-whether-new-rules-are-needed-for-apps-that-gamify-trading-chairman-says-11620239971

Excerpt:

In testimony prepared for the House Financial Services Committee, Securities and Exchange Commission Chairman Gary Gensler says brokerages that “gamify” trading — by using appealing visual graphics to reward a user’s decision to trade, for instance — may encourage frequent trading that results in worse outcomes for investors. Some Democratic lawmakers have blamed gamification for the boom in individual trading that helped drive the rise in GameStop shares.

Mr. Gensler, who will appear before lawmakers on Thursday, also said the SEC would study regulatory changes in response to the March blowup of Archegos Capital Management, an unregulated family-investment vehicle of hedge-fund veteran Bill Hwang whose leverage-fueled bets led to more than $10 billion in losses at major global banks.

Author(s): Dave Michaels, Alexander Osipovich

Publication Date: 5 May 2021

Publication Site: Wall Street Journal

Berkshire Hathaway’s Stock Price Is Too Much for Computers

Mary Pat Campbell

Link: https://www.wsj.com/articles/berkshire-hathaways-stock-price-is-too-much-for-computers-11620168548

Excerpt:

Berkshire Hathaway Inc. is trading at more than $421,000 per Class A share, and the market is optimistic. That’s a problem.

The price has grown so high, it has nearly hit the maximum number that can be stored in one common way exchange computers handle digits.

…..

Nasdaq’s computers can only count so high because of the compact digital format they use for communicating prices. The biggest number they can handle is $429,496.7295. Nasdaq is rushing to finish an upgrade later this month that would fix the problem.

It isn’t just Nasdaq. Another exchange operator, IEX Group Inc., said in March that it would stop accepting investors’ orders in Class A shares of Berkshire Hathaway “due to an internal price limitation within the trading system.”

Author(s): Alexander Osipovich

Publication Date: 4 May 2021

Publication Site: Wall Street Journal

Online-Trading Platform Will Let Investors Bet on Yes-or-No Questions

Mary Pat Campbell

Link: https://www.wsj.com/articles/online-trading-platform-will-let-investors-bet-on-yes-or-no-questions-11613557800

Excerpt:

Kalshi Inc. expects to launch in March. It plans to let users bet on “yes” or “no” answers to questions about future events. For instance, had the platform existed last year, it might have asked users whether a Covid-19 vaccine would be approved by the end of 2020.

The San Francisco-based startup hopes to benefit from surging interest in trading by individual investors. Individuals have jumped into stocks and options during the past year, using apps like those offered by Robinhood Markets Inc. Kalshi also hopes its marketplace will be used by people and businesses looking to hedge against risks that they face from future events.

Kalshi’s fundraising round comes after it won approval from the Commodity Futures Trading Commission in November to run a derivatives exchange. Sequoia led the Series A round, which brings the total money raised by Kalshi since its 2018 founding to about $36 million.

Author(s): Alexander Osipovich

Publication Date: 17 February 2021

Publication Site: Wall Street Journal

GameStop Mania Drives Scrutiny of Payments to Online Brokers

Mary Pat Campbell

Link: https://www.wsj.com/articles/gamestop-mania-drives-scrutiny-of-payments-to-online-brokers-11612434601

Excerpt:

The Reddit-fueled frenzy in stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. is prompting calls for regulators to reconsider a decades-old practice in the U.S. stock market: payment for order flow.

The practice, in which high-speed trading firms pay brokerages for the right to execute orders submitted by individual investors, has long been controversial. Some have said it warps the incentives of brokers and encourages them to maximize their revenue at the expense of customers. Supporters, including many brokers and trading firms, said it helps ensure investors get seamless executions and good prices on trades.

Last year, brokerages such as Charles Schwab Corp., TD Ameritrade, Robinhood Markets Inc. and E*Trade collected nearly $2.6 billion in payments for stock and option orders, according to JMP Securities. The biggest sources of the payments were electronic-trading firms such as Citadel Securities, Susquehanna International Group LLP and Virtu Financial Inc.

Payment for order flow helped set the stage for the manic trading in GameStop, whose shares began the year around $18, surged to a record close of $347.51 on Jan. 27 and ended Thursday’s session at $53.50. Other once-hot stocks such as AMC and Koss Corp. fell more than 20% on Thursday as the Reddit rally lost steam.

Author(s): Alexander Osipovich

Publication Date: 4 February 2021

Publication Site: Wall Street Journal