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SEC Chair on bitcoin ETF: We're technology neutral, not policy neutral

SEC Chair Gary Gensler joins ‘Squawk on the Road’ to debate why the company allowed a bitcoin futures ETF to start buying and selling however not a daily bitcoin ETF. For entry to stay and unique video from CNBC subscribe to CNBC PRO:

Securities and Alternate Fee Chairman Gary Gensler stated Tuesday that Wall Road’s prime regulator is working to find out if fee for order movement must be reformed or barred to make sure a aggressive market for purchasing and promoting buying and selling quantity.

Gensler acknowledge that trendy agreements between brokers and market makers have made buying and selling far cheaper and environment friendly than in prior a long time, however famous that some troubling conflicts of curiosity stay.

“Our markets have moved to zero fee, but it surely doesn’t imply it’s free. There’s nonetheless fee beneath these functions. And it doesn’t imply it’s all the time finest execution,” the SEC chief stated throughout CNBC’s “Squawk on the Road.”

On-line brokerages that tout “free” or zero-commission buying and selling sometimes earn money by promoting their clients’ orders to high-frequency market makers who execute the shopping for and promoting. That course of is controversial and recognized on Wall Road as fee for order movement.

And since solely a pair companies, together with Citadel Securities, deal with many of the buying and selling quantity within the U.S., Gensler and different regulators fear that they might use their clout to overcharge brokerages for commerce execution.

“We’ve had instances that we’ve introduced within the final 18 months the place there was this battle between the dealer on the one hand and this fee for order movement on the opposite,” Gensler added.

Some suspect that the battle of curiosity has led to the rise of “gamification” in securities buying and selling since brokerages like Robinhood Securities make extra revenue when their clients commerce extra.

“For those who place a retail-market order, as proven on this report, the overwhelming majority of these don’t go to the clear, lit markets. They go to the darkish market – these swimming pools that aren’t competing,” Gensler stated Tuesday. “So I’ve requested workers: ‘Can we obtain this easy idea?’ That your order, once you place it, competes with different orders.”

Whereas a ultimate choice on methods to regulate fee for order movement is anticipated to be months away, Gensler has stated the SEC is contemplating a variety of choices. They embrace better disclosure and acknowledgment necessities, an outright ban on the follow or different avenues to extend transparency within the trade.

Washington and Wall Road alike blamed gamification for violent swings in GameStop, AMC Leisure and different shares earlier this yr.

The SEC on Monday launched its long-awaited evaluation of the GameStop mania, and stated that game-like options raised considerations about back-end funds that brokerages obtain, gamification, in addition to disclosures on brief gross sales.

The regulator stopped brief, nonetheless, of laying blame on a single trigger or entity.

“Cost for order movement and the incentives it creates might trigger broker-dealers to seek out novel methods to extend buyer buying and selling, together with via using digital engagement practices,” SEC officers stated within the report.

Gensler added Tuesday morning that the SEC is now turning its consideration to brief promoting, settlement, conflicts involving digital engagement practices and market construction. Then the commissioners will weigh in and the company will put the suggestions out for public remark, he stated.

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