GameStop’s short squeeze in 2021 taught the Securities and Exchange Commission (SEC) several key lessons. Among those highlighted in a Monday speech by SEC Chair Gary Gensler was the need to modernize equity markets, in part by embracing shorter settlement times.

A retail-led movement to bet big against Wall Street short sellers caused GameStop’s stock price to spike nearly four years ago amid the “meme stock” craze. Forced to hold or sell shares skyrocketing in price, restrictions imposed by several brokerage firms blunted the rally that was later enshrined in stock market history and recounted in books and films.

Gensler, an unwavering critic of the digital assets industry, partly pinned the restrictions on a lack of market efficiency. Ultimately, a shift toward shorter settlement times—that experts say blockchains benefit from—improved upon mechanics that stifled some GameStop investors.  

“Many everyday investors lost access to the market at a critical time,” Gensler said. “The longer it takes for a trade to settle—the slower the plumbing—the more risk our markets assume.”

When purchasing or selling a stock on a venue like the New York Stock Exchange, there is a delay between when the transaction is made and when it becomes fully processed across a series of intermediaries, including a broker-dealer, clearing agency, and exchange. 

Go to Source to See Full Article
Author: André Beganski