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The US stock market regulator has called on the public to weigh in on the “gamification” of stock trading, responding to concerns that some online apps encourage investors to take risks they don’t fully understand.
The United States Securities and Exchange Commission on Friday issued a request for comment on the digital practices used by online platforms such as Robinhood to keep clients trading.
Gary Gensler, chairman of the SEC, suggested that some of these practices could constitute stock market recommendations in themselves, leading to much stricter regulation for trading platforms.
“Over the last few years we’ve seen new brokerage apps, wealth management apps that give us investment advice, as well as robo-advice,” he said in a video posted on his Twitter feed.
“While these new technologies may give us greater access and choice of products, they also raise questions about whether we, as investors, are properly protected when we trade and obtain financial advice. ”
In a separate statement, his agency asked the public to comment on the extent to which digital prompts that encourage people to trade count as an investment recommendation or advice.
“In many cases, these characteristics can encourage investors to trade more often, invest in different products or change their investment strategy,” Gensler said, warning of a potential conflict of interest between the objectives of the companies. platforms and investors.
The request for comment is a possible first step towards much tighter controls on digital trading platforms, which have come under scrutiny thanks to frantic trading at some companies like game retailer GameStop.
The company’s shares have climbed more than 1,000% this year as traders using the Reddit online chat room encouraged themselves to buy them, causing serious losses in some hedge funds that had sold the shares short or bet on a drop.
But the wild swings in the shares of GameStop and a handful of others have raised concerns about whether some online platforms encourage people to trade without fully explaining the risks.
Robinhood has been criticized on several occasions by regulators for gamification and its user experience, which included emojis and confetti-sprinkled images when investors execute trades.
The company said it looks forward to reaching out to the SEC on digital broker engagement practices.
“Robinhood has enabled millions of Americans of all origins and socio-economic classes to invest for the first time, with the potential to build long-term wealth through a simple, accessible and welcoming platform.” , did he declare.
Gensler said he was interested in practices such as different marketing for different users based on their profile and encouraging people to continue trading through certain prompts and notifications.
He previously said he wanted to review the so-called payment for order flow, where companies can pay trading platforms for the right to complete their trades. These practices have proven to be lucrative for online platforms in recent years.
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