SEC Considers Requiring More Transparency From Short Sellers After GameStop Saga: WSJ

The recent frenzied-movements in so-called meme stocks like GameStop Corp GME are causing the apex market regulator to consider ushering in more transparency in short trades, the Wall Street Journal reported Wednesday.

What Happened: The United States Securities and Exchange Commission, now under Democratic control, is pondering exercising its authority to make short trading less opaque, according to the Journal.

On Thursday, House lawmakers will look into GameStop trading and discuss the shortage of data on the short sales, as per a memorandum issued in advance of the hearing.

See also: How‌ ‌to‌ ‌Buy‌ ‌GameStop‌ ‌(GME)‌ ‌Stock‌

The memo observed that the SEC had not completed its responsibilities under the Dodd-Frank mandate, as per the Journal.

Why It Matters: The 2010 Dodd-Frank Wall Street reforms required the SEC to gather information on how much stock of each public company has been shorted. The market regulator does not gather or reveal such data on specific trades, the Journal noted. 

In the past, the SEC has refused to mandate greater disclosure of short selling including data on how much of a particular stock has been lent out.

A provision of Dodd-Frank required the SEC to issue rules within two years that would increase public knowledge about lent or borrowed shares.

Another provision would require the SEC to publish monthly disclosures on how many shares of a public company have been shorted.

On Jan. 28, GameStop shares touched as high as $483, a near 2442% jump since the beginning of the year when they traded at $19. 

The rally in stocks like GameStop, Nokia Oyj NOK, AMC Entertainment Holdings Inc AMC, Blackberry Ltd BB was primarily fuelled by retail investors on Reddit forum r/WallStreetBets.

The squeeze bled short-sellers like Melvin Capital and Citron Research, who were forced to cover their short positions.

Citron said in late January it would no longer publish short reports and instead switch its focus to multi-baggers. 

Price Action: GameStop shares closed nearly 7.2% lower at $45.94 and gained 1.11% in the after-hours session. 

For news coverage in Italian or Spanish, check out Benzinga Italia and Benzinga España.

Photo courtesy: Oxiq via Wikimedia