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Legislators oversee GameStop’s top US market participation

(Bloomberg) – Members of the US House committee responsible for Thursday’s GameStop hearing are more market-driven than the average American family, but most don’t hold individual stocks. Disclosure forms for the 54 members of the House Financial Services Committee show 83% or 45 lawmakers have market exposure to mutual funds, retirement accounts, or direct ownership of individual stocks. This includes chairwoman Maxine Waters, a California Democrat whose husband owns two mutual funds with stocks. According to the 2019 Federal Reserve Survey of Consumer Finances, it was 53% of American families. Only 20 members, less than half, hold shares directly. Nine of the members do not disclose direct or indirect shareholdings on their disclosure forms. Only eight lawmakers said they had traded shares since January 2020, including senior Republican on the panel, Patrick McHenry of North Carolina, who sold all of the shares in the only equity he held – between $ 15,001 and $ 50,000 in Dominion Energy Inc. shares . – in November. And Ohio Republican Anthony Gonzalez, a former Indianapolis Colts player, bought up to $ 100,000 in shares in Charter Communications Inc. A total of 20 committee members directly own shares. New York Democrat Alexandria Ocasio-Cortez, committee member and vocal critic of Wall Street and restrictions on trading apps like Robinhood Markets, had a 401 (k) from a previous employer between $ 1,001 and $ 15,000 and cash in two accounts with Charles Schwab Corp., including a brokerage account of $ 1,000 or less, most members did not comment on their holdings, but some said they would not get too involved in the market because of their position on a committee that oversees these matters. “We don’t deal with it regularly,” said committee member Al Green, a Texas Democrat, of the stock market. “Some of us lost money in the process.” Green has a retirement account from his work for Harris County, Texas, and an individual retirement account, which is at least $ 50,000 according to its financial disclosure forms. He said the challenge for the committee is to understand the intricacies of modern stock trading: “We also make sure we understand the flow of the market, that we understand the bid- Understand ask-spread, “he said on Bloomberg Television.” These things are so incomprehensible that it only takes a person a while to become familiar with the language. “Committee member Brad Sherman, a California Democrat, says he is acting not active because “I don’t think I can beat the market” and fears that well-timed trades could lead to insider knowledge being used “I would hope none of my colleagues are high frequency traders. You shouldn’t have enough time to get it right, ”said Sherman, who owns three Vanguard funds worth at least $ 215,000 and a California state pension. Only about 15% of American families say they own individual stocks in the Federal Reserve Consumer Finance Survey. But among those like members of Congress who make more than $ 100,000 a year, 88% had direct or indirect exposure to the stock markets, compared to 83% of committee members. Senate banking committee members who want to hold a hearing GameStop has not yet planned to, are more directly familiar with the market. Approximately 22 of the 24 members report that they or a family member directly owned shares. The college-aged son of Senator Patrick Toomey of Pennsylvania bought and sold between $ 1,001 and $ 15,000 in GameStop stock financial disclosure forms on consecutive days in January, according to the Senator. Still, only three senators on the committee said they had made stock sales since January 2020. “The deals were done without my knowledge,” Toomey said in a statement, adding that he would have told his son that GameStop would have been if he was aware of a classic bubble that ends badly for most attendees becomes. House members’ stocks vary greatly in size and scope. 35 members reported that they, their spouses and dependent children had assets in mutual or exchange-traded funds, including Waters and McHenry. Members raise money on Wall Street to meet their constant need to raise money for re-election. Securities and investment firm staff and political action committees – the kind troubled by the app rally GameStop saw last month – gave committee members more than $ 9.5 million in the 2020 election cycle, more than any other Industry The member-regulated stock market is far more complex than it was a few decades ago, as the GameStop madness has shown. At first glance, it has never been easier – or seemingly cheaper – to buy or sell stocks. Paying commissions and calling brokers to close a trade will quickly become a thing of the past. However, behind these advances – and last month’s frantic trading – lies a complex web of brokers, high-frequency trading firms, and exchanges that can prove particularly difficult to examine in a congressional hearing. Thursday’s hearing examines how retailers are behaving Social media has driven the stock prices of short selling stocks like GameStop, AMC Entertainment Holdings Inc. and Nokia Oyj higher. Among those scheduled to appear before the house panel is Gabriel Plotkin, head of Melvin Capital Management, the hedge fund that has lost up to $ 7 billion on its GameStop short and other bets, and his savior, Kenneth Griffin, Founders of Citadel, which raised Melvin $ 2 billion, and Vladimir Tenev, Chief Executive Officer of Robinhood, who developed the app that first facilitated retailing and then curtailed The Merchants’ Spree. Trade the Legislature. Indiana Republican agent Trey Hollingsworth, a multimillionaire whose company is redeveloping abandoned industrial sites, was also one of the most active The Dealers, with more than 30 transactions since January 2020. New Jersey Democrat Josh Gottheimer reported more than 525 individual transactions in the same period his largest investment in his former employer Microsoft Corp. A financial advisor acts on his behalf, his office members will hear about the epic January rally in stocks like GameStop that ended shortly after the Robinhood app temporarily restricted certain trades. It will contain technical jargon familiar to market insiders, such as payment for order flow, certain market markings, lot size, market data fees, and internalization. All of the complexity is based on extensive regulations introduced by the Securities and Exchange Commission in 2005, guidelines and interpretations that have been issued since then, usually at the behest of powerful industry players. A recent attempt by the SEC to overhaul the system has been hampered by a barrage of legal challenges, and Congress has not drafted any new laws on the matter. Robinhood does not actually pass through an exchange. When someone uses the app to buy stocks or options from GameStop, Tesla Inc., and other companies, they may be matched with a seller on the New York Stock Exchange or the Nasdaq, but often that order never makes it there. Rather, the request is quickly fulfilled by Griffins Citadel Securities or its competitors such as Virtu Financial Inc through a process called internalization. These firms pay Robinhood and other brokers for these orders and the right to choose which to fill and collect money for the price difference between purchases and sales. Unsolicited orders are routed to an exchange that pays companies like Citadel a small fee to run the business. And all of this at lightning speed with complex algorithms. The situation is only more complicated with options trading, which played a major role in GameStop’s massive rise and fall. A spokeswoman for Representative Blaine Luetkemeyer, a Republican from Missouri, said Luetkemeyer spent 30 years in banking but avoids actively trading “Avoid unsubstantiated proposals of conflicts of interest or inappropriateness. “While some members may be inexperienced in certain areas, it is up to Congress to learn and understand the questions put before the committees,” said Spokeswoman Georgeanna Sullivan. “This hearing should give them the opportunity to do so.” More articles like this can be found at bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP