U.S. SEC chair pledges trading rules review in first Congressional hearing

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The new chair of the U.S. securities regulator on Thursday told lawmakers the agency is considering new trading rules as it looks to address problems highlighted by this year's GameStop Corp (GME.N) saga and the meltdown of private fund Archegos Capital.

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File photo: The seal of the U.S. Securities and Exchange Commission hangs on the wall at SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

Gensler said in prepared testimony that new trading rules being considered include: greater disclosure of "short-selling," a strategy that hedge funds and other big investors use to bet a stock will fall; increasing transparency around securities lending, which underpins short-selling; and new reporting rules for the "total return" equity swaps that felled Archegos.

Gensler also said he has asked SEC staff to draft a request for public input into how trading apps entice retail customers using game-like features such as points, rewards and competitions - a tactic known as "gamification." He added that he has directed staff to draft a proposal on expediting the two-day trade settlement process to reduce system risks.

Shares of GameStop soared in January after retail investors congregating on Reddit and trading on low-cost brokerage platforms bought shares in the video game retailer, causing big losses for hedge funds that had shorted the stock.

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