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EXHIBIT 11
Case 1:21-md-02989-CMA Document 559-13 Entered on FLSD Docket 04/28/2023 Page 1 of 3
U.S. GOVERNMENT PUBLISHING OFFICE
WASHINGTON :
44–837 PDF
2021
GAME STOPPED? WHO WINS AND
LOSES WHEN SHORT SELLERS,
SOCIAL MEDIA, AND RETAIL
INVESTORS COLLIDE, PART III
VIRTUAL HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
MAY 6, 2021
Printed for the use of the Committee on Financial Services
Serial No. 117–22
(
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Case 1:21-md-02989-CMA Document 559-13 Entered on FLSD Docket 04/28/2023 Page 2 of 3
20
parency on the short-selling side. I am encouraged to hear that
FINRA, under Robert Cook, is going to be doing some things in
that area as well.
Mr. POSEY. Thank you. Mr. Bodson, please share with us how
you are working to reduce the settlement cycle to 1 day while pre-
serving the benefits of netting and [inaudible] what the savings
proposed on margin funds might be?
Mr. BODSON. Thank you, Congressman, for that question. Short-
ening the settlement cycle is the big concept of time equals risk.
Reducing the period that trades are open and reducing the poten-
tial impact of the default of one of our members means that we
simply have to collect lower levels of margin or collateral. One of
the biggest components of our calculation of margin is volatility-
driven, what is happening in the market, how are prices moving,
and by shorting that period, we believe we can reduce that charge
by 40 percent in a volatile period. That could be $6 billion less cap-
ital that firms have to post with us and can use elsewhere. So, it
would be a significant amount for our members.
Mr. POSEY. Great. I am really glad to hear that.
Chairman Gensler, tell us about what the SEC is doing to ensure
that payment for order flow doesn’t mean retail investors are sub-
ject to unfair trades?
Mr. GENSLER. I have asked the staff to take a close look at this
in the context of the overall market structure, because payment for
order flow, which some brokers use and some don’t, is, in essence,
a payment to the broker for that order flow, and it can be in con-
flict with the interests of that customer. And that inherent con-
flict—we found in a case that was settled in December, where there
was actually communication between the wholesaler and broker
saying, ‘‘Look, I can give your customer more or I can give you
more.’’ There was a tradeoff between these two.
I think that we need to take a closer look at that, but also in the
context of the overall equity market structure, because there is also
payment for order flow on exchanges, which is called rebates. So,
there are other pieces of this puzzle, not just to wholesalers.
Mr. POSEY. Thank you, Mr. Chairman. Do you believe that co-
operation among retail investors in chat rooms, for example, can be
undesirable collusion in the equities market?
Mr. GENSLER. I think that we should always be vigorously en-
forcing our laws and ensuring that there is not fraud and manipu-
lation. But again, we have a free speech right to go and say to a
neighbor, whether it is online or in person, ‘‘I like this investment,’’
and thoughtfully say why I like this investment. Our laws are
about if somebody is trying to defraud another person, mislead an-
other person, manipulate the markets, and that we should root out
and vigorously root that out, whether it is a big institution, or an
individual. or, frankly, a computer that’s controlled by a big institu-
tion.
Mr. POSEY. Okay. During your CFTC service, you once said that
transparency isn’t costly. Would you explain that concept in the
context of financial markets?
Mr. GENSLER. Did you say that I had said transparency is a—
Mr. POSEY. Transparency isn’t costly. It pays to be transparent.
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