Right after Robinhood, SEC could analyze penny inventory listing criteria

The Securities and Trade Fee may possibly shortly be reevaluating the listings specifications of main exchanges in a shift that could bar the Nasdaq and the New York Inventory Trade from listing speculative penny stocks, in accordance to persons with information of the matter.

The SEC — also acknowledged as Wall Street’s prime cop — has lengthy labeled as penny stocks any share that trades beneath $5, and according to the fee, “these businesses may have minor or no earnings” and are “very speculative.”

But the NYSE and Nasdaq combined record as lots of as 1,000 organizations that would meet the SEC’s penny stock designation and thus could not be suitable for tiny investors.

By listing the firms, some regulators imagine the exchanges are providing an imprimatur of basic safety to these shares, in accordance to individuals with know-how of the matter.

An SEC spokesman declined comment, as did press officials for the NYSE and Nasdaq.

The exchanges’ listing coverage on penny stocks was brought to the commission’s attention following the Robinhood investing frenzy. The investing included a handful of extensive-time penny stocks that exploded amid prevalent message board buzz that received traction amongst hordes of novice traders utilizing the no-fee and available Robinhood investing application.

Shares of online video recreation retailer GameStop, which had traded beneath $5 for substantially of the summertime, jumped to virtually $500 in January in the course of the heart of the mania.

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The investing spree in the long run sparked major investor losses, though it does not feel to be over however as shares of GameStop started off climbing in latest times to over $100 a share just after slipping to close to $40. The wild swings have sparked a congressional hearing and regulatory opinions from the SEC between other organizations.

As described by FOX Company, the SEC’s enforcement division is searching into whether or not shares of the stocks have been manipulated by traders making bogus statements about the providers on information boards, enticed buyers to buy at the inflated charges and then dumping shares just before they crashed in price.

Shares of online video recreation retailer GameStop, which had traded below $5 for a lot of the summer months, jumped to just about $500 in January in the course of the heart of the mania. (iStock)

In the meantime, the SEC’s Division of Buying and selling and Markets may perhaps acquire a deep dive into the listings standards for the NYSE and Nasdaq right after identifying that Robinhood only lets for trading of stocks that are stated on a major exchange, FOX Organization has realized.

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Robinhood does not allow for the investing of so-named “above the counter” penny stocks that don’t meet NYSE and Nasdaq requirements (other price reduction brokerages these kinds of as Charles Schwab allow these buying and selling). If the stocks in the center of the trading frenzy have been delisted in the summertime, investor losses would have been averted, people shut to the subject say.

Robinhood does not enable the buying and selling of so-known as “more than the counter” penny stocks that don’t meet NYSE and Nasdaq benchmarks. (Getty Images)

Critics of the Nasdaq and NYSE listing of penny shares say the key exchanges have justified the inclusion of penny shares to preserve earning listing fees from these businesses.

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But individuals at the exchanges say even organizations that trade down below $5 a share can have important market place price and so be appropriate for investing. The NYSE listing requirements allow for penny stocks to be mentioned if they have a sector price of $50 million more than a period of 30 times whilst conference other thresholds. The Nasdaq is explained to have much more lenient market capitalization specifications.

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The penny stock listing problem could be lifted in the course of hearings for the confirmation of President Biden’s incoming SEC chair, Gary Gensler, scheduled for this coming week. Gensler will deal with a selection of incredibly hot-button problems when he can take above the SEC, which includes regulating particular purpose acquisition organizations, cryptocurrency and the latest stock buying and selling frenzy.