SEC Chair Gary Gensler is expected to outline new rules to make the stock market more efficient for small investors and public companies.

Why should we care?
The proposed rules may force retail trading platforms like Robinhood to totally remake their business models. The current prevailing method, payment for order flow, doesn’t guarantee that individual investors will receive the best price for their stock when buying or selling. And, since fintechs like Robinhood accept a commission when routing stocks through wholesalers, it creates a conflict of interest wherein retail trading platforms don’t care about optimizing the price of individual customers’ trades. As an alternative, we may see the emergence of auctions in which firms compete to execute trades. This could force wholesalers and trading platforms alike to either create their own auctioning infrastructure or make way for entirely new players. It could also bolster the power of more traditional trading systems like Nasdaq. Robinhood’s stock is down 6% in response to this news, suggesting investors aren’t hopeful that the trading platform will emerge stronger on the other side of this potential regulatory shift. These investors may eye auctioning infrastructure with greater interest in the meantime.