Hester M. Peirce and Elad L. Roisman are Commissioners at the U.S. Securities and Exchange Commission. This post is based on their recent public statement. The views expressed in this post are those of Ms. Peirce and Mr. Roisman and do not necessarily reflect those of the Securities and Exchange Commission or its staff.
Today [October 18, 2021], the staff issued a report on the so called “meme stock” episode that occurred this past January. We would like to thank the staff not only for their hard work on this report, but also for keeping the Commission fully and timely informed during the period of extreme volatility discussed in the report. While the report includes an interesting account of the events, it does not appear that many conclusions can be drawn from the data. This report should have been an anodyne report on the events of earlier this year and, if evident from the data, an assessment of the causes of those events. Surprisingly, the report turned into an account of those events awkwardly intertwined with discussions of market practices and policies that mirror Commission-level conversations unrelated to the specifics of January’s events. Including these discussions distracts rather than informs our understanding of the meme stock episode.
In the wake of an anomalous market event, it can be tempting to identify a convenient scapegoat and leverage the event to pursue regulatory actions without regard to the factual record. The report, however, finds no causal connection between the meme stock volatility and conflicts of interest, payment for order flow, off-exchange trading, wholesale market-making, or any other market practice that has drawn recent popular attention. Indeed, in our discussions about causes of the January episode, whether with staff or with market participants, we have seen no evidence that these practices were a cause of these events.