Nasdaq CEO: Retail trading likely to be key focus for Biden's SEC chief

Vast majority of retail transactions occur in dark markets

Nasdaq CEO Adena Friedman says the Biden administration’s top financial watchdog is likely to make retail trading a top priority. 

Retail investors have poured money into the stock market amid the COVID-19 pandemic, taking advantage of stimulus checks and more time to focus on investments while working from home. More than 10 million retail accounts were opened last year, according to an estimate from JMP Securities. 

"I think on the back of some of the retail trading trends and the hearings that happened in Washington, I do believe this will be a focus area for the SEC, and they're already working on a kind of a white paper thought piece around it to go out and get comments and input from the industry," Friedman said on Nasdaq’s first-quarter earnings call on Wednesday. 

Ticker Security Last Change Change %
NDAQ NASDAQ INC. 57.68 +0.55 +0.96%

Neither Nasdaq nor the U.S. Securities and Exchange Commission immediately responded to FOX Business’ request for more details about the white paper. 

On Wednesday’s call, Friedman said about 45% of trading is done through dark markets and that the vast majority of those transactions are on the retail side, meaning individual investors do not contribute to price discovery. 

She noted that regulators are likely to take a look at settlement cycles and the current T+2 system which settles transactions in two business days. 

The system says that even if a broker has the money, it must still put up more cash as collateral. T+2 came under scrutiny earlier this year after trading app Robinhood Markets Inc. was forced to limit transactions in highly volatile securities after a surge in trading volume limited its abilities to cover clearinghouse requirements.    

Friedman said other areas that regulators could examine include the disclosure of short positions and minimum tick and trade sizes.


Friedman voiced her support for Gary Gensler, who was sworn in as U.S. Securities and Exchange Commission chairman on Saturday. 

"We're excited to have Gary Gensler come into the role of chairman," Friedman said. "I think that it's great to have a leader within the SEC that really understands markets and market structure."