What are blue sheets? What to know about the data SEC will seek from Robinhood
GameStop action puts tool used by regulators for market makers & brokers front and center
The U.S. Securities and Exchange Commission is expected to request access to mobile brokerage firm Robinhood’s “blue sheets” in the coming days as part of its review of unprecedented volatility in shares of GameStop and other stocks favored by retail traders.
Robinhood executives are already preparing for the request, FOX Business Network Senior Correspondent Charlie Gasparino reported this week. The requests are considered a precursor to regulatory scrutiny and potential action.
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In a blue sheet request, the SEC asks a firm to provide data related to customer transactions involving a particular stock. The data typically include the names of individual clients, the amount of shares they traded and when the transactions occurred.
Regulators use the information obtained through a blue sheet request to determine whether illegal activity occurred.
Officials are expected to review the circumstances that led to massive price swings for shares of GameStop, AMC Entertainment and a handful of other stocks. Reddit users from the “WallStreetBets” forum and other retail investors began buying shares of GameStop and other stocks known to be heavily “shorted” among hedge funds.
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The resulting “short squeeze” put several hedge funds in danger of insolvency and prompted Robinhood and other brokerage firms to limit transactions involving the stocks.
Regulators will examine whether Reddit users who touted GameStock and other embattled stocks engaged in an effort to manipulate the market to drive up prices. In a column for the New York Post, Gasparino noted that such cases are difficult to prove.
In a lengthy statement on the situation, the SEC said it was “closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days.”
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The agency noted that it would review the actions of “regulated entities” such as Robinhood who opted to restrict transactions.
“The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities,” the agency said in a statement. “In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws."