Gensler: Extending trading around-the-clock is good for getting greater transparency

Frank Holland (Anchor) 00:00.070

i don't know what you're hearing this seems to be one of the most divisive things i've heard of on wall street so we have some people like the wells fargo trading desk they go it's literally the worst thing in the world and you talk to other traders they go oh it's not a big

Frank Holland (Anchor) 00:11.870

deal in fact we had carrie firestone here on the show and she said she actually thought it might smooth out trading during the day where do you stand does this increase volatility does it lower volatility how does it impact investing

Gary Gensler (Former Chairman) 00:23.390

i think a great question frank and there's going to be until this rolls out we won't fully know but i i would call myself on the on the supportive side when i was chair of the securities and exchange commission we already had found starting in twenty twenty one and twenty two

Gary Gensler (Former Chairman) 00:40.990

there was trading robin hood you mentioned their their users wanted to trade sometimes at one o'clock in the morning and you might say well i'd rather sleep well and but i think that for those that want to trade it's a good thing to get greater transparency and so let me just

Gary Gensler (Former Chairman) 01:00.070

say this how does it happen now robin hood sends an order to something called blue ocean most of your viewers don't know blue ocean it's called an alternative trading system it's one of four or five of these things and you send that order to that there's not much transparency so

Gary Gensler (Former Chairman) 01:18.750

when i was SEC chair somebody came in it was called twenty four X and asked to register with the SEC to create an exchange and those exchanges will do something like the tape you know when the the prices are coming across the screen i think that's a good thing for the investing

Gary Gensler (Former Chairman) 01:37.900

public all

Frank Holland (Anchor) 01:39.220

right so you do see some upside you're not on the campus the worst thing ever that happened to the to the stock market or wall street so you're seeing the potential for

Gary Gensler (Former Chairman) 01:46.420

some upside i see i see another piece of upside actually right now and there's an academic study that was out that eighty percent percent of the volume overnight and it's thin it's not a lot of volume it's less than one percent of the overall twenty four hour volume but eighty

Gary Gensler (Former Chairman) 02:03.710

percent of it's coming out of asia half of that eighty percent is out of korea you know i i was with the dentist the other day when you all reached out to have me come on this rastami my dentist and he asked me said gary what why are you going on TV what are you talking about

Gary Gensler (Former Chairman) 02:19.120

and i told him he said why do people want to do this and i said well some people want to do it why should we say no now but two things are happening one we're helping them get better transparency better regulation and the overnight session and two those asians that want to trade

Gary Gensler (Former Chairman) 02:36.310

during their daytime can trade the big names of america and isn't that good for those american companies that those asian investors who want to trade can do it in their daytime

Frank Holland (Anchor) 02:50.110

so there's an upside for those investors i want to ask you what's really the downside for US investors because as you mentioned people can already do it on robin hood they're already doing it why not just open the exchange for that quote un quote night session and let people do

Frank Holland (Anchor) 03:02.430

it right there on the exchange and like you said it would increase transparency i think the other question is about liquidity what do you think it would increase liquidity in those overnight hours

Gary Gensler (Former Chairman) 03:11.070

well interestingly and again it's just some recent academic studies but they say that there's not great liquidity in the middle of the night that means the bid after spread is a little wider but it actually tightens up and helps the open in the morning so remember at nine thirty

Gary Gensler (Former Chairman) 03:30.630

in the morning the big core session happens that's where ninety percent of the volume is between nine thirty and four o'clock in the afternoon and it will probably modestly this one study says maybe help in the morning look it's about investor protection and some people rightly

Gary Gensler (Former Chairman) 03:47.910

worry look are we are we moving more to sort of trading in the middle of the night day trading now night trading addictive trading and all academic studies show all economic show the more you trade your lower your average returns and so rightly people are saying what about

Gary Gensler (Former Chairman) 04:07.430

investment protection and i look at it and i i voted for this last november as well i look at it and i say investor protection net net goes up with greater transparency can see greater surveillance that's a good thing we have to recognize that there's still there's some risk

Gary Gensler (Former Chairman) 04:25.790

that some greater people will trade in the middle of the night

Frank Holland (Anchor) 04:29.230

and and burn fairness there's risk in the middle of the day if you trade between nine thirty and four there's still some risk i want to ask about one other topic we're looking at coinbase this morning those shares are up about three percent coinbase the latest company getting in

Frank Holland (Anchor) 04:40.350

the prediction market how are you viewing the prediction markets do you think there needs to be specific regulation around them

Gary Gensler (Former Chairman) 04:46.810

look it it's interesting all capital markets have a feature of prediction we predict the price of a stock or its earnings economic predictions we predict the price of corn or wheat and that's important for farmers and merchants to hedge their risk i think that there's two issues

Gary Gensler (Former Chairman) 05:06.410

one is is it well regulated with transparency and we we protect against fraud and so forth and two and this is a long held view is if if it's hard to ensure for the integrity of the market and it's harder to ensure for the integrity in things around sports and around politics

Gary Gensler (Former Chairman) 05:29.110

and it's just it's trickier and and so i think that it's really important to make sure that we don't undermine either our political system or our sport system in these prediction markets but we have to recognize we have prediction markets for weather events and that's probably a

Gary Gensler (Former Chairman) 05:52.350

helpful thing for people to hedge severe weather risk