The Securities and Exchange Commission released its report on the GameStop (GME) - Get GameStop Corp. Class A Report mania earlier this year and concluded that online brokerages were using the practice of payment for order flow and the 'gamification' of stock trading to encourage more engagement from retail investors.
Payment for order flow is one of the primary revenue sources for brokerages like Robinhood, a stock trading app favored mostly by millennials. SEC chair Gary Gensler has warned that banning the practice of sending orders to the market-maker that pays them the biggest rebate is still under consideration.
The Agency also flagged online trading platforms that offer game-like incentives such as points, rewards and bonuses which are increasing engagement and activity which could be risky.
But the report also dismissed popular conspiracy theories that 'naked shorting' was the cause of the GameStop price surge and that players like Citadel securities were buying up GameStop to hedge against call options they were writing.
The conclusion detailed in the report was that positive market sentiment and excitement caused the extreme volatility in GameStop and others such as AMC (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report.