Broker-trading Apps are Aimed at Increasing Trading

January 21, 2022
investor broker discussing trading strategy holding papers with financial charts pens cropped shot broker job investment concept 74855 14251.jpg

Recently, Gary Gensler, who serves as chairman of the SEC, came out to warn retail investors who use special brokerage applications in their activities that provide for no commission, because broker-trading apps are aimed at increasing trading. In particular, those brokers who are engaged in the sale and purchase of shares. So, let’s analyze the key aspects of the information received regarding this issue.

  • CNBC’s Jim Cramer said the investment community should be extra vigilant because investors could be forced to trade more frequently.
  • What Gensler adds among other things: trading is not good, but investing is a great solution.

Let’s talk more about this situation next.

As recently as Wednesday, Securities and Exchange Commission Chairman Gary Gensler issued some warning to retail investors who trade using brokerage applications that offer no commission. In particular, those brokers who are engaged in the sale and purchase of shares.

In an interview with CNBC’s Jim Cramer, the head of the US Securities Regulatory Authority expressed concern about the following issue. He considers unreasonable and inappropriate incentives between investors and the services they offer in the stock markets.

Gensler, being interviewed by Mad Money, spoke about the following: “The entire public interested in investing should be especially vigilant, because broker-trading apps are aimed at increasing trading.” In addition, he adds: “Trading is not good, but investing is a great solution. That’s what the statistics show.”

In particular, Gensler’s comments were aimed at answering a question regarding Reddit memes that appeared in January 2021, when significant attention was drawn to the possible gamification of the investment field.

Gensler also stressed that while Americans are subject to some kind of “coding” of behavior every day when using certain technological developments, special consequences can materialize when it comes to finances.

“Because through active work, brokerage applications and robot advisors significantly increase the income of their developers, the main task is to increase the number of trading operations,” says Gensler.

Among other things, Gensler also notes that the SEC is carefully studying behavioral cues and the phenomenon of gamification in order to trace all the steps taken to ensure an adequate level of investor protection. In addition, it was said that recently the number of people interested in investing has significantly increased.

“Of course, it’s good to see that more and more people are thinking about their future and are trying to study the field of investing, as well as the corresponding market,” Gensler said. “However, spreading the potential on everyday small trades significantly reduces future returns.”

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