Finance Monthly - December 2021

41 Finance Monthly. Inve s tmen t elite world of trading. But in the end, Robinhood stood accused of siding with Wall Street when it instigated trading halts and limited the amount of shares in GameStop that its users could purchase. As Milton Ezrati of Forbes writes, with GameStop, “there was no good or bad involved, unless stupidly taking excessive risk is somehow immoral”. A confidence game Following the GameStop saga, the SEC intervened to ban trading for six company names who were suspected of being “targets of apparent social media attempts to artificially inflate their stock price”. In a similar vein, Bloomberg has argued that Robinhood has made trading “so easy, and maybe even too hard to resist”. Reconfigured, gamified app trading is at oddswith serious, long-term investment. It might also blunt the reality of material consequences for parties with professional investments, such as pensions and mortgages, and not just fat-cats. However, in a recent study, Chief Economist at NASDAQ, Phil Mackintosh, downplayed the long-term influence of trading apps, citing home-working and lockdowns as reasons for the surge in the use of these platforms. In the same report, Sapna Patel, Head of Market Research at Morgan Stanley, also dismissed concerns that gamification is increasing overall risk levels. While increased accessibility may help users navigate the market, the content is what rules the roost: “the what to trade, the when to trade and how often to trade, is driven by social media influencers, whether it’s the Elon Musks of the world tweeting about GameStop, or it’s the Reddit-like platforms where they’re making recommendations. That’s what’s driving retail to trade more so”. Academic reports have similarly reinforced this view. Balancing the scales? There’s a case to be made for levelling the playing field. And markets are, and always have been, risky places in which to dabble, for professionals and the retail crowd. Gamified platforms do not explicitly encourage this volatility, but they can intensify it. There’s a danger that participants can lose large amounts of money on these platforms, perhaps because certain behaviours are encouraged by design. Looking back to the events surrounding GameStop in early 2021, we can see how social media sparked an unpredictable contagion. Given the difficulty of regulating social media, this is a broader and more fraught conversation in its own right. After all, it wasn’t until Elon Musk sent one of his infamous tweets that GameStop’s stock price soared like a SpaceX rocket.