SEC
SEC to review practices regarding small investors’ stock being filled by high-speed trading firms.
In response to the recent GameStop saga, the SEC acting chairwoman, Allison Herren Lee, has signaled support for the widespread review of practices regarding the trade of small investors’ stock by high-speed trading firms. The current system, payment order flow, is decades old, but is under attack as the number of individual investors who trade on brokerage apps continues to increase. Consequently, Lee wants regulators to make sure that all practices are fully disclosed and “' ‘consistent with best execution obligations.’ “ Lee’s letter was in response to Senator Elizabeth Warren who sent questions to the SEC after “meme stocks” created large amounts of volatility, resulting in brokers having to curb trade to meet margin calls. In the past, the SEC has signaled its liking into payment order flow, so the issue is something to looked at in the near future.
Bond Market
Flood of debt tests the Bond Market
Experts on Wall Street are starting to believe that the US government’s borrowing is testing investors’ appetite for treasury debt. Overall, falling bond prices have pushed the treasury note from around 1% to more than 1.5%, the highest the note has been in over a year. As such, investors claim that the COVID-19 vaccine and economic resurgence (led by stimulus checks) will lead the Federal Reserve to raise short-term interest rates. Additionally, the supply of 30-year treasury notes has been an accelerant of higher yields. In general, people on Wall Street are divided over the supply of treasury yields. In the past, these supplies have had little impact on on yields, however, the current situation is unprecedented, leading some to believe that different outcomes could occur.
ROBLOX
Roblox set to go public on March 10
Roblox (RBLX) will be traded on the NYSE staring March 10. Roblox’s reference price is set at $45 based on a formal IPO price and recent private-market transactions. However, Roblox is going public through a direct listing and not the traditional route of an IPO. A direct listing allows Roblox to float its shares on the NYSE without having to pay investment banks for an IPO. Initially, Roblox was set for an IPO in 2020, but after the strong debuts of Airbnb and DoorDash, company officials found it difficult to gauge the correct price of Roblox’s shares.
Chinese Tech. Stocks
Chinese tech. stocks are falling harder than their US counterparts
As US tech. stocks are entering the correction territory, Chinese tech. stocks continue their downward trend. Over the past three weeks, the largest Chinese tech. stocks listed in Hong Kong have fallen by around 26%. The Hang Seng Tech Index, which tracks 30 companies, closed Tuesday at a drop of at least 20% from a recent high, marking its lowest level in 2021. In comparison, the Nasdaq closed 10.5% lower than a recent high. Investors claim that the US and Chinese market both took a hit due to the rise in treasury bond yields, but China took a larger hit because of an influx of money from investors in mainland China. However, investors can still remain optimistic as Chinese tech. stocks long-term growth outlook remains intact.
US Dollar
Investors worry as the dollar strengthens
Investors expected the dollar to decline, but it is actually up 2% since its low in early January. Since the US Presidential Election in November, investors have predicted the US dollar to drop by at least 20%, however, the drop turned out to only be 3.3% and has risen since. Consequently, people are starting to worry that if the dollar keeps strengthening, the recovery in emerging markets, which rely on dollar funding, could be hurt. For example, the dollar has significantly strengthened in comparison to the Brazilian real and Mexican peso, hurting their recovery efforts. Additionally, the dollar sits 1.7% higher than the euro, which was supposed to be a major player for global recovery. A reason for the increase in the US dollar is because of rising bond yields, and this condition makes financial conditions in the rest of the world stricter. As such, recovery in those economies could be restricted.
Works Cited
Davies, Paul J. “Dollar Strength Confounds Investors and Sparks Some Worries.” The Wall Street Journal, Dow Jones & Company, 4 Mar. 2021, www.wsj.com/articles/dollar-strength-confounds-investors-and-sparks-some-worries-11614870716?mod=markets_minor_pos2.
Goldfarb, Sam. “Flood of New Debt Tests Bond Market.” The Wall Street Journal, Dow Jones & Company, 10 Mar. 2021, www.wsj.com/articles/flood-of-new-debt-tests-bond-market-11615372201?mod=markets_lead_pos3.
Michaels, Dave. “GameStop Saga Prompts SEC to Weigh Review of Payment for Order Flow.” The Wall Street Journal, Dow Jones & Company, 9 Mar. 2021, www.wsj.com/articles/gamestop-saga-prompts-sec-to-weigh-review-of-payment-for-order-flow-11615316739?mod=markets_lead_pos6.
Yu, Xie, and Joanne Chiu. “Chinese Technology Stocks Have Fallen Harder Than U.S. Peers.” The Wall Street Journal, Dow Jones & Company, 9 Mar. 2021, www.wsj.com/articles/chinese-technology-stocks-have-fallen-harder-than-u-s-peers-11615288384?mod=markets_major_pos12.
Ziobro, Paul. “Inside Roblox's Stock Debut, from Direct Listing Decision to Its Financial Outlook.” The Wall Street Journal, Dow Jones & Company, 9 Mar. 2021, www.wsj.com/articles/inside-roblox-stock-debut-from-direct-listing-decision-to-its-financial-outlook-11614179052?mod=markets_lead_pos11.