Potential market weaknesses highlighted by the GameStop trading frenzy brought calls for further investigation and possible regulation at a second House Financial Services Committee hearing Wednesday.
Those weaknesses include the potential for conflicts of interest between payment for order flow and best execution, whether short sale disclosure is adequate and if settlement times should be shortened.
Citadel Securities' role in the GameStop saga also came up. Alexis Goldstein, senior policy analyst at Americans for Financial Reform, told the panel that Citadel and Virtu Financial "execute a larger volume of U.S. stocks than the New York Stock Exchange" and may be putting investors at a disadvantage.
Dennis Kelleher, president and CEO of Better Markets, called for Citadel to be investigated by the Financial Stability Oversight Council. "I don't think there is any situation where Citadel does not pose a systemic risk," Mr. Keller said.
Former SEC commissioner Mike Piwowar, now executive director of the Milken Institute Center for Financial Markets, noted that the Securities and Exchange Commission is looking into whether GameStop investors were put at a trading disadvantage or there was illegal trading activity.
"I have complete confidence that the commission and its compliance and enforcement staff will identify and pursue any evidence of non-compliance or wrongdoing," he said. Given changes in markets and technology, the SEC should revisit whether trading rules are working, Mr. Piwowar said.
A closer look at securities lending would also be a good idea, he said, but would involve coordination with bank regulators.