The Arrows Start Flying. But What is the Target?

Managing Director Dave Oxner discusses GameStop, Robinhood and Congress

There are but a handful of moments over the past 15-years when I can recall the equity markets remaining the sustained focus of front page news. Social media mentions of “Wall Street” and “investigation” or “regulation” are up 2,000% since last week and among members of Congress, up 1,000% over the same period, with a near even divide between Republican and Democratic mentions.

As a staffer for the House Financial Services Committee during the financial crisis and the Flash Crash, I had a front row seat to a few of these spectacles. But we are now in the middle of another saga where nobody can cleanly predict what happens next and what the response of policymakers will be.

GameStop started the new year trading around $17 a share before seemingly topping out at $347 just three weeks later. While many of us may have sheepishly increased our video game hours during the quarantine, there is no rational way to explain that significant increase. You could call the speculative bubble being formed with GameStop and other stocks a digital manifestation of Occupy Wall Street. You could call it the democratization of finance. Or you could observe the events of recent days and conclude we’ve seen some version of this many times before. With the bubble seemingly about to burst, it seems ripe to discuss the fallout in Washington.

There has been a lot of excellent writing about the psychological and societal underpinnings of what we are witnessing on Reddit and in the markets but given that Cogent Strategies is a firm focused on advocacy, not sociology, we’ll leave that to others. And advocacy will be required in the days, weeks and months ahead as policymakers rush to articulate and legislate the supposed flaws that have now been revealed in our financial system.

Thursday, January 28, seemed to be the day when pundits and politicians decided they had seen enough to know what needed to happen. Among the arrows fired in interviews and press releases, some were aimed at the hedge funds, some were aimed at the Securities and Exchange Commission (SEC), and many were aimed at the platforms themselves and that generic boogeyman called Wall Street.

As I learned during my time representing Wall Street’s largest and most powerful trade association, you could fill books with the misconceptions and misunderstandings about our capital markets and the incredible opportunity they provide. Though the story of GameStop and the other targets is without a final chapter, recommendations to “fix” the markets have already been offered and they run the gambit — closing carries interest, improving special purpose acquisition company (SPAC) disclosures, creating a wealth tax, installing a tax on high frequency trading, forcing disclosure of short positions, and many more ideas that may or may not have anything to do with what we are witnessing this week.

With so many arrows in the air, it can be pretty dangerous to walk around when you don’t know the target. Stakeholders, including those directly and indirectly affected, should help these same pundits and politicians find a target and sort through the misinformation and confusion both over how our markets function and how they are regulated. How should they do this?  Utilize digital analytics to understand where the debate started and where it’s going. Welcome the attention from Congress (it’s unavoidable) and make it an opportunity to tell your story and create a new narrative.

The bottom line is this: if you aren’t seated at the table, you might be on the menu. Consider this your wake-up call for the dinner party that’s coming – whether your invitation arrives next month or next year. The good news is, if you’re looking for a +1, I’m available.

Dave Oxner is a managing director at Cogent Strategies. He previously served as a managing director and head of federal government relations for the Securities Industry and Financial Markets Association (SIFMA). Prior to SIFMA, Dave spent a decade on Capitol Hill, most recently serving as senior policy advisor to Sen. Jerry Moran (R-KS) where he oversaw the senator’s Senate Banking Committee and Appropriations Subcommittee on Financial Services portfolios and previously working for the House Financial Services Committee. For Dave’s complete bio, click here