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Why did the SEC release a report on GameStop?

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The U.S. Securities and Exchange Commission on Monday released a report examining the frenzied trading in shares of retailer GameStop Corp, and other ‘meme’ stocks, in January, and recommended some areas for further regulatory consideration.

The report could have implications that affect where retail stock orders are executed and how that service is paid for, when brokers can restrict trading, and the amount of transparency around short sales.

Here are some key details from the GameStop saga:

WHAT HAPPENED?

Shares of GameStop surged more than 1,600% in January as retail investors colluded in online forums like Reddit‘s WallStreetBets to try to bid up the heavily shorted stock and force hedge funds to unwind their bets against it, with the hope the short squeeze would drive the price even higher.

The extreme volatility in GameStop shares, along with other popular meme stocks, prompted the clearinghouse that guarantees trades before they are completed to raise the collateral from brokers to clear the trades.

That led several brokerages, including Robinhood Markets, to temporarily restrict trading in the red-hot stocks, helping curb the rally, infuriating retail traders and rattling market confidence. Others, like Charles Schwab Corp, adjusted margin requirements and limited advanced options strategies on the affected stocks.

WHY THE SURGE IN RETAIL TRADING?

In late 2019, large retail brokers like Schwab and Fidelity followed Robinhood’s lead and eliminated trading commissions.

Then, in early 2020, with COVID-19 lockdowns keeping people at home, major entertainment and sporting events canceled, and government stimulus checks sent to many U.S. households, retail trading levels soared.

While the main narrative around the GameStop frenzy was retail investors taking on big hedge funds, institutional investors were also major players in the buying and selling.

WHO WAS HURT?

Hedge fund Melvin Capital required a $2.75 billion lifeline when it had to close out its short position in GameStop at a huge loss in January.

Anybody who bought GameStop shares at $482.95 on Jan. 28 and then sold them since would have lost money.

GameStop shares are currently at $183.28, around 1,275% higher than they were a year ago.

WHAT HAS HAPPENED SINCE?

– Congress held several hearings on the GameStop episode;

– The SEC has asked for public comments on the effects of the “gamification” of trading apps and whether the public is at risk;

– The main post-trade utility for U.S. stocks has recommended shortening the settlement cycle for stock trades to one day after the trade happens, from two days;

– Various companies and industry groups have made recommendations on improving transparency around the execution of retail orders.

(Reporting by John McCrank, Editing by Rosalba O’Brien)

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Toronto-Dominion Profit Tops Estimates on Canadian Recovery – Yahoo Finance

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(Bloomberg) — Toronto-Dominion Bank’s Canadian operation is getting a boost from a rebound in consumer spending and the continued strength of the country’s housing market.

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Profit in the Canadian retail business rose 19% to C$2.14 billion ($1.7 billion) in the fiscal fourth quarter, the Toronto-based bank said Thursday in a statement. Overall profit topped analysts’ estimates.

Toronto-Dominion has seen its balances of mortgages and home-equity lines of credit swell throughout the pandemic as Canadian home prices soared and sales volumes remained strong. The unit has posted two straight quarter-over-quarter gains in credit-card balances as the country’s consumers start to ramp up spending.

“The recovery is under way, and we’re especially pleased with that because we are a strong consumer, retail bank,” Chief Financial Officer Kelvin Tran said in an interview. “We’re purpose-built for this recovery.”

The bank — freed last month from industrywide restrictions on boosting its dividend and buying back stock — also raised its quarterly dividend 13% to 89 cents a share and said it would repurchase 50 million shares, or 2.7% of shares outstanding, which would cost roughly C$4.6 billion at the current price.

Toronto-Dominion rose 3.1% to C$94.82 at 9:45 a.m. in Toronto. The shares have risen 32% this year, compared with a 27% gain for the S&P/TSX Commercial Banks Index.

Net income declined 26% to C$3.78 billion, or C$2.04 a share, in the quarter ended Oct. 31. Excluding some items, profit was C$2.09 a share. Analysts estimated C$1.96, on average.

The lender’s net interest margin — the difference between what it earns from loans and what it spends on deposits — widened to 1.58% in the fourth quarter from 1.56% in the third. That’s a contrast to rivals including Royal Bank of Canada and National Bank of Canada, which reported narrowing spreads for last quarter. For Toronto-Dominion, the margin was helped by higher wholesale lending revenue and better investment revenue in the U.S. bank, Tran said.

Toronto-Dominion released C$123 million in provisions for credit losses. Analysts estimated the bank would set aside C$161 million.

The company’s U.S. retail operations haven’t gained the same momentum as the Canadian division. While the full personal loans category increased from the third quarter, business loans fell 5.9%. In Canada, business loans have gained sequentially for four straight quarters. Total profit for the U.S. unit rose 66% to $1.09 billion in the fourth quarter, helped by a recovery of credit provisions.

“In the U.S. there’s more excess liquidity due to various government programs,” Tran said. “So our customers don’t have a need at this point in time to get more loans from banks.”

(Updates shares in sixth paragraph.)

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OPEC+ sticks with current oil production plan, despite Omicron – Aljazeera.com

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OPEC+ is sticking with its current plan to adjust crude output by an additional 400,000 barrels a day in January.

OPEC+ is sticking with its plan to keep slowing raising oil output, despite the threat the new Omicron variant of the coronavirus could pose to global crude demand.

OPEC+ – a grouping of the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and its allies led by Russia – made the decision at the conclusion of its meeting on Thursday to stick with its current plan to adjust crude output by an additional 400,000 barrels a day in January.

The group has been incrementally opening its taps since August as it continues to unwind the deep production cuts it agreed to back in 2020, when oil prices crashed in the opening months of the pandemic.

Thursday’s decision to hold the line on its current output plan comes at a time of heightened concerns in global oil markets.

Benchmark oil prices have fallen more than $12 since the World Health Organization declared Omicron a “variant of concern” last week, triggering fresh travel restrictions – which could dent crude demand – as well as fuelling concerns over how effective current COVID-19 vaccines may be against the new strain.

Oil prices kept slipping following the news of Thursday’s OPEC+ decision. At 10:26am ET (15:26 GMT) in New York trading, global benchmark Brent crude was down 60 cents to $68.27 a barrel, while United States benchmark West Texas Intermediate (WTI) crude was down 66 cents at $64.91 cents a barrel, according to Bloomberg data.

Last Thursday, Brent crude was trading upward of $82 a barrel, while WTI was north of $77 a barrel.

Global oil markets have been whipsawed in recent weeks. An energy crunch that swept the globe in October saw prices rise sharply, prompting calls from US President Joe Biden for OPEC and its allies to boost output and help cool the market.

OPEC+ resisted those calls, leading the US and other nations to tap their strategic oil reserves to help alleviate global price pressures.

But the unpredictable path of the pandemic has flexed its muscle over global energy markets once again with the emergence of the Omicron variant.

“The Omicron variant has sobered up markets during the last few days, halting the oil demand recovery enthusiasm and sending traders scrambling to limit risk in their portfolios,” analysts at Rystad Energy wrote in a note to clients on Thursday.

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Oil Prices Bounce Back Despite The OPEC Decision – OilPrice.com

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Oil Prices Bounce Back Despite The OPEC+ Decision | OilPrice.com


Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Oil prices rose on Thursday after OPEC+ decided to keep its oil production policy unchanged and add another 400,000 bpd on the market in January.

As of 10:14 a.m. EST, post OPEC+ meet, WTI Crude was up 1.46% at $66.53 and Brent Crude had increased 1.35% at $69.80. Both benchmarks erased the losses of 3% right after first news reports suggested the monthly increase was on for January.

OPEC+ is sticking to its production plan to add 400,000 barrels per day (bpd) to its production in January, OPEC said in a statement on Thursday, noting that the meeting remains in session.  

The group “agree that the meeting shall remain in session pending further developments of the pandemic and continue to monitor the market closely and make immediate adjustments if required,” OPEC said.

The next regularly scheduled meeting of OPEC+ is set for January 4, 2022.

So, the group is now set to add oil on the market in January, although speculation was high in recent days that OPEC+ could opt for a pause in the monthly increases because of the still high uncertainty over the Omicron COVID variant, the SPR releases led by the United States, and the expected worse-than-thought oil surplus early next year.

The leaders of the group, Saudi Arabia and Russia, had already signaled earlier this week that OPEC+ should not jump the gun and freeze the monthly additions to supply because of the Omicron variant, which has spooked the oil market. With still little information on the new variant and whether it escapes vaccine protection, the alliance looks ready to take further action, if necessary, but it is showing it is not over-reacting to Omicron as many analysts said the market has done.

Initial reactions to the rollover of the production policy suggest that OPEC+ could also believe that global demand will remain resilient during the winter season, and sends a message to the market present in almost every press release: stability.

By Tsvetana Paraskova for Oilprice.com

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