Investors are hardly powerless against supposedly insidious gamification techniques, write Jennifer J. Schulp and Jack Solowey.
About the authors: Jennifer J. Schulp is the director of Financial Regulation Studies at the Cato Institute’s Center for Monetary and Financial Alternatives. Jack Solowey is a policy analyst at the center.
The SEC’s proposed “predictive data analytics” rule covers the use of technology by brokers and advisers related to retail investors. While purportedly aimed at the game-like features of apps the SEC identified as deserving further review after trading in GameStop, the SEC also says its rule focuses on the use of artificial intelligence by brokers and advisers.
By deterring brokers and advisers from using and providing technology, undertaking technological development, or adopting ever newer technologies, the SEC risks reversing gains in investor participation in our markets. Yet it’s exactly this accessibility that has the SEC on edge. The SEC is concerned that digital features that allow customized user experiences, or design elements that make trading seem more fun, will induce investors to make decisions that are in the firm’s—but not the investor’s—best interest. But, as the University of Pennsylvania’s Jill E. Fisch professor put it, it’s “unclear, however, why investing should not be fun.
Beyond educational materials, rules that inhibit the ability of brokers and advisers to take advantage of technological advances are likely to increase the costs of investing. This will leave more investors out in the cold, depriving them both of the benefits of learning by doing and of the market generally.
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