Dividend Stocks

GME Stock: SEC Proposes New Margin Call Plan in Response to GameStop Halts

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Volatility is nothing new for GameStop (NYSE:GME). As of this writing, GME stock is down about 4% on Friday. This action comes as the Nasdaq and S&P 500 seesaw around the breakeven mark for the day.

Shares of GameStop remain almost 20% below the first-quarter high of $27 seen in late March. However, GME stock is still up more than 21% from its $18 low earlier this month. In fact, shares have been riding a nice winning streak coming into Friday’s session. Excluding today, GameStop has rallied in 11 of the past 13 trading sessions.

Still, while shares have been trading better, the days of extreme volatility may be over for GME. That’s due to recent news from the U.S. Securities and Exchange Commission (SEC). Recently, the SEC “voted to propose a plan to bolster the resiliency of clearing houses during times of significant market stress, such as the 2021 ‘meme stock’ trading frenzy.”

As many traders remember, the meme stock craze was driven by GameStop, AMC Entertainment (NYSE:AMC) and a few others. The SEC said the following about the recent proposal:

“The Securities and Exchange Commission today proposed rule changes that would improve the resilience and recovery and wind-down planning of covered clearing agencies. The proposal would amend the existing rules regarding intraday margin and the use of substantive inputs to a covered clearing agency’s risk-based margin system and add a new rule to establish requirements for the contents of a covered clearing agency’s recovery and wind-down plan.”

Put more simply by Bloomberg Law, the plan “gives clearing firms new powers to make intraday margin calls.”

How Do the SEC’s Actions Impact GME Stock Now?

Some are wondering how this will impact GME stock specifically. Well, right now, the move doesn’t impact shares very much — at least not yet.

First of all, this is just a proposal, so the rule still needs to be voted on. Second, the proposal is an attempt to limit the intraday volatility, which we saw can be extreme during certain periods of the market.

SEC Chair Gary Gensler said the following about the plan proposal:

“Today’s proposal would help ensure the continuity of clearing services during times of significant stress […] Well-regulated and well-managed clearinghouses help lower risk for the public. I am pleased to support the proposal.”

Will this move sink GME stock? I don’t think so. It might prevent the absurdity that we saw at the height of the meme stock craze — with an emphasis on “might” — but even then it’s no guarantee.

On the date of publication, Bret Kenwell did not hold either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.