Gamestonk: What Happened and What to Do about It

44 Pages Posted: 10 Feb 2021 Last revised: 10 Mar 2021

See all articles by James Angel

James Angel

Georgetown University - Department of Finance

Date Written: March 1, 2021


The price of GameStop stock exploded from $18.84 at the end of 2020 to a high of $483 on January 28, 2021, before collapsing to under $60 in early February. The stock had long been heavily shorted even before the pandemic. A stock bubble and its collapse inflict collateral damage even on those not participating in the bubble, including index-fund investors. The incident raises questions about the duties of brokers and financial service professionals in the age of social media, and the role of payment for order flow (PFOF).

The price dislocation in GameStop highlights several leaks in the plumbing of the US equity market that need to be plugged or else similar dislocations will happen again. The antiquated T+2 settlement cycle needs to be shortened to reduce risk and attendant collateral needs in the system. Institutional short positions should be disclosed on SEC Form 13F just as long positions are. The frequency of short interest disclosure should be increased to daily from the current biweekly. The SEC should implement the Congressional mandate in Dodd-Frank §894 to increase transparency in the stock lending market by implementing a ticker tape for stock lending transactions. Short positions should be marked to market yearly for tax purposes yearly to eliminate the tax incentive to delay covering short positions. SEC rules 204 and 15c3-3 need to be modernized to help prevent spikes in prices far beyond any reasonable levels. Rule 606 should be extended to require brokers to report retail execution quality.

Keywords: GameStop, bubbles, short selling, short interest, retail investors, payment for order flow, financial regulation, settlement, T+2, DTCC, Securities and Exchange Commission, SEC, Rule 204, Rule 606, Rule 15c3-3

JEL Classification: G1, G2

Suggested Citation

Angel, James J., Gamestonk: What Happened and What to Do about It (March 1, 2021). Available at SSRN: or

James J. Angel (Contact Author)

Georgetown University - Department of Finance ( email )

McDonough School of Business
Washington, DC 20057
United States
202-687-3765 (Phone)
202-687-4031 (Fax)

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