Jon Stewart is taking on Wall Street again.
During the 2008 financial crisis, as host of the “Daily Show,” Stewart regularly skewered big banks, market pundits and regulators. Now, he’s wading even deeper into the weeds of finance as an emphatic ally of a Reddit-sparked movement of small investors clamoring for a revolution in the U.S. stock market.
They’re rallying around SEC Chair Gary Gensler’s push for the most sweeping overhaul of share trading in a generation to make it more affordable and fair. But Gensler is running into a wave of opposition from Wall Street giants like GOP megadonor Ken Griffin’s Citadel Securities that are fighting to maintain the status quo with legal threats, dire warnings and reams of data countering the SEC’s analyses.
Stewart — who is so immersed in the fight that he’s even interviewed Gensler on his new TV show and on his podcast — describes his passion for the issue as part of a long-running preoccupation with the “blatant absurdities” of institutions like the Pentagon, Fox News and Wall Street.
“The system was written and built for the people that are operating in it. So you’re the away team,” Stewart, 60, said in an interview. “You’re allowed access, but only at a certain level. You don’t get into the VIP room. You don’t get the platinum card. Your presence there is, in some ways, exploitable.”
Wall Street brokers, traders and exchange operators have long dominated the debates over how stock market trading works, shaping the way billions of dollars of shares change hands every day. But the surge of interest in the finer details from Gensler, Stewart and armies of do-it-yourself investors signals that times may be changing.
Partly inspired by the meme stock mania of 2021 — when small investors banded together to send the prices of a handful of beleaguered stocks like their beloved GameStop soaring — the SEC’s plans are intended to inject new competition and clarity into the market, Gensler says.
The agency is proposing to shift the economics of trading on exchanges and institute a new best-execution rule — a mandate that requires brokers to seek the most favorable terms to carry out client orders. Among other changes, the proposals would force brokers to disclose more about the quality of trading they offer and reroute individual investors’ orders through auctions, putting them up for bids like a collector’s item on eBay to increase competition.
Executives, lobbyists and even a few Gensler allies object to many of the proposals, which they worry may be a step too far in reimagining what they say is largely a well-functioning system. Fidelity has warned that retail investors may suffer. Vanguard is concerned about unintended consequences. And even stock exchanges like NYSE say the auction proposal, which is intended in part to bring more retail trading onto exchanges, could undermine the market design and hurt investors.
Yet there’s a lot of buy-in from the financial community, including some of the biggest investors. A group of six pension funds, including the California Public Employees’ Retirement System, applauded the SEC’s proposed changes to exchange pricing. Other executives say the agency is addressing issues that the industry itself has been urging regulators to look at for years.
For many small investors, the proposals represent a sign that Gensler’s SEC is taking seriously their concerns that the market is rife with conflicts of interest.
The individual investing crowd was largely cast aside after capturing the country’s attention two years ago by pushing meme stocks like GameStop and AMC Entertainment to the moon — and squeezing some big-name hedge funds that were betting on the shares to fall.
Now, they “have a seat at the table,” said Urvin Finance CEO Dave Lauer, who leads a mom-and-pop investor advocacy group called We the Investors.
“Individual investors feel empowered,” said Lauer, whose group orchestrated a letter-writing campaign to the SEC on the proposals, netting more than 5,000 missives of support for the proposals. “They’re educated and they’re engaged and they’re relentless.”
For his part, Stewart admits that he is no SEC policy wonk or that he knows for sure whether the SEC’s plans are perfect. But he has spent an inordinate amount of time over the past two years discussing trading with the likes of Lauer on both his show, “The Problem with Jon Stewart” on Apple TV+, and a podcast. He interviewed Gensler once on his show in 2021 and on his podcast last year.
“To have a system that has such power over the American economy, yet still lacks transparency and competition, I just thought that was fascinating,” Stewart said. “It’s irresistible to some extent because of the power that it wields.”
But Wall Street is fiercely lobbying to derail the potential changes.
Executives at Robinhood — the online brokerage that played a central part in the 2021 meme stock frenzy — are warning that, if enacted, the plans could mark the return of costly trading fees for individual investors. Griffin’s Citadel Securities is questioning the SEC’s legal authority to pursue the proposals. And even larger investors overseeing the savings of everyday Americans through retirement plans and mutual funds fear that some of the changes will hurt them, despite their intent to do otherwise.
“If you harm institutional trading,” said Mehmet Kinak, global head of equity trading at Baltimore-based asset manager T. Rowe Price, “you’re essentially harming the same individuals you’re trying to help.”
Many executives argue that the small-investor enthusiasm for Gensler’s proposed changes is misguided because the everyday person’s trading experience — with near-immediate execution and no commissions — is the gold standard.
“We’re essentially taking what is a well-functioning part of the market and introducing new things like … less transparency and higher costs into the equation,” said Joe Mecane, head of execution services at Citadel Securities, at an industry event. “What I think a lot of us are scratching our heads about is how does that potentially result in a better outcome for investors?”
The SEC’s plans are likely to look different once finished — that is, if the agency actually winds up finalizing the plans. Gensler could back away from some of the proposals after reviewing the flood of comments that have come in. The SEC could even simply run out of time, as a potential change in administration looms in less than two years.
Both Lauer and Stewart recognize the risk of Wall Street delaying the outcome as well as the threat of the courts striking down whatever the SEC does.
“The courts have been very sympathetic of late that the government apparently has no role in regulating financial markets, industry or anything,” said Stewart. The U.S. markets have proved to be “awfully resistant” to change designed for the masses, he said. “There’s a reason why the house always wins.”