GameStop / RiverNorthPhotography

Last week, the U.S. Securities and Exchange Commission (SEC) issued a long-awaited report detailing the results of its review of trading in so-called “meme” stocks — specifically, GameStop Corp. — earlier this year.

That report didn’t propose specific rule changes to address the issues that arose amid a sharp increase in trading activity and volatility in stocks that attracted widespread social media attention. However, Moody’s Investors Service said in a new report that the SEC highlighted areas of possible future regulatory action, which Moody’s said would be good for markets.

“Any future regulations or related efforts that shorten the settlement cycle and increase market transparency would be credit positive for the retail brokers, central counterparty clearing houses, market makers and exchanges that comprise the market infrastructure,” Moody’s said.

Other possible changes, such as restrictions on payment for order flow practices, would have mixed effects, Moody’s suggested.

“Retail brokers that rely on this type of revenue face lower profitability, while market makers would lose the purchased access to trade against the retail order flow and associated revenue from these transactions,” Moody’s said. However, exchanges would benefit from the order flow being directed their way, instead of to market makers.

Additionally, the Moody’s report said, “increased scrutiny of ‘off-exchange’ market makers acting as wholesalers may pressure their profitability, but greater transparency would be credit positive for all market infrastructure participants.”

Finally, the Moody’s report suggested that improved reporting on short sales would benefit all market players.

“Increased reporting standards and transparency would enable market participants to better understand the causes of events like the ‘meme stock’ frenzy, where dramatic increases in volatility could be linked to short selling,” Moody’s said.