Weekly Roundup

Retail Investors and ETFs: It was reported that ETF trading by investors has increased at a three-year compound annual growth rate of 52%.  The rise of ETF trading by retail investors was attributed to numerous key factors, including commission-free trading, improved digital experiences on direct platforms, and investors having greater access to financial education through social media and other forums’ growth.

Women-Led VCs:  A “US VC female founders dashboard” from Pitchbook highlighted data on the number of women-led venture capital funds trending up in recent years. The data also indicated that 2022 saw the creation of several women-led funds, incubators for female founders, and more new companies.

CBOE, Fidelity, Coinbase Collaborate on Bitcoin Spot EFT:  CBOE, celebrating its 50th anniversary this year, filed an application to list and trade shares of spot bitcoin ETFs, including one by Fidelity, to add surveillance-sharing agreements with crypto-trading platform Coinbase.

Consolidated Audit Trail:  The Proposed Funding Model of the Consolidated Audit Trail drew further industry scrutiny over lack of budget oversight, with the CAT 2023 budget reportedly approaching agency-like size and scale.

Bipartisan Crypto Regulation: In the House, Rep. Patrick McHenry (R-NC) continued to work on building political traction for a crypto market structure bill and a stable coin measure with the aim of marking up both pieces of legislation before the August Congressional recess. In the Senate, Sens. Kirsten Gillibrand (D-NY) and Cynthia Lumis (R-WY) reintroduced legislation to grant the CFTC broad powers to regulate the crypto market structure and stablecoin issues. Political traction remains unclear.

Regulation to Avoid a Bank Run: The SEC voted on “swing pricing” rules to prevent money-market funds from running short on cash during a fiscal crisis. The aim is to discourage bank runs and prevent panics in the banking system.

FTC Probing OpenAI: The FTC opened an investigation into OpenAI, the artificial intelligence company that launched ChatGPT, to determine if the organization has violated consumer protection laws. The investigation will address allegations of “unfair or deceptive privacy or data security practices.”

Third-Party Exam for Investment Advisors: The SEC’s Investor Advisory Committee recommended the establishment of a third-party exam for prospective investment advisors, following concerns about fraud and abusive practices in the industry. It has been speculated that the new testing requirements could drive revenue for accounting firms.

Nasdaq’s Special Rebalance: Nasdaq launched a  “special rebalance”’ to prevent fund managers linked to the index from accidentally violating  SEC diversification regulations.

ESG:  As the partisan divide on ESG initiatives continues in Congress, numerous state governments have been working on various climate initiatives. For example, the California State Legislature advanced a bill that would require corporations to disclose their “planet-warming” emissions levels. As currently written, the measure would be stricter than the SEC’s current proposal on climate disclosure rules, which only pertains to public companies. Governor Gavin Newsom (D) has yet to comment on the bill.

In the Mix: This Week’s Top FinTech Thought Leader

  • Timothy Massad, former chairman of the CFTC, spoke to CNBC about his thoughts regarding streamlining the establishment of crypto regulations. Massad indicated that the SEC and CFTC should sidestep ongoing litigation by creating a self-regulated organization to set basic standards for asset protection, fraud prevention, conflicts of interest, and record-keeping for all platforms that trade with bitcoin or Ethereum. “We strongly support enforcement of the laws, but what we’re saying is, we need more than that…This is a way to get investor protection standards into the industry as it exists today without having to fundamentally change the securities or the derivatives laws,” Massad said.
  • Ian Swanson, CEO and co-founder of Protect AI, discussed the need to regulate AI capabilities at Reuters’MOMENTUM conference. Swanson believes that given the increased pace at which innovations in the AI space are being implemented throughout society, it is regulators’ responsibility to ensure that the technology is being deployed responsibly. “We are flying down the highway in this car of AI…We need to have safety checks. We need to do the proper basic maintenance and we need regulation,” Swanson said.
  • Marc Andreessen, General Partner of Andreessen Horowitz, published an op-ed highlighting his thoughts on the potential future benefits of AI as tool for humans, cautioning against over-regulation.