Weekly Roundup

Potential Government Shutdown: Speculation regarding the possibility of a federal government shutdowncontinues to linger due to various budgetary and political disputes in Congress. Speaker Kevin McCarthy (R-CA)stated that the House will remain in session next week until a deal is finalized.

2023 Retail Trading Boost: According to the latest figures from Nasdaq Data Link, retail trading levels in 2023 remain ahead of last year’s reported numbers. While trading volumes did experience a typical summer slow-down and still slightly lag behind pre-Covid levels, industry experts expect the pace of retail trading to continue to increase in the months ahead.

Concern About Volume and Interconnectedness of Gensler Proposals: While SEC Chair Gary Gensler has proposed 47 new industry regulations through the agency’s voting process during his tenure, several sector observers have noted that his approach has created uncertainty regarding consequences of the interactions of the proposals’ impact on markets. A study indicated that 83% of the proposals have not been mandated by Congress. Commenters have raised concern about the interconnectedness of proposals, without economic analysis on combined impact.

Nasdaq’s AI Powered Order Type: The SEC this week approved Nasdaq’s request to launch the Dynamic Midpoint Extended Life Order program, making it the first green-lit exchange order type utilizing AI to enhance efficiency for entities operating on the stock exchange.

Gensler’s AI-focused Testimony: As part of his testimony this week before the U.S. Senate’s Banking Committee, SEC Chair Gary Gensler detailed the agency’s latest efforts to deploy AI in its operations. Specifically, Gensler noted that the SEC is using a variety of AI models for market surveillance and to aid a number of different enforcement investigations. While the agency has previously highlighted its data-driven approach in identifying manipulative trading practices, this marks the first public acknowledgment of its use of AI programs.

Qredo Integrates Circle: Cryptocurrency security firm Qredo has integrated Circle’s USDC stablecoin into its non-custodial wallet. Numerous industry pundits believe the move will help address gas fee challenges and bolster crypto adoption accessibility by allowing USDC to serve as the primary gas token on any blockchain and streamline access to decentralized applications.

Virtu Lawsuit: The SEC this week sued Virtu Financial with allegations of falsely communicating to customers that their data would not be accessible by outside groups, and  for communications regarding the platform’s use of “information barriers” and a “systemic separation between business groups” to protect personal information. Virtu, which had last November filed a lawsuit against the SEC for not responding to a Freedom of Information Act request seeking disclosure of equity market structure overhaul, accused the SEC of having a position “driven by politics and headlines rather than the facts and the law.”

FTX to Sell Crypto Assets: FTX has received approval from the U.S. Bankruptcy Court for the District of Delaware to liquidate its cryptocurrency assets, allowing the company to repay customers following its recent bankruptcy filing.

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

  • Michael Hong, partner at Davis Polk law firm, spoke with the Financial Times this week regarding the SEC’s latest rule targeting the private fund industry. Like many stakeholders in and around the sector, Hong argued that the new regulations will only stifle competition and place unnecessary burdens on advisors and the clients they serve. “A lot of smaller managers already spend a large portion of their operating budgets on compliance. This will increase barriers to entry,” said Hong.

  • Adena Friedman, CEO of Nasdaq, spoke about the “three pillars of sustainable growth,” including a focus on market modernization.