Weekly Roundup

McCarthy Out, McHenry (temporarily) In: In a stunning and historic move, 8 Republicans and the entire Democratic House caucus voted in favor of Rep. Matt Gaetz’s (R-FL) motion to remove Rep. Kevin McCarthy (R-CA) from the speakership. As the Republican caucus seeks to install a new speaker when the House is back in session next week, Rep. Patrick McHenry (R-NC), Chairman of the House Financial Services Committee and a fintech innovation advocate, will serve as Speaker pro tempore.  

AI and Financial Services Regulation: Discussion continued over whether there is a need for regulation of artificial intelligence in financial services. For example, in credit underwriting services, policy discussions have centered around transparency requirements for firms to give  consumers or the government information regarding decision-making and use of AI tools.

Liquidity Provision – Market Growth: A study reported that the market size for High-Frequency Trading (HFT) firms, which provide liquidity to the markets, is anticipated to have a continual annual growth rate of 11.8% by 2028.

ESG Ratings: Public debate continued regarding ESG ratings, with regulators and lawmakers are focused on the accuracy, transparency and potential for conflicts of interest with sustainability scores.

SEC’s Ripple Appeal Denied: U.S. Southern District of New York Judge Analisa Torres this week rejected the SEC’s appeal of her decision against the agency’s efforts to sanction Ripple Labs. In her ruling issued this past July, Judge Torres found that the SEC misinterpreted current securities laws while seeking to punish Ripple for selling their XRP digital currency on public markets. Numerous industry experts have noted that the decision could seriously hamper the SEC’s long-term ability to police the crypto industry.

Citi’s Algo Trading Focus: Citi Group announced the appointment of Jamie Mortimore as director of the bank’s newly formed global rates algo trading team. Mortimore, who has served as the head of J.P. Morgan’s global rates algo trading team for the past six years, stepping into this role represents the bank’s sharpened focus on meeting increasing demand amongst their client base for instant online trading access.

DOJ’s CCP-linked Crypto Crackdown: The Department of Justice (DOJ) this week announced charges against eight companies linked to the Chinese Communist Party for using various crypto platforms to help facilitate fentanyl-related transactions. Specifically, the DOJ alleges that the individuals and entities named in the case used digital currency platforms as major planks of their cash flow structures. In conjunction with these charges, the Treasury Department also announced sanctions against the parties and crypto exchanges named in this indictment.

 SEC Slams Coinbase’s Dismissal Arguments: In a court filing made earlier this week, the SEC requested a federal judge to reject Coinbase’s motion to dismiss the agency’s lawsuit against the digital asset platform. The request specifically outlined that Coinbase’s choice to cite the decision in the Ripple Labs case is not relevant to this particular suit.

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

  • Michael Warlan, Head of Global Trading at Third Avenue Management, spoke with Traders Magazineregarding support for an incremental approach regarding SEC’s most recent equity market structure proposal. Warlan noted support for Regulation 605 reforms, and some tick size, but expressed caution about other wholescale changes such as order competition and best execution proposals.  He noted, from a buy side perspective, Best Execution is appealing conceptually but he has concerns regarding unintended consequences; that on Order Competition, that while increasing access to previously inaccessible liquidity would be helpful, that he has concerns about efficiency and practicability.

  • Michael Lewis released his book about SBF, entitled “‘Going Infinite.”

  • David McIntosh and Tim Ryan, co-chairs of the Blockchain Innovation Project, penned an editorial forCoinDesk criticizing SEC Chair Gary Gensler’s campaign to regulate the crypto sector. Specifically, McIntosh and Ryan called on Congressional leaders to reign in what they view as Gensler’s overzealous efforts to “regulate digital assets out of existence.” “Despite the boom in blockchain technology and digital assets, bureaucrats like Securities and Exchange Commission (SEC) Chairman Gary Gensler want to stifle their development in the United States through unlawful, overbearing regulations based on a misguided approach that lacks understanding of their potential,” they wrote.