Weekly Roundup

SEC’s Unprecedented Rulemaking Agenda: The SEC continues to push an unprecedentedly aggressive rule-making agenda, with its most recent proposal aimed at preventing conflicts of interest in the asset-backed securitization market by requiring firms to invest in compliance programs. Many financial firms have argued that the SEC’s regulatory campaign is imposing undue costs upon the industry, potentially impacting profits and leading to increased fees for everyday consumers.

Algo Trading Powers Continue to Rise: In an effort to increase market share within the fixed income algorithmic trading space, two major fixed income trading platforms, MarketAxess and Tradeweb, have expanded their service offerings through strategic acquisitions of algorithmic trading providers. Algorithmic trading has become integral to many financial service firms’ fixed income execution strategies, and numerous industry observers believe that these acquisitions are aimed at bolstering the platforms’ capabilities to meet the growing demand for algo trading solutions in the fixed income market.

Treasuries Crypto Crackdown: Deputy Treasury Secretary Wally Adeyemo issued a warning this week to cryptocurrency companies, stating that they risk being cut off from the U.S. economy if they fail to block illicit activity. This follows the Biden Administration’s request for new federal legislation that would grant the Treasury Department authority to regulate crypto marketplaces deemed illicit by the U.S. government.

SEC v. Jarkesy: The Biden Administration presented its arguments on Wednesday to the U.S. Supreme Court to expand the SEC’s authority to enforce securities laws through administrative hearings. The Court’s conservative majority, however, expressed concern regarding the agency’s discretion to choose between federal court and in-house hearings. The decision, which is expected to be handed down next summer, could have broad implications for federal agencies seeking to enforce environmental, consumer protection, and market integrity laws.

Cyber Disclosure Rules: New rules set by the SEC mandating disclosures of material cyber incidents by public companies within a four-day timeframe will go into effect this month. Numerous experts have noted that the restrictive timeline does not account for the intricate nature of most cyber incidents, which typically involve numerous internal and external stakeholders, and will require many firms to hastily establish command centers dedicated to addressing cyber incidents and meeting regulatory mandates.

Crypto Regulation: A new report from The Financial Stability Board (FSB) highlighted the potential vulnerabilities associated with the rise of crypto, emphasizing similarities with legacy risks in traditional finance, including leverage and liquidity mismatches. While many industry experts believe that the current threat posed by digital assets to the health of financial markets is limited, the FSB recommends additional assessments of regulatory measures that would prevent crypto-related risks from “amplifying across the financial system,” including enhanced cross-border cooperation and information sharing.

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

  • U.S. Representative Tom Emmer (R-MN) spoke with Thinking Crypto this week about his views on SEC Chair Gary Gensler’s approach to regulating the crypto industry. In response to Gensler’s aggressive posture toward the sector, Emmer has proposed an amendment to the Financial Services and General Government Appropriations billthat would limit  the amount of taxpayer funds the SEC can use for crypto enforcement. “These wins are wins for the industry. And they highlight that the rules of the road are unclear for the industry, despite Gary Gensler’s best efforts to pretend like they are. I guess the bottom line on that one is the SEC is an incompetent cop on the beat, which I’ve said over and over, and the crypto community’s refusal to lay down and die is proving Gensler’s incompetence in the courts. And that’s a good thing,” said Emmer.

  • In an interview with CNBC, Brian Armstrong, CEO of Coinbase talked about the aftermath of Binance’s $4 billion settlement with the U.S. Department of Justice and how it is a turning point for the crypto industry. “The enforcement action against Binance, that’s allowing us to kind of turn the page on that and hopefully close that chapter of history,” said Armstrong.