Weekly Roundup

Fintech Deals: Fintech companies are increasingly becoming acquisition targets for traditional U.S. banks as valuations have plunged around 70% this year. The decline presents an opportunity for banks to beef up their technology for digital banking, online payments, and other financial services and to diversify beyond lending.

Crypto Study: A new study by the Bank for International Settlements suggests that about 75% of retail crypto traders have lost money on Bitcoin. Data spanning 95 countries from 2015 to 2022 indicates most app downloads occurred when Bitcoin’s price was above $20,000.

Class Action Lawsuit: A class action lawsuit has been filed on behalf of FTX users claiming that celebrities endorsed unlicensed securities. In addition to FTX, other defendants in the suit include NFL star Tom Brady, model Gisele Bundchen, NBA players Steph Curry and Shaquille O’Neil, MLB’s David Ortiz and Shohei Ohtani, and the Golden State Warriors. The complaint says damages clear the $5 million minimum to bring the case in federal court.

Electronic Trading: RBC Capital Markets has launched a second algorithm on Aiden, its AI-based electronic trading platform. The algorithm leverages 300+ data inputs, combinations of actions, and post-execution optimization to solve for the arrival price challenge and reduce slippage.

NYSE ETF: The PIMCO Active Bond Exchange-Traded Fund has begun trading on the NYSE. This is the first ETF to list on the NYSE in the past 15 years and the first-ever active ETF to be listed on the NYSE floor. In recent years, the SEC has approved a series of rule changes that have allowed a broad range of ETFs to list on the NYSE.

Rule Changes: Rule changes proposed by the SEC could raise scrutiny of sponsor-led secondary deals. The changes would require private fund managers carrying out adviser-led secondary transactions to report their completion dates and describe the deals within one business day of closing.

Spot Bitcoin ETFs: Following FTX’s bankruptcy, the SEC’s approval of spot bitcoin ETFs isn’t looking too likely. “Because the SEC’s concerns about allowing a spot bitcoin ETF are rooted in the resiliency and transparency of the spot markets, I can’t imagine the collapse of FTX will be good for the prospects of a spot bitcoin ETF in the short term,” said Jeremy Senderowicz, a shareholder at Vedder Price. Approval would likely require a change in SEC commissioners.

CryptoLaw Petition: Around 4,000 people have signed a petition on the CryptoLaw website demanding that Congress investigate SEC head Gary Gensler’s “actions in the FTX fraud.” The CryptoLaw website is run by lawyer John Deaton, who is representing Ripple against the SEC and contributes frequently to the public discourse on the case.

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

  • Adrienne Harris, superintendent of the New York Department of Financial Services, proposed that lawmakers in Washington take a closer look at the New York state regulatory regime: “We would like for there to be a framework nationally that looks like what New York has, because I think it is proving itself to be a very robust and sustainable regime.” She highlighted New York’s extensive registration process, which includes an assessment of a company’s organizational structure, the fitness of executives, financial statements, and Anti-Money Laundering and Know Your Customer regimes.

  • Steven Maijoor, chair of the Financial Stability Board’s crypto working group, urged global authorities to agree on global norms for the crypto industry. His comments were in response to FTX’s recent demise and the subsequent market turmoil. Rapid growth of crypto markets coupled with incomplete supervision means that they will “soon reach a point where they represent a threat to the stability of the global financial system” Majoor said.

  • Gurbir Grewal, director of the Enforcement Division at the Securities and Exchange Commission, is trying to restore trust in the financial markets by hitting rule breakers with stiffer penalties and requiring them to acknowledge their misconduct. “This is so critically important right now given the volatility and the uncertainty we’re experiencing across the financial markets and in the crypto market,” Grewal said. This year the SEC secured a record $6.4 Billion in enforcement payments.

  • John Ray, FTX’s new CEO, slammed the company’s management, saying FTX’s financial statements could not be trusted. Ray said in a court filing that FTX was the worst case of corporate failure that he had seen in his more than 40-year career as an insolvency professional.

  • Eric Stockland, head of quantitative strategy at BMO Capital Markets, says that we’ve entered the golden age of electronic equity trading, as venues compete for institutional business on performance, rather than fees. Stockland noted innovation from Cboe Global Markets in equities trading including rolling out periodic auctions in the US this year and building order types such as the midpoint discretionary order and the quote depletion protection order.

  • Episode 2 of Study Hall season 2 is out now! This episode explores all crypto with Global Digital Asset & Cryptocurrency Association’s CEO Gabriella Kusz and Grayscale Chief Legal Officer Craig Salm. We discuss the state of crypto, regulation, Spot ETFs, FTX’s recent crash, and more. Listen to the full podcast here: https://open.spotify.com/episode/3KX8PBugY56taPxT9ToQWd?si=h9qb6BsTTL6P1Vv743Uvsg