Weekly Roundup

SEC Contemplating Market Changes: The SEC voted to release four proposals among the biggest changes to stock-market rules since the mid-2000s. The proposals include changes to best execution, tick size, disclosures, and review of a potential auction mechanism. Although the proposals are meant to benefit retail investors, it is unclear whether the auction proposal will confer a net benefit to retail investors, who have the narrowest bid ask spreads in history and dependable liquidity. The proposals come in response to a review prompted by last year’s frenzied trading in GameStop.

Industry Reactions: Industry executives appear eager to comment on the SEC’s recent overhaul of stock market rules, with initial reactions rolling in ahead of the public comment period. MMI CEO Kirsten Wegner said, “The auction proposal overlooks and tinkers with time-tested market attributes of price discovery that have greatly improved trading for retail and institutional investors, as far as bid-ask spreads and dependable liquidity in times of volatility.”

Disclosure Rules: Publicly traded companies must now comply with the SEC’s new disclosure requirements in proxy statements covering fiscal years ending on or after Dec. 16, 2022. In August, the SEC adopted final pay versus performance rules requiring disclosure of the relationship between actual executive compensation and the financial performance of a company. The rules apply to all reporting companies with a few exceptions.

Retail Losses: According to Vanda Research, the average retail portfolio is down about 30% this year. By contrast, the S&P 500 Index is down 17%. Investment portfolios belonging to retail traders suffered a $350 billion blow this year. Losses tend to be concentrated in high-profile stocks like Tesla, which wiped out about $78 billion for retail traders alone.

Crypto Outflows: Following FTX’s bankruptcy filing, crypto investors are rushing to withdraw their assets in record numbers. Last month, investors pulled 91,363 bitcoin, nearly $1.5bn USD, from centralized exchanges including Binance, Kraken, and Coinbase. This marks the largest bitcoin outflow on record.

FSB Steps Up: Financial Stability Board (FSB) watchdogs will lay out firm steps to regulate the cryptocurrency industry in early 2023. The board intends to set a timeline for global regulators to implement its first recommendations on global crypto regulation, and detail areas where policymakers could benefit from “more clarity.” This increased oversight comes in response to the issues exposed by recent failures like FTX and Terraform Labs.

Fintech Fines: Under The Office of the Comptroller of the Currency’s (OCC) revised “civil money penalty matrix,” smaller banks risk bigger fines if many consumers get hurt by violations committed by their financial technology or other partners. The OCC will start using the updated guidance Jan. 1.

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

  • Sam Bankman-Fried, FTX Founder, was charged with eight counts of fraud and conspiracy, in what the U.S. attorney’s office called a scheme to defraud his crypto exchange’s customers and his hedge fund’s lenders. Prosecutors also charged Bankman-Fried with defrauding the U.S. and violating campaign finance rules for conspiring with others to make illegal political contributions.

  • Changpeng Zhao, Binance CEO, is vying to become the “responsible face of crypto” following FTX’s collapse. Zhao appears to be laying the groundwork for a bigger lobbying presence. Days after FTX’s bankruptcy, Binance started a political action committee, and has since significantly ramped up its marketing.

  • Gilbert Garcia, chair of the SEC’s Diversity and Inclusion Subcommittee, said that the SEC should explain why it hasn’t implemented more diversity recommendations for asset managers, and called the SEC’s progress “extremely disappointing.”

  • Jamil Nazarali, EDX Markets CEO, spoke at I.D.E.A.S. 2022. He discussed the evolution of market structure in the digital assets space, and dissected how the future model can simultaneously increase institutional adoption and reduce trading costs.

  • Episode 4 of Study Hall season 2 is out now! MMI CEO Kirsten Wegner sat down with Sputnik ATX CEO Oksana Mindyuk Malysheva to talk about calculated risk-taking, investing, and gaining the confidence to go out on your own. Listen here: bit.ly/3Ftk1c9