Weekly Roundup

Trading Booms: Retail investors have been pouring money into the stock market this year, buoying a market rebound. According to JPMorgan, retail traders accounted for up to 25% of all stock trading in January. These fast retail cash flows suggest that retail investor power is growing and could potentially surpass the level of market sway retail investors achieved during the ‘meme stock’ frenzy two years ago.

“Unapproved” Messages: The SEC and CFTC are investigating claims that Wells Fargo employees are communicating using “unapproved” messaging services. The investigation comes when industry employees are under increasing scrutiny from regulators.

Promotional Charges: The SEC charged former NBA player Paul Pierce for making false and misleading promotional statements about EMAX tokens on his social media platforms and for not disclosing his payment for the sponsored posts. Pierce settled the charges and agreed to pay a total of $1.409 million in fines and fees. Pierce is the latest name to join a growing list of celebrities whom the SEC has sued for false or misleading promotion of crypto assets.

Securities Dealer Registration: According to legal experts, the SEC’s proposal to expand the range of firms required to register as securities dealers may rely on an overlooked Florida court case. The case, SEC vs Ibrahim Almagarby et al, could “significantly impact people’s feeling about the legitimacy of the dealer definition rule.”

IEX-Coinbase Partnership: A new crypto exchange may be headed for the US markets thanks to a potential partnership between IEX and Coinbase. Despite increased regulatory scrutiny, an IEX spokesperson asserted IEX’s determination to create a federally compliant crypto exchange. The spokesperson stated, “we continue to consider ways that we can help provide a regulatory path for digital asset securities.”

SEC Opposition: The SEC and New York’s top financial regulator have objected to crypto exchange Binance.US’s $1 billion deal to purchase bankrupt crypto lender Voyager. The SEC said the deal may violate laws of unregistered securities and cited other ongoing investigations into Binance.US and Binance Holdings.

Stablecoin Regulation: The jury is still out on whether Paxos’s issuance of the BUSD stablecoin violated investor protection laws. The SEC issued a Wells Notice, telling Paxos that it should have registered the token as a security. Paxos is now holding “constructive discussions” with the SEC on several initiatives.

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

  • Steven M. Sears, president and COO of Options Solutions, wrote an op-ed in Barron’s on how options trading could help remedy the retirement crisis brought on by demographic trends and underfunded retirement savings. Sears reflected on the value of a simple, conservative approach to options trading that would enable investors to receive dividend payments – an ideal retirement strategy for retirees.

  • Ann Wagner, U.S. Representative (R-MO) and House Financial Services Committee Chairman, voiced her opinion on the SEC’s proposed overhaul of the US stock market. Representative Wagner said the proposals would “unnecessarily break well-functioning markets and make it more difficult for [small companies] to go and stay public.”

  • Chuck Mack, Head of Strategy for North American Trading Services at Nasdaq, noted several uncertainties in the SEC’s recent proposal to enhance order execution competition for individual investors via new auction mechanisms. Mack stated in Traders Magazine that there would need to be a marked increase in interactions between institutional and retail trade to generate the decreased trading-costs expected by the SEC. Mack also pointed out the logistics challenge of potentially thousands of auctions taking place daily and the subsequent impact on lit trading in the form of the National Best Bid and Offer (NBBO).

  • Daniel Noorian, Head of Listed Derivatives Sales at Liquidnet, commented on the effects of the unprecedented record inflows into the derivatives market. Noorian said in Markets Media that the “increased volumes put not only execution desks under pressure but also lead to strains within operations as the firms clear increased derivatives volumes.”