In the 1920s, Wall Street cleared and settled trades by the end of the day after the trade instruction (“T+1”). Over the years, that cycle bloated to T+4, to T+3 in 1993, and then T+2 in 2017. Last week, the SEC proposed to go back to that old standard in a new way, shaving a day off the current T+2 clearing and settlement cycle. The SEC and industry participants agree that adopting a “T+1 standard settlement cycle could produce greater reductions in market, credit, and liquidity risk for market participants.” The Rule Proposal builds on the industry’s recent work on the issue, especially the ..read more

Securities regulator FINRA has postponed all in-person arbitration, mediation, and disciplinary hearings through May 1, due to COVID-19 concerns.  All other case deadlines remain unaffected.  The guidance is here. The post FINRA-DR Postpones In-Person Hearings appeared first on Burr & Forman ..read more

The price of Bitcoin recently topped $57,000.  New York’s Attorney General issued an Investor Alert on Virtual Currency Risks, as did the SEC’s Division of Examinations. The SEC’s “crypto-mom,” Commissioner Hester Peirce has been speaking on it daily, and Chair-nominee Gensler touches on it in his March 2 remarks before the Senate Banking Committee. SEC Chair Nominee Gary Gensler’s prepared remarks for his Mar. 2 hearing before the Senate  Banking Committee indicate he will focus on fintech: Markets—and technology—are always changing. Our rules have to change along with them. In my c ..read more

The Deposit Trust & Clearing Corp. (“DTCC”) released a February 24 roadmap for shortening the settlement cycle for US equities by half over the next two years.  The proposal anticipates DTCC’s completion of its “Project ION” using distributed ledger technology (“DLT”) to integrate and speed clearing and settlement processes.  Moving to a shorter settlement cycle would reduce industry costs, market risk and lower margin requirements. The clearing and settlement process was front and center at the House Financial Services Committee’s February 18, 2021 hearing over the GameStop (NYS ..read more

The Securities Industry and Financial Markets Association (“SIFMA”) recently proposed sweeping modernization of industry self-regulatory rules to reflect firms’ successful pivot to remote operations over the past year.  SIFMA suggests significant remote work likely will continue, even after the COVID-19 “pilot program.” SIFMA proposed a “location agnostic” overhaul of the Rules in its February 16 comment letter in response to FINRA’s call for “lessons learned” during the COVID-19 pandemic.  See FINRA Reg. Notice 20-42 (Dec. 16, 2020). Firms’ Supervision obligations under FINRA Rules ..read more

SEC Commissioner Hester Peirce earlier this month proposed a draft SEC Rule 195 as a safe-harbor for developmental token offerings, providing a registration exemption for three-years to allow the token’s network to achieve “maturity.” Proposed Rule 195. In proposing the Rule, Commissioner Peirce stressed that it is a developmental concept and welcomed direct input.  She also said it might work better as a no-action position. The Rule would provide a three year non-exclusive exemption to allow Initial Development Teams (“IDT”) an “incubator” period during which a token “wrapped in an inves ..read more

Last week, the SEC’s Corporate Finance division issued its second no-action letter supporting a digital token issue.  On July 25, 2019, the Staff agreed it would not recommend enforcement action over the issuance of Quarters tokens for online gaming. The issuer, Pocketful of Quarters, Inc. (“POQ”), states its use case as addressing “in-game currency fragmentation” by creating a “universal gaming taken” to solve “the inability to use gaming credits, coins or other units of value purchased in, or earned playing, one online video game in other online games.” The POQ ecosystem involves two sm ..read more

On May 9, 2019, the House Financial Services Committee voted to establish two task forces dedicated to studying technological innovations that impact the financial services arena: a FinTech Task Force and an Artificial Intelligence Task Force. The FinTech Task Force is initially set to study various issues, including fintech regulation in the domestic and international spheres, alternative data for loan underwriting, and data privacy. The Task Force on Artificial Intelligence will study how artificial intelligence affects how consumers interact with and use financial services. The FinTech Task ..read more

The Commodity Futures Trading Commission’s (“CFTC”) Final Interpretive Guidance on the “actual delivery” exception to regulatory jurisdiction for digital assets became effective June 24, 2020.  See 85 Fed. Reg. 37734.  The CFTC unanimously adopted the Guidance in March:  Retail Commodity Transactions Involving Certain  Digital Assets, Rel. 8139-20 (Mar. 23, 2020). The Final Guidance adopts the 2017 Proposed Interpretation with some minor changes.  The “actual delivery” exception to CFTC regulatory jurisdiction still requires unencumbered physical delivery, but the chan ..read more

Paxos Settlement Service announced February 20, 2020 that it has commenced P2P settlement of US listed equity trades over a private, permissioned blockchain with Credit Suisse and Instinet (a Nomura Bank subsidiary). Paxos expects Societe Generale will join soon. Paxos is registered with the New York Department of Financial Services and regulated as a limited-purpose trust company. Late last year, Paxos obtained SEC No-Action relief from clearing-agency registration, limited to a “Feasibility Study No-Action Phase” restricted to a maximum of seven participants for 24 months, and involving only ..read more