Speaking in an announcement on social media platform Truth Social, incoming President Donald Trump said: “Paul is a proven leader for common sense regulations. He believes in the promise of robust, innovative capital markets that are responsive to the needs of investors and that provide capital to make our economy the best in the world. 

Paul Atkins, Gary Gensler

“He also recognises that digital assets and other innovations are crucial to making America greater than ever before […] A former SEC Commissioner from 2002-2008, Paul strongly advocated for transparency and protecting investors.”

Atkins was initially appointed by President George W. Bush as a commissioner of the SEC in July 29 2002, where he served until August 2008. 

His appointment follows the announcement of Gensler’s official departure – set for 20 January 2025.

Gensler joined the SEC in April 2021 following the GameStop crisis, appointed by President Joe Biden.

Prior to this, on 14 November, Gensler appeared to suggest a departure from the commission through a thinly veiled farewell message during his ‘Car Keys, Football, and Effective Administration’ speech for the Practicing Law Institute’s 56th Annual Institute on Securities Regulation.

Read more: Gensler alludes to departure from SEC

Speaking in the official announcement, Gensler said that it had been “the honour of a lifetime to serve with [SEC staff] on behalf of everyday Americans and ensure that our capital markets remain the best in the world”. 

He added: “I thank President Biden for entrusting me with this incredible responsibility. The SEC has met our mission and enforced the law without fear or favour. I’ve greatly enjoyed working with my fellow Commissioners, Allison Herren Lee, Elad Roisman, Hester Peirce, Caroline Crenshaw, Mark Uyeda, and Jaime Lizárraga. I also thank Congress, my colleagues across the US government, and fellow regulators around the world.”

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24X made its registration application to the US Securities and Exchange Commission to (SEC) to launch the first every 24-hour exchange for equities on 6 February 2024, following an unsuccessful application in 2023. 

24X’s proposal sought to “significantly expand trading outside of regular trading hours” for NMS stocks. Specifically, the national securities exchange’s initial plan was to operate every day of the year (all 365 including holidays), 23 hours a day – subject to certain pauses. 

Following this announcement, the launch is initially set for regular trading times, with after-hours trading from Sunday to Thursday to come once the set-up is complete. 

“[…] the Commission shall by order grant an application for registration as a national securities exchange if the Commission finds, among other things, that the proposed exchange is so organised and has the capacity to carry out the purposes of the Exchange Act and can comply, and can enforce compliance by its members and persons associated with its members, with the provisions of the Exchange Act,” said the SEC in its official report.

Specifically, the SEC highlighted several factors which must be ensured, including that 24X guarantees fair representation of the exchange’s members when it comes to its directors – namely that one or more directors representative of investors and not associated with the exchange, or with a broker or dealer.

Across the industry, desire for after-hours trading is on the up as barriers to entry continue to lower with this latest decision by the SEC by no means minor. 

The New York Stock Exchange (NYSE) is also planning to extend its weekday trading on its NYSE Arca Equities Exchange to 22 hours a day it announced back in October. 

The exchange confirmed it was filing updated rules with the SEC for the extended trading, with clearing to continue via the Depository Trust & Clearing Corporation (DTCC) which has also recently announced plans to extend operational hours.

This approval of 24X is set to have significant effects on the region’s market structure, as well as the potential for other securities exchanges to follow suit in light of the SEC’s decision.

Speaking to The TRADE, Sylvain Thieullent, chief executive at Horizon Trading Solutions highlighted that the transition to round-the-clock trading presents a wealth of opportunities, but also complexities.

“As evidenced by this ruling from the SEC, stock exchanges, traditionally confined by time zones, could now find themselves playing catch-up in a world where trading knows no bounds […] Trading in the dead of night requires the need to navigate potentially volatile markets with precision and extreme quickness. Outside of regular trading hours, liquidity tends to be thinner.

“Thin liquidity can result in wider bid-ask spreads and increased price slippage, making it more challenging for high-speed traders to execute trades at desired prices. Only algos capable of analysing vast volumes of data, detecting patterns, and executing trades with split-second precision will separate the winners from the losers. With regulators scrutinising every move, ensuring the integrity and reliability of these algorithms will be key.”

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Jorge Tenreiro

Specifically, the watchdog concluded that Cumberland DRW had operated as an unregistered dealer since “at least March 2018 through to present” in more than $2 billion of crypto assets offered and sold as securities.
 
This was “in violation of the registration requirements of the federal securities laws that are designed to protect investors,” said the regulator in an official announcement.

Cumberland operates 24 hours a day, seven days a week and refers to itself one of the world’s leading liquidity providers in crypto assets. 

“The federal securities laws require all dealers in all securities to register with the Commission, and those who operate in the crypto asset markets are no exception,” said Jorge Tenreiro, acting chief of the SEC’s crypto assets and cyber unit (CACU).

“Despite frequent protestations by the industry that sales of crypto assets are all akin to sales of commodities, our complaint alleges that Cumberland, the respective issuers, and objective investors treated the offer and sale of the crypto assets at issue in this case as investments in securities, and Cumberland profited from its dealer activity in these assets without providing investors and the market with the important protections afforded by registration.”

The SEC’s complaint specifically charges Cumberland with violating section 15(a) of the Securities Exchange Act, seeking permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

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The watchdog also charged the bank with “failing to supervise” the head of its US Treasuries trading desk who allegedly made “hundreds” of illegal trades over that period.

The firm was ordered to pay $6.5 million to the SEC, $6 million to FINRA to resolve ‘related charges’, and entered into a deferred prosecution agreement with the US Department of Justice and agreed to pay a total sanction of more than $15 million.

Mark Cave, associate director in the SEC’s division of enforcement, said: “Manipulative and deceptive trading undermines the integrity of our markets. Broker-dealers and other firms cannot ignore their employees’ manipulative conduct and must take meaningful steps to detect and prevent it. Today’s action results from our continuing commitment to combating illicit trading.” 

Specifically, a former TD Securities trader was found to have spoofed the US Treasury cash securities market through entering orders with no intention of executing to obtain more favourable execution prices on other orders which were taking place simultaneously which he did intend to execute. 

After these intended orders were filled (profiting TD Securities) the trader in question allegedly then cancelled the other orders.

The SEC has ruled that the firm “lacked adequate controls and that it failed to take reasonable steps to scrutinise the trader after receiving warnings of his potentially irregular trading activity”. 

Read more: JP Morgan hit with record $920 million penalty after admitting eight-year spoofing scheme 

Following the findings, TD Securities has consented to the entry of the SEC’s order finding that it violated an antifraud provision of the federal securities laws as well as having failed to reasonably supervise the trader in question.

The SEC confirmed that it had received assistance from the Fraud Section of the DOJ’s criminal division and FINRA throughout the investigation.

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Specifically, the settlement resolves violations of recordkeeping rules.

Speaking in an announcement, the firm said: “SPGR is pleased to have concluded this matter. [SPGR] takes compliance with regulatory obligations very seriously and is committed to the integrity of its ratings process and high-quality independent credit ratings.” 

The SEC has officially recognised SPGR’s remedial acts and cooperation with the regulator.

In recent times, the watchdog has launched intense industry-wide investigations into off-channel communications. Just last month 26 broker-dealers were charged with millions in recordkeeping failures.

Speaking in August, Gurbir Grewal, director of the SEC division of enforcement, asserted: “As today’s enforcement actions against more than two dozen firms reflect, we remain committed to ensuring compliance with the books and records requirements of the federal securities laws, which are essential to investor protection and well-functioning markets.”

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The firms were found to have longstanding failures related to maintaining and preserving electronic communications by their personnel.

The charge specifically relates to “violating certain recordkeeping provisions of the Securities Exchange Act, the Investment Advisers Act, or both [and] the firms were also each charged with failing to reasonably supervise their personnel with a view to preventing and detecting those violations,” said the watchdog.

The firms which received the highest penalties of $50 million were: Ameriprise Financial Services, Edward D. Jones & Co, LPL Financial, Raymond James & Associates.

In addition, RBC Capital Markets agreed to pay a $45 million penalty, BNY Mellon Securities Corporation (together with Pershing LLC) agreed to pay $40 million, and TD Securities USA (together with TD Private Client Wealth LLC and Epoch Investment Partners) agreed to pay a $30 million penalty.

Gurbir Grewal, director of the SEC division of enforcement, asserted: “As today’s enforcement actions against more than two dozen firms reflect, we remain committed to ensuring compliance with the books and records requirements of the federal securities laws, which are essential to investor protection and well-functioning markets.” 

Of the 26, three firms received credit for self-reporting and as a result will pay reduced civil penalties. 

These firms are: Truist Securities (together with Truist Investment Services and Truist Advisory Services) which agreed to pay a $5.5 million penalty, Cetera Advisor Networks (together with Cetera Investment Services) which will pay $4.5 million, and Hilltop Securities which agreed to pay $1.6 million.

Grewal highlighted how this reward for reporting prior to staff’s investigation demonstrated “once again” the empirical benefits of cooperating proactively.

The other charged entities were charged with penalties between $18 million and $400,000: Osaic Services, together with Osaic Wealth ($18 million); Cowen and Company, together with Cowen Investment Management ($16.5 million); Piper Sandler & Co ($14 million); First Trust Portfolios ($8 million); Apex Clearing Corporation ($6 million); Great Point Capital ($2 million); P. Schoenfeld AM ($1.25 million); Haitong International Securities USA ($400,000).

Addressing the specifics of the charged, the regulator added that the investigations “uncovered pervasive and longstanding use of unapproved communication methods, known as off-channel communications, at these firms. As described in the SEC’s orders, the firms admitted that, during the relevant periods, their personnel sent and received off-channel communications that were records required to be maintained under the securities laws.” 

The SEC added that the failures involved individuals at multiple levels of authority, including supervisors and senior managers.

Following the conclusion of the investigation and charge of financial penalities, the firms in question were ordered to cease and desist from future violations and have now begun implementing improvements to compliance policies and procedures.

Read more: SEC orders Senvest Management to pay $6.5 million penalty for recordkeeping failures

Elsewhere, the Commodity Futures Trading Commission (CFTC) has announced settlements with The Toronto Dominion Bank, Cowen and Company, and Truist Bank for ‘related conduct’. 

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The commission has also charged nine other affiliates with failing to inform the US Securities and Exchange Commission (SEC) of a cyber intrusion, these are: Archipelago Trading Services, New York Stock Exchange, NYSE American, NYSE Arca, NYSE Chicago, NYSE National, the Securities Industry Automation Corporation, ICE Clear Credit, and ICE Clear Europe. 

All parties have agreed to a cease-and-desist order.

Gurbir Grewal, director of the SEC’s division of enforcement, asserted that the importance of the case hinges on the fact that it includes the world’s largest stock exchange as well as several other prominent intermediaries.

“Given their roles in our markets [they] are subject to strict reporting requirements when they experience cyber events. Under Reg SCI, they have to immediately notify the SEC of cyber intrusions into relevant systems that they cannot reasonably estimate to be de miminis events right away. The reasoning behind the rule is simple: if the SEC receives multiple reports across a number of these types of entities, then it can take swift steps to protect markets and investors.”

Specifically, the case relates to the fact that ICE experienced a system intrusion through a vulnerability in its VPN, which the exchange investigated immediately and found that malicious code had been inserted to remotely access the ICE corporate network.

The SEC’s charge comes due to the fact that ICE personnel did not notify the legal and compliance officials at ICE’s subsidiaries of the intrusion for several days, and instead the SEC had to contact the parties in question as they assessed reports of similar cyber vulnerabilities.

“[ICE] took four days to assess its impact and internally conclude it was a de minimis event. When it comes to cybersecurity, especially events at critical market intermediaries, every second counts and four days can be an eternity. Today’s order and penalty not only reflect the seriousness of the respondents’ violations, but also that several of them have been the subject of a number of prior SEC enforcement actions, including for violations of Reg SCI,” said Grewal.

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“Under current rules, proprietary trading firms which are solely members of an exchange are subject to less rigorous oversight and operate in a less transparent manner than firms that are current FINRA members and that are required to report their Treasury trades,” explained commissioner Jaime Lizárraga.

”Today’s [23 August] amendments remedy this lack of transparency by levelling the playing field between current FINRA members that report their Treasury trades and non-FINRA members that aren’t required to.”

Previously some firms were able to engage in unlimited proprietary trading of securities off-member-exchange without FINRA oversight – at the time this related to National Association of Securities Dealers (NASD), FINRA’s predecessor.

However, as chair of the SEC Gary Gensler explained in a statement this week, markets have undergone drastic developments since the rule was first introduced in 1976.

“Today [23 August], many broker-dealers conduct significant cross-exchange or off-exchange activity. Yet, some of today’s broker-dealers continue to rely on an exemption from national securities association registration that’s older than the cell phone era. This has led to a regulatory gap whereby a number of firms that have cross-market, monthly trading volume valued in the hundreds of billions of dollars are exempt from national securities association oversight.”

Gensler further added: “I support this adoption because I believe it will modernise the rule to enhance cross-market and off-exchange oversight for some of the most active participants in the capital markets.”

Commissioner Caroline Crenshaw highlighted that the decision will extend FINRA’s oversight to potentially dozens of broker-dealers. 

The rule has divided the market, with conflicting opinions on the benefits of such a move.

Lizárraga said: “These amendments bring transparency to off-exchange activity and level the playing field for firms that provide liquidity on and off-exchanges […] overall, these reforms promote markets that are fairer, more efficient and transparent, and also more resilient and stable, with lower spreads that benefit retail investors.”

However, whilst some, like Gensler and Lizárraga, highlight key benefits including increased transparency and strengthened oversight in the treasury markets, others question the effect it may have on liquidity.

Commissioner Mark Uyeda on 23 August stated his staunch opposition to the rule, pinpointing the substantial downside risk these amendments pose, explaining that “it could result in a reduction in liquidity, particularly in sectors of the market that can least afford it”.

He added that the amendment also includes a conflict-of-interest angle: “The Commission’s findings in favour of a mandatory expansion of FINRA membership are based largely on FINRA’s own submission. But FINRA has a conflict of interest here as these amendments would benefit FINRA in terms of increased revenues.”

Once the final rule is published in the federal register – taking effect 60 days from posting – firms will have a year to comply.

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NASDAQ’s Bob Greifeld has slammed the Securities Exchange Commission (SEC) over its process in approving the Investors Exchange’s (IEX) application to become an exchange, while launching a rival product.

In an interview with Bloomberg, the chief executive officer Greifeld explained: “We were against the process. The SEC clearly did not carry out their responsibility.

“The rule of the land says your quote must be immediately accessible without artificial delay. The Commission should’ve gone through the comment and review process and let the market adjust to that,” He added.

Greifeld also revealed that NASDAQ had put forward a concept similar to speed bumps – controversially implemented by the IEX – to the Commission, but it was not approved.

The speed bumps slow incoming orders by 350 microseconds to prevent high-frequency traders on its market from having any advantage over other participants.

In response to the Commission decision, NASDAQ has announced the launch of ‘extended life orders’, to counter IEX’s speed bumps.

The initiative aims to ‘reward’ those who put orders in for a longer period of time by placing them ‘front of the queue’, meaning their orders will be executed quicker.

“It’s a major evolution to market structure,” Greifeld said.

The exchange discussed the issue with buy- and sell-side market participants, and said many did not like the concept of speed bumps.

Technology focused participants particularly did not like the idea, Greifeld said, as it “delays the onslaught of technology and its progress.”

In June this year, the SEC approved IEX’s application to become an exchange, explaining its decision was about promoting competition and innovation.

Speaking at the time, Brad Katsuyama, chief executive officer at IEX, said: “It’s been quite a journey…”

He added: “We have faced several obstacles along the way and we learned along the way, but we hope our partners realise that our team's hearts and minds are in the right place.”

Before the decision was announced, NASDAQ threatened legal action against IEX over its use of speed bumps.

Amir Tayrani, the attorney for Nasdaq, said in a letter to the SEC that rules surrounding intentional time delays are prohibited, so the “Commission lacks the authority to approve IEX’s pending application and to treat IEX’s intentionally delayed quotations as protected.”

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NASDAQ, Bats Global Markets and the New York Stock Exchange (NYSE) have teamed up in an attempt to overrule regulations approved by the Securities Exchange Commission (SEC) in the US.

The group - simply known as ‘Exchanges’ – have confirmed they will be filing a set of exchange rules and update the limit-up, limit-down (LULD) rules approved by the SEC.

The Exchanges have four key focuses; eliminating time periods trading can continue without LULD bands, reducing trading pauses, achieving standardisation of primary exchange re-openings following a trade pause, and the elimination of clearly erroneous execution (CEE) rules when LULD is in effect.

Over the past year, the exchanges have been working together to introduce systematic protections to prevent trades in the interval between LULD halt resumption, it said.

The group has also implemented a pricing system, which sees closing prices allocated to opening prices when no open print is available on the primary exchange.

It said since this has been enforced, there has been a 75% reduction in “spurious LULD trading pauses”.

The Exchanges explained they are working together to strengthen US equity markets, “by harmonising key functions of the US equity markets to increase resiliency during times of extreme volatility”. 

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