Wednesday Morning Reads

Gensler grilling

The SEC has been operating under temporary leadership since the end of December, when Chairman Jay Clayton left the agency after 3.5 years in the role. Since taking office, President Biden has been looking to appoint Gary Gensler to lead Wall Street's chief regulator, prompting the latter to testify before the Senate Banking Committee on Tuesday. He was mainly grilled on tactics used by some online brokerages, given the recent GameStop (GME) trading frenzy and its fallout.

Who is Gary Gensler? He's a former Goldman Sachs partner and ex-chief of the Commodity Futures Trading Commission (under the Obama administration). Gensler also spent time at the U.S. Treasury in the 1990s and served as the CFO for Hillary Clinton's 2016 presidential campaign. On the academia front, he's a professor at MIT's Sloan School of Management, where he teaches classes on digital currencies and blockchain.

At the hearing, the SEC nominee pledged to analyze the rise of stock trading "gamification" and intervene if necessary. He'll also "look at market structure in the equity markets around payment for order flow when frankly just a couple - a handful - of financial firms are buying most of the retail flow in America." Gensler further indicated the agency could soon move to force companies to disclose more about their political spending, climate risks and board diversity.

On cryptos: "To the extent that somebody is offering an investment contract or security that's under the SEC's remit, and they have exchanges that operate there, then we have to make sure there's investor protection. If it's not that, and it's a commodity, as Bitcoin (BTC-USD) has been deemed to be, then it's either a question for Congress or it's possibly a question for the Commodity Futures Trading Commission."

Siphoning SPACs

After losing its position as Europe's leading financial capital, the British government is looking toward looser stock listing rules to attract tech firms and SPACs. A surge in blank check companies has short-circuited the traditional IPO process, prompting a need for change to support the U.K.'s financial services sector. New listing rules would also aim to diversify London's recently struggling stock market, which is skewed toward older areas like banking, energy and mining.

Backdrop: Just weeks after the Brexit transition period ended on Jan. 1, Amsterdam surpassed London as Europe's largest share trading center, which piled pressure on the city to improve its competitiveness. SPACs have meanwhile surged in popularity during the pandemic, reaching record highs last year and continuing at breakneck speed so far in 2021. In fact, in the first two months of the year, there have been $61B worth of SPAC IPOs globally, almost all listing in the U.S. ($83B worth of deals were recorded in 2020).

Proposals: Current U.K. rules require SPACs to suspend trading once a target is acquired - meaning investors are locked in even if they don't like the purchase - but new recommendations from the Financial Conduct Authority could lift that requirement. Other changes would make it easier for company founders to list shares without giving up control, including dual-class share structures or reducing the free float requirement. Dual-class share structures have seen the Nasdaq and New York Stock Exchange attract many hot tech IPOs that have served as magnets for new growth companies to list in the U.S.

More pressure from Beijing

One of the most powerful businessmen in the world is Jack Ma - the founder of e-commerce colossus Alibaba (NYSE:BABA) - but he's found himself at odds with the Chinese government. After he criticized Chinese-state owned banks last year, Beijing retaliated with an antitrust investigation into Alibaba and pulled the listing of Ant Group, set to be the world's biggest IPO, in which Alibaba owns a one-third stake.

The latest: The financial payments powerhouse, which is also China's largest holder of consumer credit information, has defied intense government pressure by only giving a small amount of financial data to the country's central bank, FT reports. Personal credit information is a so-called "public good," according to the PBOC, and should be kept by a publicly owned entity or government agency. The central bank has long wanted to create a pool of credit data to help state-owned banks gauge creditworthiness due to increasing consumer loan defaults.

Ant is China's largest holder of consumer credit data, while its Alipay app is the country's biggest payments platform. The company, along with retail behemoth Alibaba, has seen Jack Ma become China's richest person, though he lost the title this week as his business empire came under regulatory scrutiny.

Thought bubble: Ant will likely cave in because, after all, it is a Chinese company and must listen to the government to stay in business. But Ma's fight with the authorities is another example of the escalating tensions between the state and China's private sector as President Xi exerts tighter control over the economy. Another area to consider is consumer trust in Ant Group, with many clients complaining online that they will walk away if their credit info is reported to the government.

Microsoft Mesh

At its annual Ignite developers conference, which was a streamed event this year due to the pandemic, Microsoft (NASDAQ:MSFT) joined other tech titans in setting the stage for a mixed reality future. Its new platform called Mesh will allow individuals in different physical locations to participate in a shared holographic experience. Users will initially be able to express themselves as avatars, but over time, Mesh will allow people to project their own image through holoportation.

Quote: "This has been the dream for mixed reality, the idea from the very beginning," said Microsoft Technical Fellow Alex Kipman. "You can actually feel like you're in the same place with someone sharing content or you can teleport from different mixed reality devices and be present with people even when you’re not physically together."

Powered by the Azure cloud platform, Mesh will soon offer developers a full suite of AI-powered tools for avatar creation. Those include session management, spatial rendering, and synchronization across multiple users and holoportation to build mixed reality solutions. The open Mesh standards will also allow developers to design across supported devices, which includes Microsoft's HoloLens 2 headset, a range of other VR headsets, smartphones, tablets and PCs.

Outlook: Microsoft has already announced two apps built on the platform - Mesh for HoloLens and a Mesh-enabled version of Altspace VR, which essentially allows for holographic work meetings with enterprise-grade security features. The company further hopes there will eventually be a robust portfolio of third-party Mesh apps and integrations within Microsoft products like Teams. It may also soon get a high-priced competitor from Apple (NASDAQ:AAPL), which is reportedly working on a $3,000 mixed reality headset for release as early as next year.

What else is happening...

Number of Lyft (LYFT) riders hits highest weekly growth since pandemic.

CBOE files to list what could be the first U.S. Bitcoin ETF.

Biden backs former President Trump's stance on solar tariffs.

Instacart (ICART) valued at $39B following latest funding raise.

Facebook (FB) CFO says vaccine progress means ad growth headwinds.

Big day for Rocket Companies (RKT) after Reddit chatter, Jim Cramer plug.

Intel (INTC) must pay $2.2B in damages after patent trial loss.

Inflation expectations are key in a post-Phillips Curve World - Fed's Daly.