Paxos applauds SEC’s move to shorten settlement cycles amid meme stocks fiasco

Rick Steves

“Last year, after the chaotic market events of January, Chair Gensler testified that time equals risk. We agree”, said Paxos in a statement.

Paxos has congratulated the US Securities and Exchange Commission’s (SEC) recent proposal to shorten the securities transaction settlement cycle.

“Paxos congratulates the SEC on releasing its proposed rule to shorten the standard settlement cycle from two business days after trade date (“T+2”) to one business day after the trade date (“T+1”), and its request for comment regarding the achievement of settlement by the end of trade date (“T+0”).

“We applaud Chair Gensler’s focus on improving efficiencies and reducing risk in equity settlement cycles. Chair Gensler’s efforts can improve not only the efficiency and effectiveness of US securities markets but can also support increased competition and global competitiveness.”

Time equals risk

The government agency wants to make a change after much pressure from the trading industry in recent years and particularly since the meme stock trading crazy of January 2021 which saw several platforms restricting trades on account of large volumes and volatility.

Robinhood Markets Inc., Citadel Securities,  IBKR, E-Trade, Ally Financial, Apex, and others took a hit in the court of public opinion but were found innocent by the SEC in a report released last year.

Citadel Securities quoted the report in the Short Squeeze lawsuit as it argued the firm was blameless for the trading restrictions suffered by retail investors. The judge decided to dismiss the case.

“Last year, after the chaotic market events of January, Chair Gensler testified that time equals risk. We agree”, said Paxos in a statement.

The Paxos Settlement Service, together with partners Bank of America, Credit Suisse, Instinet, and Societe Generale, has demonstrated the viability of such accelerated settlements.

The firm filed an application with the SEC for a full equities clearing agency registration on October 18, 2021, and hopes the Commission quickly files a notice in the Federal Register seeking public comments regarding our submission.

Paxos offers crypto trading, settlement, and custody

In 2021, Interactive Brokers aka IBKR partnered with Paxos for its cryptocurrency features. The US-listed broker’s customers will be able to buy, hold and sell a handful of crypto assets — Bitcoin, Ethereum, Bitcoin Cash and Litecoin.

Through Paxos, Interactive Brokers clients will be able to trade cryptocurrency at a commission of just 0.12% – 0.18% of trade value, with a $1.75 minimum per order. Plus, there are no added spreads, markups, or custody fees.

“As financial markets evolve, sophisticated individual and institutional investors are increasingly seeking out allocations to digital currencies as a means of achieving their financial objectives. In giving our clients access to cryptocurrency trading, we recognize the need to meet the growing investor demand to trade cryptocurrency alongside other asset classes in a convenient and low-cost way,” said Milan Galik, CEO at Interactive Brokers.

IBKR’s foray into the digital asset space is noteworthy due to the firm’s reputation for serving more sophisticated clients. The discount brokerage, which counts nearly 1.49 million accounts, joins the no-fee app Robinhood as the only US brokers offering direct trading in cryptocurrencies.

Paxos’ status as a licensed financial services company in the US allows it to offer different products, such crypto trading and settlement, and custody services. Further, the firm can issue tokenized securities and also its customers to access the traditional banking system.

The unique position has enabled Paxos sign big enterprise clients, such as Revolut, Crédit Suisse, Société Générale and StoneX.

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