Wall Street’s Trade Group Is Crusading Against Gambling, and Paper Notices

Ron Kruszewski, the CEO of Stifel Financial and chair of Sifma, said rules requiring paper notices are “beyond ridiculous.” (Dreamstime)

Key Points

• Sifma wants to transition from paper notices to email for brokerage customers.
• Sifma is focused on initiatives for the U.S. Treasuries market such as centralized clearing.
• Sifma leaders express caution regarding tokenized securities and prediction markets.

With markets feeling pretty good about themselves—stocks are trading at 25 times trailing earnings—Wall Street’s trade association Sifma wants to keep the motor humming.

In an online member briefing Wednesday, Sifma’s leaders reviewed initiatives on round-the-clock stock trades, tokenized securities, the U.S. Treasuries market, and archaic laws that require mailed paper notices.

“We’re sitting here today talking about modernizing Treasury clearing, the blockchain digitization of assets. Everything’s on an app,” said Ron Kruszewski, the CEO of Stifel Financial and chair of Sifma. “Yet we still have rules that requires paper. It’s beyond ridiculous.”

The U.S. House of Representatives passed a bipartisan bill to make email the default for notices to brokerage customers, with paper always available by choice. Sifma hopes the Senate will concur next year.

Trading in the enormous market for U.S. Treasuries is the focus of several initiatives. Centralized clearing of those trades will phase in over the next six months, under a rule adopted by the Securities and Exchange Commission under President Joe Biden.

Sifma CEO Ken Bentsen, Jr. said the group is also pushing for more sensible treatment of Treasuries under the Basel III bank rules and the stress tests of the Federal Reserve.

The administration of President Donald Trump has prioritized blockchain technologies and federally regulated prediction markets —two areas where the president’s family has business interests.

The Sifma leaders voiced old-school caution when they talked about tokenized stocks and prediction-market sports bets.

Bentsen said his group has sent five memos to federal regulators, urging that the rules of existing securities law should apply to digital versions of stocks and other securities. “What you can’t do is water down the rules for something that is a share of Apple, whether it’s in a paper form or a digital form,” he said.

Echoing a recent Op-Ed he wrote for Barron’s, Kruszewski worried that the dopamine rush of zero-date options and prediction-market sports bets is diverting young people from patient investing.

“I believe it’s a new form of gambling, dressed up as financial innovation,” Kruszewski said. “It’s a nascent industry that operates through regulatory loopholes and it blurs the line between investing and entertainment in ways that really should really concern all of us.”

Write to Bill Alpert at william.alpert@barrons.com