The week in investor relations: Fidelity, Schwab and Citadel Securities plan new crypto exchange, Biden focuses on foreign transactions and Germany takes control of Rosneft refineries

– The Wall Street Journal (paywall) reported that a ‘consortium of financial heavyweights’ including electronic trading giant Citadel Securities and brokerages Fidelity Investments and Charles Schwab announced plans to launch a new cryptocurrency exchange. The launch of the exchange, to be called EDX Markets, is a sign Wall Street continues to see opportunity in digital assets despite this year’s slump, the WSJ said.

Other backers of the new exchange include high-speed trading firm Virtu Financial and venture-capital firms Sequoia Capital and Paradigm. Though it didn’t give a timeline for launch, EDX said in a press release that it would aim to serve both individual and institutional investors, adding that the technology to run its exchange would be provided by Members Exchange, an upstart stock exchange founded in 2019 by some of the same firms backing EDX, including Citadel Securities, Fidelity, Schwab and Virtu.

– US President Joe Biden directed a government investment screening panel to sharpen its focus on foreign transactions that involve personal data and advanced technologies, reported the South China Morning Post, in a move it said appeared to be ‘aimed at national security risks the US sees in China’. Without changing the legal authority of the Committee on Foreign Investment in the US, which reviews US asset purchases by overseas entities for national security risks, the Biden administration wants it to put deals under closer scrutiny for several specific concerns, the White House said.

The move was motivated by ‘what we’ve learned from the past few years and the administration’s related efforts to address the need for supply resilience of key supply chains, both inside and outside of the defense industrial base,’ according to an official quoted by the paper.

– The German government took control of three refineries owned by Russian oil company Rosneft, said the Financial Times (paywall), in what it described as ‘a major escalation of the energy war between Moscow and the West triggered by Russia’s invasion of Ukraine’. 

The move is part of efforts by the government of Olaf Scholz to protect the German economy from the effects of an EU-wide embargo on Russian crude, which will come into effect in December and is designed to deprive Russian President Vladimir Putin of revenues to fund the Ukraine war, continued the paper. The measure secures PCK, a refinery owned by Rosneft in the north-eastern German town of Schwedt, whose future had been called into question by the looming oil embargo. 

– In related news, the EU plans to raise about €140 bn ($139.6 bn) by imposing windfall taxes on the ‘abnormally high profits’ of energy companies and redirecting proceeds to households and businesses struggling with soaring bills. The Guardian reported that the ‘long-awaited emergency measures’ to tackle the rising price of electricity were described by Frans Timmermans, the EU official in charge of the green transition, as a necessary response to energy supply shortages and high prices.

‘The era of cheap fossil fuels is over. And the faster we move to cheap, clean and homegrown renewables, the sooner we will be immune to Russia’s energy blackmail,’ Timmermans said.

The paper additionally revealed that British Gas owner Centrica plans to voluntarily cap booming profits in an effort to cut household bills and ‘defuse outrage’.

– The Guardian also reported that the Bank of England (BofE) has designed a new stress test for the UK’s biggest banks, with the financial health check focused on the impact of energy crisis defaults. The UK’s largest banks will be tested on their ability to withstand a rise in defaults linked to sky-high energy prices, as part of the BofE’s delayed health check of the financial industry.

The paper said it understands the bank has crafted a new crisis scenario that will feature a deep economic recession, punctuated by soaring energy bills that could make it harder for some borrowers – particularly businesses – to afford loan repayments. It comes as UK businesses await details of Prime Minister Liz Truss’ £150 bn ($171 bn) energy bills bailout package, which the new leader pledged would temporarily cap sky-high bills for companies that might otherwise be forced to close.

– Goldman Sachs Group is embarking on its biggest round of jobs cuts since the start of the pandemic, reported Bloomberg (paywall). The ‘Wall Street titan’ plans to eliminate several hundred roles starting this month, said the news outlet, citing people with knowledge of the matter. While the total number is less than some previous rounds, Bloomberg noted that the reductions are ‘a resumption of Goldman’s annual culling cycle that it had largely paused during the pandemic’.

– General Electric set the first week of 2023 for completion of the spin-off of its healthcare unit and named a new board for the planned independent company, according to Reuters (paywall). The new board members of the unit, which will be named GE Healthcare, include CEO Peter Arduini and executives from Honeywell International and Amazon Web Services. Including GE CEO Larry Culp as non-executive chair, the board will have 10 members.

‘With this initial group of directors, we have a highly qualified and capable board that will enable GE Healthcare to hit the ground running,’ Culp said.

– Bloomberg reported that the NYSE is adding tools for its publicly listed companies to track how they’re doing on equality in the workforce ‘amid a broader push to take action on ESG issues’. The NYSE has partnered with workplace equity platform Syndio to offer companies tools that measure pay and opportunity gaps, said the news agency. As NYSE members, firms will have access to Syndio’s software to help them identify potential biases.

‘The social element of ESG has been harder to support and is often less defined for companies, but [is] an area of increasing focus at the board level, among employees and with legislatures and regulators,’ said Michael Blaugrund, NYSE’s chief operating officer, in an interview.

– ‘A tumbling pound and a renaissance for the fossil fuel industry’ will not be enough to reverse a long-term trend and draw investors back to the UK stock market, a leading British fund manager told the FT. Richard Buxton, an investment manager in UK equities at London-based Jupiter, said in an interview: ‘What could bring people back to major investing in the UK? I can’t hand on heart provide a heap of compelling answers.’

Investors have pulled £6.6 bn from UK equity strategies this year, making 2022 already the biggest year of outflows in a decade, according to data from trade body the Investment Association. This figure outstrips the £4.8 bn withdrawn in 2016, the year of the Brexit referendum. UK-focused funds have recorded net outflows every year since then, added the paper.

– Markets Media reported a new initiative to boost ESG disclosure in Singapore. Singapore Exchange (SGX Group) and the Monetary Authority of Singapore (MAS) have jointly launched ESGenome, a digital disclosure portal for SGX-listed companies to report ESG data ‘in a structured and efficient manner, and for investors to access such data in a consistent and comparable format,’ said Markets Media.

‘ESGenome is designed to capture corporate sustainability disclosures in a simple and effective manner useful to investors and the broader capital market ecosystem,’ the news provider reported Michael Syn, senior managing director and head of equities at SGX Group, as saying. ‘We are optimistic that by being frontrunners in ESG data disclosure via ESGenome, our listed companies will be in a better position to raise capital and attract international investors that are actively looking for leading ESG firms.’