Good afternoon. Patty [Schuler], thank you for that kind introduction. Congratulations to STAC on your centennial and a hundred years of meaningful contributions to our industry. Your organization holds a special memory for me. Two days and twenty years ago, I joined a STAC panel for the first time—because who can resist the attraction of Chicago in January? After our panel ended, a friend encouraged me to head to O’Hare, as Chicago-style winter weather was on the way. Luckily for me, I listened, and our flight took off just ahead of a slate of cancellations. I made it home late that Friday night. And on Sunday morning, my wife and I welcomed our first child to the world—four weeks ahead of schedule. Today, I wish Jack Selway a happy 20th birthday.
Before I say more, please understand that I speak today in my official capacity as the Commission’s Director of the Division of Trading and Markets. My remarks do not necessarily reflect the views of the Commission, the Commissioners, or members of the Division’s staff.
In 1914, Carl Sandburg published “Chicago,” the poem that gave your great city its well-known nickname. Sandburg wrote:
“Come and show me another city with lifted head singing so proud to be alive and coarse and strong and cunning.
Flinging magnetic curses amid the toil of piling job on job, here is a tall bold slugger set vivid against the little soft cities;
Fierce as a dog with tongue lapping for action, cunning as a savage pitted against the wilderness,
Bareheaded,
Shoveling,
Wrecking,
Planning,
Building, breaking, rebuilding . . .!”[1]
More than a hundred years later, progress has replaced Chicago’s hog butchers and tool makers with derivatives exchanges and proprietary traders. Your importance as a center for price discovery and risk management is unquestioned. Your deep global markets and expert trading community are strategic assets that ensure our Nation’s continued economic pre-eminence. I am therefore pleased to discuss with this audience certain Division priorities for the next three years under the leadership of Chairman Atkins.
Returning to Sandburg, three of our projects involve “planning and building.” We will endeavor to create a framework for investors to access tokenized securities. We will work to further harmonize SEC rules with those of the CFTC. And we will guide our equity markets to a successful transition to 24-by-7 operation. “Breaking and rebuilding” describes our fourth project. Here, the Division proposes to modernize legacy rules to drive efficiency, stoke competitive forces, and reduce costs borne by the investing public.
Building on the work of our Crypto Task Force, the Division has engaged with market participants – both “TradFi” incumbents and “DeFi” new entrants – across the waterfront of tokenized securities operations, such as primary issuance, secondary trading, and custody. Our touchstone is “innovation without arbitrage.” This means that as we advise the Commission on modernizing policies to facilitate a healthy ecology for tokenized securities, we aim to do no harm to our existing, well-functioning marketplace. Before the holidays, we granted a “no action” letter to the DTC for its tokenized security services, and we issued staff statements on custody and trading. The Division will continue to consider staff action where appropriate and will soon take up the pen on rulemaking proposals, starting with financial responsibility, record keeping, and market structure. Importantly, we will work with self-regulatory organizations on initiatives to extend their operations to tokenized securities.
A second “build” is the SEC’s effort to further harmonize its rules with our sister regulator, the CFTC. Here, the Division will work shoulder-to-shoulder with CFTC colleagues to ensure our Nation’s continued leadership in financial markets, as Chairman Atkins directed us at our roundtable on September 29:
“To achieve this ambitious vision, our two agencies must work in lockstep to transform dual regulation from a source of confusion into a source of strength. Together, we can offer the best of both worlds: the investor protections that have defined U.S. markets, combined with the innovation-friendly approach that will keep us at the frontier of financial technology throughout the 21stcentury.”[2]
Digital assets and event contracts squarely present opportunities for partnership. But streamlining rules for traditional markets is equally critical. Operational, capital, and compliance efficiencies await—as well as potential product and protocol innovations. Our work will be vastly improved by your ideas, and I ask that you engage the Division early and often.
Interest in 24-by-7 equity trading continues to grow, in terms of both retail investors and non-U.S. corporate clients attracted to the unmatched breadth and depth of our capital markets. The marketplace for global capital is already 24-by-7, as are many digital asset platforms, and our third project is to support industry initiatives to move our equity markets in this direction. Much work is required to ensure that investors understand, and benefit from, these profound changes to our collective workflow. As with any far-reaching industry effort, collaboration across the wide spectrum of market constituents is the key to success.
Our fourth project is focused not on the promising future, but rather on present challenges, caused by regulations of yesteryear. As we take stock of our rulebook, we find a number of walls to spackle and many weeds to pull. Regular, reasoned review of private sector obligations engendered by our rules is core to responsible regulation. Current examples of the Division’s work here include efforts to reduce costs and improve governance of the Consolidated Audit Trail and to streamline the National Market System via modernization of Rule 611, commonly known as the “Trade-Through Rule.” The list of possibilities here is long. Once again, your feedback will help us prioritize and remain practical.
Best laid plans and multi-year projects require a healthy dose of humility. It is said that philosopher and boxing legend Mike Tyson observed that “everyone has a plan until they get punched in the face.” And there is no tougher sparring partner than the market, as this community well knows. Quite possibly, surprises and challenges will confront the Division in coming years. Should these occur, trust that immediate demands from market exigencies will always be our priority.
Sandburg spoke of Chicago’s “lifted head singing so proud to be alive.” Happy 100th birthday to STAC. This year, we mark our Nation’s 250th birthday as well. So let’s cut the cake – and celebrate. And dedicate ourselves anew to turning birthday wishes and plans and projects into an improved future circumstance that benefits the investing public that we together serve.
Thank you for your time and attention. I look forward to your questions and your engagement on our priorities in the future.
