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Thank you. I’m Randy Snook, executive vice president at SIFMA.
We gather again this year at a difficult time in our markets and America’s economy. Over the last three years we’ve all experienced stressful economic conditions that have tested the strength and underlying structure of our financial markets.
What we face now is a crisis of confidence.
Given the current environment, you can’t blame investors for their anxiety:
- Europe continues to deal with a sovereign debt crisis that looks to only get worse before it gets better;
- America’s economy is teetering on the edge of a double dip recession;
- Unemployment remains stubbornly high;
- Companies are holding more capital in reserve, unsure to invest it in R&D and job growth because of regulatory, tax, and general economic uncertainty
- Beyond those factors, we have partisan gridlock in Washington that seems to be incapable of finding solutions.
So, what can we as an industry -- active in all markets and serving millions of institutional and individual clients -- do to help restore confidence in our markets?
In response to the financial crisis and the events of the May 6th Flash Crash, regulators have taken numerous and expedient steps to address questions about certain weaknesses in the fundamental structure of our markets.
Like regulators, we at SIFMA were very concerned over the financial crisis and the market events of May 6th.
So, over the last couple of years, SIFMA, along with our members, exchanges and regulators have come together to find solutions to improve our market structure, while maintaining confidence in the functioning of equity markets.
The US securities markets are integral to our economic well-being, and it’s important we all do what we can to reassure investors that our markets are sound and their interests are protected.
In the past couple of years we’ve seen:
- the SEC adopt rules for a single stock circuit breaker program and issue for comment a so-called “limit up/limit down” SRO plan to address individual stock volatility,
- the implementation of the short sale alternative uptick rule,
- the adoption and implementation of the market access rule,
- the adoption and beginning of implementation of the new Large Trader Reporting Rule,
- the harmonization of FINRA’s and NYSE’s customer protection rules,
- many OATS changes and further work on a consolidated audit trail, and
- of course continued work on Dodd-Frank-related initiatives as Ira mentioned this morning.
SIFMA continues to believe that the best regulations result from a partnership among all market participants and regulators.
Evaluation and effective implementation of existing and proposed rules require an expansive effort by both regulators and participants in the industry.
This process includes input from all parties and an exchange of ideas to ensure that the most effective rules are adopted; rules that do not have inadvertent, adverse consequences to the markets.
As an example, SIFMA member firms worked with regulators and other market participants on quickly developing the single stock circuit breaker pilot program after the May 6th flash crash.
By working together, the industry was able to implement individual stock circuit breakers on an expedited basis. This, in turn, helped stabilize and improve investor confidence.
We also have been constructive partners in the development of a limit up/limit down mechanism that should be adopted by the SEC in the near future, which hopefully will achieve the balance of strengthening equity markets while not sacrificing efficiency, nor unintentionally undermining market function.
And now, today, as we have done with a number of the regulatory initiatives I have just mentioned, SIFMA has also begun efforts to address concerns around high frequency trading.
High frequency trading has garnered attention not only by regulators, but by the media, as we’ve seen significant coverage over the last several months on an area of our industry that is not necessarily the most understood.
Since many of our panelists are discussing high frequency trading, I will briefly mention only a couple of points.
I emphasize that the term “high frequency trading” covers many different types of trading strategies. Many of these strategies provide benefits to our markets through greater price discovery and added liquidity, while there could be some that may undermine the proper functioning of our markets.
SIFMA has been consistent in our communications to regulators that we support a review of high frequency trading and, where necessary, appropriate regulatory action. However, it is important that regulators understand the differences among the various strategies before regulatory changes are adopted.
What we’re seeing in our current markets – with high frequency trading and other innovations -- is the development of complex technologies to execute trades on behalf of institutional and individual investors.
As these technologies continue to develop, it is critical for market participants, exchanges and regulators to keep an ongoing open and constructive dialogue.
Open dialogue is critical for investors and the markets because we believe these technological developments represent advancements that benefit all parties involved, and yet know that they may pose -- at least initially -- challenges for regulators. Ensuring that all market participants, regulators and investors understand the trading strategies that produce benefits to our markets -- and instituting appropriate regulatory checks for those that negatively impact our markets -- directly supports our overall efforts to bolster and maintain investor confidence.
We have a long way to go, but I can assure you, SIFMA will continue to engage with regulators, exchanges and other parties as we continue to work together to find regulatory and market-based solutions that strengthen and protect our markets.
This, in turn, will help protect investors and reinforce confidence that our markets are the bedrock for deep and efficient capital formation.
Thank you.
