Speech by SEC Commissioner:
Statement at Open Meeting
Commissioner Kathleen L. Casey
U.S. Securities and Exchange Commission
January 13, 2010
Thank you, Madam Chairman. I am pleased to be here and offer my perspectives on the proposing and concept releases that we will consider this morning. But first I would like to join you in commending the professional staff of the Division of Trading and Markets for their outstanding work. Preparing releases for a January 13th open meeting means working hard over the holidays. In particular, I would like to recognize Dave Shillman, John Roeser, Dan Gray, and Theodore Venuti. I also would like to join Chairman Schapiro in welcoming to the SEC the new Director of Trading and Markets, Robert Cook. I look forward to working with you, Robert.
I support seeking public comment on both releases before us today. I will address the concept release when we consider it later this morning. On the sponsored access proposal, the required regulatory risk management controls and supervisory procedures appear — at first blush — to be a defensible approach to address concerns relating to "unfiltered" or "naked" access to an exchange or ATS by customers of a broker-dealer using that broker-dealers' market participant identifiers. I look forward to carefully reading all of the comments.
But, from my perspective, I want to emphasize that I think it is absolutely necessary for the Commission first to develop a deeper understanding of the whole range of U.S. equity market structure issues before we consider adopting any final rule amendments in the market structure space.
Sometimes we don't know what we don't know, and if we rush to regulate without a complete understanding of the extent to which complex and dynamic activities may be interrelated and interconnected, the specter of unintended consequences looms particularly large. We should strive to avoid playing a game of Whac-a-Mole in this area, where we solve one problem and inadvertently create a new one.
In my view, a comprehensive approach that includes reviewing public comments on the concept release from experts and practitioners, holding roundtables, and engaging in rigorous fact finding on advances in trading practices and technology prior to adopting any final trading rules would reduce the chances of such an outcome.
It is no surprise that powerful market participants, and their champions, seek new regulations to create a "level playing field." As my colleagues on the Commission know all too well, those requesting such a result should be greeted with some skepticism, because in Washington, calls for a level playing field roughly translates to "I'm losing market share, and need a regulatory advantage."
So before we rush to regulate, consider the following: paradigm-shifting regulatory measures adopted by the Commission, and the resulting competition, has transformed the equity markets over the past decade. This vigorous competition for customer order flow among numerous trading venues has led to more choices of trading centers, greater speed and liquidity, financial innovation, tighter spreads, and lower execution costs. Investors, particularly individual investors, have reaped the benefits of the fierce competition that has developed in this area. Therefore, it is imperative that we not take any regulatory actions that would impede or reverse this considerable progress. I am pleased that our concept release embraces the "First, do no harm" principle.
I look forward to reviewing all of the public comments on the sponsored access release. I want to thank Chairman Schapiro for her strong leadership on this and other issues, and would like to ask the Trading and Markets staff just a few questions.