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Remarks at the Meeting of the Equity Market Structure Advisory Committee

Commissioner Kara M. Stein

April 26, 2016

Good morning and welcome to this meeting of the Equity Market Structure Advisory Committee. Today’s agenda covers two recommendations that have come from the hard work of two of the Committee’s subcommittees.

But, first I want to take this opportunity to note a significant item on the Commission’s calendar for tomorrow. Tomorrow, the Commission will consider issuing a public notice on a proposed plan, submitted by the SROs, to create, implement, and maintain a consolidated audit trail.

The development and deployment of a consolidated audit trail may be one of the most important market structure items that the Commission undertakes this year. I want to thank the Chair for prioritizing this as it is critical for Commission in fulfilling its mission to ensure fair and orderly markets.

Turning to the work of the Equity Market Structure Advisory Committee, I am pleased to see that we are being presented with two recommendations today. The first recommendation is from the NMS Subcommittee and concerns a framework for a Potential Access Fee Pilot. This idea has been floating around for a number of years, and I want to commend the subcommittee for tackling this and suggesting a way forward. I am very much looking forward to hearing from today’s panelists and the ensuing the discussion.

In particular, I’m interested in learning about how we can best obtain a robust data set. Could this pilot incorporate a trade-at provision? If so, how? What are the pros and cons of doing so? Further, I’m interested in learning about potential timelines. How long would it take to develop and implement? How long should a potential pilot run?

The second item on the agenda concerns recommendations regarding Trading Venue Regulation. With ever newer and faster technologies, our trading market is constantly evolving. The SROs and the Commission need to evolve too. This is critical to the markets remaining fair and orderly and vital to maintaining a high-level of investor confidence. As our markets change, our regulatory approach must also change. We need to take into account new tensions, risks, uncertainties, and conflicts.

In 2008, our nation learned an important lesson when our regulatory approach failed to keep pace and remain effective. For some time, the Commission’s agenda has been focused on mandated rules and regulations to address problems revealed during the financial crisis. However, we must find the time and attention to be forward-thinking. I applaud the work of this subcommittee that calls our attention to how we can optimize our rules to address today’s concerns. I look forward to the dialogue with the panel.

Finally, I look forward to the status reports of the Market Quality and Consumer Issues subcommittees. As I have said in the past, I very much appreciate the time and attention that each of you have dedicated to the important work of this Committee.

This work requires you to put aside your own business interests and to think through solutions for our markets as a whole. I am counting on you—and the American people are counting on you—to recommend improvements to our equity market structure for the benefit of all investors and of our nation. I look forward to today’s analysis and discussion about what is best for our capital markets.