Remarks at Meeting of Investor Advisory Committee

Thank you, Jennifer [Marietta-Westberg], and the rest of the committee members for holding this meeting today. Thank you also to today’s panelists. Allison [Bennington] and Mina [Nguyen], I appreciate your hard work on this Committee. Your voices will be missed.

I particularly look forward to the three panel discussions on today’s agenda. The topics of these panels are timely. The Commission has devoted a significant amount of effort over the past several years to market structure issues, with an emphasis on improving data provision to market participants. I am eager to see those changes implemented, but they are not the end of the story. It also matters what market participants do with the data provided to them; are market participants achieving best execution for themselves and their clients?

Best execution is a nuanced concept. That there are two separate best execution discussions on the agenda today reflects the complexity of the topic. I look forward to hearing from panelists how best execution interacts with different facets of the national market system ruleset—the topic of the first panel—and how best execution works in the wholesale broker context—the topic of the second panel. I urge panelists and committee members to remember that best execution is not a one-size-fits-all concept. For most retail investors price might matter most, but institutional investors often have a larger set of considerations. A bright line approach, focused perhaps primarily or solely on price, might make sense for retail investors, while a more flexible approach might better reflect the varying needs of institutional investors.

Of course, no discussion of best execution in the current market environment can disregard the incentives created by payment for order flow and exchange rebates. As Chair Gensler suggested in his remarks at the Global Exchange and Fintech Conference yesterday, although much of the conversation following the meme stock phenomenon earlier this year focused on the conflicts posed by payment for order flow, exchange rebates present similar potential conflicts.[1] I expect that today’s discussion will remind us not only of the potential conflicts for brokers arising from these payments, but also of the benefits that they seem to bring, particularly in the form or lower (or zero) transaction costs for retail investors.

I also look forward to the panel discussion on Rule 10b5-1 plans, which establish protected paths for insiders to trade in their companies’ own stock. Three days ago, Chair Gensler, citing concerns about how company insiders are using these plans, announced that we will be revisiting the now nearly two-decades-old rule.[2] I look forward to working with him, the rest of the Commission, and the staff on exploring whether any changes to the rule are needed. Today’s discussion will provide useful data points for us to consider.

Thank you again for your willingness to serve on this committee. I look forward to a productive day.