The Capital Markets, Securities and Investment Subcommittee held a hearing today to examine the current state of the U.S. equity markets—specifically what is working well in today’s markets, as well as areas that need improvement or are impacting the optimal functioning of the markets.
“The U.S. equity markets are widely recognized for being the deepest, most liquid, and most competitive markets in the world. However, it doesn’t mean that these markets are perfect and that there is no room for improvement. That is why a truly comprehensive review of equity market structure is long overdue,” said subcommittee Chair Bill Huizenga (R-MI). “In order to move markets forward, we need to know where they’ve been. Today’s hearing was an important first step in doing just that.” To watch Chairman Huizenga's entire opening statement, click on the video below.
Key Takeaways from the Hearing:
Despite significant technological advancements and constantly evolving industry practices in today’s market, the statutory framework that governs equity market structure remains largely unchanged.
In order to determine what is the appropriate statutory framework to represent today’s markets and – more importantly – to build in sufficient flexibility that will allow our markets to continue to evolve and allow innovation, we must first analyze how the equity markets have evolved, what is working, and what needs to be improved.
Topline Quotes from Witnesses:
“In many ways, today’s markets bear little resemblance to those of just a decade ago. The old images of brokers fielding telephone calls and floor traders hollering orders has long since given way to a profoundly interconnected, technology-driven marketplace that transacts across an astonishing array of exchanges and trading venues… Yet, as markets have advanced, the fundamental structure that underpins them has not evolved to benefit all markets segments equally.” - Tom Wittman, EVP and Global Head of Equities, NASDAQ
“Overall costs to investors in the U.S. equity marketplace have fallen and are among the lowest in the world, and market quality and reliability continue to improve. Retail customers now have low-cost, immediate access to our markets with exceptional execution quality. However, Regulation NMS has also contributed to some unintended consequences throughout the marketplace. Regulation NMS has created a complex and fragmented market, which may increase costs for some market participants.” - Chris Concannon, President and COO, Chicago Board of Options Exchange
“The United States has the largest percentage of individual investor participation and the deepest and most liquid markets in the world. As stakeholders and policymakers debate possible changes to our market structure, it is critical to remember how efficient and resilient our markets are to the benefit of retail investors that Charles Schwab and others serve every day. That being said, the evolution we have seen has created odd incentives and antiquated systems and everything should be on the table for review.” - Jeff Brown, SVP, Legislative and Regulatory Affairs, Charles Schwab
“All issuers and investors, large and small, should have access to the bounty of the capital markets. On behalf of the NYSE’s listed companies and investors, we encourage right-sized regulation for our capital markets system.” - Thomas Farley, President, New York Stock Exchange
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