Speeches and Floor Statements

Statement: Financial Services Hearing on “U.S. Equity Market Structure Part I"

A Review of the Evolution of Today’s Equity Market Structure and How We Got Here

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Washington, June 27, 2017 | comments

Congressman David Scott (GA-13) provided the following remarks during the  House Financial Services Committee hearing to review the current state of the U.S. equity markets and review how the current structure has evolved since the enactment of the Securities Acts Amendments of 1975.

Click here to watch video of Congressman Scott’s exchange with Matt Lyons, SVP and Global Trading Manager,
The Capital Group, and Joseph Saluzzi, Partner, Themis Trading LLC.

Rep. Scott: Thank you very much, Mr. Chairman. Our equity market structure has played such a very pivotal role in our total economy, and I think it is important to establish that our capital markets of the United States is the greatest in terms of competitive advantages to the world.  I trust in our markets to work effectively. It’s what attracts investments from across the world to the United States. I want to repeat that—trust in our markets to work effectively is what attracts investments from across the world to the United States. This is what makes our nation number one. And I think that’s why this hearing here today is so important; to study the evolution of our equity market structure and to search out and get recommendations from you panelists and this committee, and how we can all work together to improve it. And this is indeed a complex subject matter.  Everyone basically wants a fair, very transparent open market.  But we want this because improved markets results in better execution of trades. And better execution of trades means better prices, which saves money for the everyday people. So, keeping that in mind, to our American people who may be watching this hearing, to those who are saving money for retirement, or saving for a down-payment to buy a house, I simply want to ask this panel how Congress should prioritize any changes to the market structure.  We’ll go down the line. What I’m asking for here is, it’s important for us to keep our nation strong, to keep our nation’s financial system strong, to keep up us number one. And the fundamental question is, because you all are very distinguished, what can you tell us as Members of Congress, that we need to do to keep our nation strong in having the strongest financial economic system on the planet? Mr. Lyons?

Mr. Lyons: Yes, Mr. Scott, thank you. I think that importantly the Congress can encourage the SEC to continue down the road of looking to create opportunities for our system to be better. I do agree we have the most fairest, most efficient, most liquid, most competitive markets in the world and I think it serves our economy and our citizenry read very well. However, I have explained that there are conflicts of interest in the market that we think can be addressed. And we really would like, and hope that the Congress can push the SEC to address some of those conflicts that we described earlier. We also think that the proposals that the SEC has made over broker disclosure routing and ATS’s are an important component for regulated funds like ourselves to monitor and evaluate the execution quality we get on behalf of our clients, which lead to better investment outcomes as you suggest.

Mr. Saluzzi: Thank you Congressman. I can’t agree more that trust and confidence in our markets are the most important thing you need. And old friend of mine, Sen. Kaufman used to always say fairness and transparency is the key here. And I agree, and what doesn’t give me trust and confidence is when I see major dark pools and ATS’s getting fined multimillion dollars, when I see the stock exchange getting fined millions of dollars for various behaviors or certain high-frequency trading firms also getting fined. So I think what’s missing here, a critical link, is proper surveillance.  And that goes back to the SEC and in an attempt to fix that, they have recommended a consolidated art of trail which is now being built but it falls short in one key area—it only covers the stock and options market, it doesn’t cover the futures market because of the CFTC. They need to talk to each other.

Rep. Scott: Absolutely. And something that I’m not sure where the people watching us this morning are quite aware, but, I think that, I want to bring to the attention of this committee that according to information that I received, trading at traditional national venues like the New York Stock Exchange, has gone down. That worries me.  

Mr. Saluzzi: If I can get in a real quick step—prior to MMS, 80% of their share was done at the New York Stock Exchange, of their listed stocks, now it’s less than 25 because of the fragmented maze of liquidity created.

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