Thank you, Chairman Schapiro.
I am pleased to support the concept release and the more comprehensive approach to the review of equity market structure that it reflects. Markets are complex systems comprised of numerous components and features that must work together to ensure a well-functioning "whole." The comments received in response to the concept release not only will inform any future Commission efforts in this area, but also should inform certain ongoing rulemakings, such as the Commission's earlier proposals concerning flash orders1 and "dark" pools2.
The analysis of U.S. equity market structure should begin with the following recognition: The U.S. has high-quality markets that have performed extremely well, including during the recent financial crisis. Although price declines and volatility led to losses and unease, throughout the turmoil, U.S. equity markets opened and closed in an orderly fashion and transactions cleared.
The concept release is thorough in its request for comment, so I will highlight only two complementary points.
First, the study of equity markets often centers on the actual structure of the markets, such as the degree of market fragmentation and the volume of undisplayed versus displayed liquidity, and on trading and investing activities, such as high-frequency trading as compared to "buy-and-hold" strategies. Without question, these are important considerations; but they should not distract from a focus on the bottom line — namely, how do U.S. equity markets perform? For example, technological advances and other innovations that link trading venues by facilitating the search for liquidity can contribute to high-quality performance, even though the sheer number of trading venues might suggest a fragmented market structure at odds with the goals of a national market system.
I am keenly interested in hearing commenters' views on how best to evaluate equity market performance. Among other things, I look forward to comments that assess whether it is appropriate and workable for the regulatory regime to elevate the interests of one type of investor over another, such as the interests of "long-term investors" over those of "short-term professional traders."
Second, the analysis of equity markets and how they are regulated should be grounded in data to the extent possible. Data has a way of disciplining decision making and thus can help channel regulatory efforts to where they are most productive. Accordingly, rigorous empirical studies and other data that we receive from commenters promise to be particularly instructive.
In conclusion, I would like to join my colleagues in thanking the staff from the Division of Trading and Markets, the Division of Risk, Strategy, and Financial Innovation, and the Office of the General Counsel for their hard work on the concept release. Given the importance of the Commission's review of U.S. equity markets, I appreciate your commitment to studying these issues carefully.