Thank you, Chairman Clayton, and thank you to the Staff and Director Redfearn for getting this proposal to the finish line. I know it has been some years in the making, and I want to be sure that the Staff knows my view: that the hard work you all have put in shows in the excellent proposal before the Commission today.

In my prior life, I was a researcher focused on the empirical study of corporate and securities law. My experience was that evidence drawn from our markets could tell us a great deal about the kinds of law that could best protect investors—and help us understand the consequences, both intended and otherwise, of the choices regulators must make.

That's why I'm so supportive of this proposal. If adopted, the transaction-fee pilot should give the Commission significantly more robust data than we have now to assess how fees and rebates affect order routing, execution quality, and market depth. The pilot is thoughtfully and carefully designed so that we will learn what we need to know to make sure American investors get the level playing field they deserve. For example, the proposal's Test Group 3, or the "no-rebate" bucket, will provide a crucial economic baseline for testing the effects of a prohibition on transaction-based rebates, and I am particularly interested to learn more about commenters' views on that issue.[1]

More broadly, targeted pilot programs—particularly in complex areas like this one, where intuitions are strong but evidence is scant—are and should continue to be a critical part of our rulemaking effort. They allow us to generate valuable data to determine whether and how rulemakings might benefit investors—and to carefully tailor them to investors' needs.

Many questions have been raised about payment for order flow in our equity markets.[2] Today, the Commission takes an important step forward to getting the investing public some answers. I am delighted to support today's proposal. And I very much look forward to learning from public commentators' views on these important questions.


[1] SECURITIES AND EXCHANGE COMMISSION, TRANSACTION FEE PILOT FOR NMS STOCKS (March 14, 2018), at 28 (describing Test Group 3 and distinguishing it from alternative Test Groups and the Control Group proposed to be used in the pilot).

[2] See, e.g., Matt Levine, Fast Trader Pulled a Fast One on Some Customers, BLOOMBERG VIEW (January 17, 2017).