July 09, 2014


WASHINGTON – Today, Senate Banking Committee Chairman Tim Johnson (D-SD) held a hearing titled “The Role of Regulation in Shaping Equity Market Structure and Electronic Trading.”

Below is Chairman Johnson’s statement as prepared for delivery:

“Good morning. Today the Committee will examine equity market structure. It is a complicated topic, and a whole new vocabulary is needed to understand market structure and electronic trading. Words like: dark pool, high-frequency trading, and data feed, are pieces to understanding the market puzzle. Even experts disagree on the details of how the markets work and what issues and problems exist.

“In less than a decade, the stock market has moved from being dominated by two exchanges, to an extremely competitive, but fragmented marketplace with 11 stock exchanges and over 40 private alternative trading centers, increasing complexity and instability in the system. However, many rules and market conventions date back to the days of less complex markets.

“The regulatory environment has to recognize the new electronic trading landscape, one where institutions, individuals, market makers and traders interact at high-speed over dozens of connected markets. The benefits of lower costs and more efficient trading are important, but fairness and market resilience are also vital and should continue to be examined.

“Additionally, while we have seen a sizeable stock market rally since the Flash Crash four years ago, we also hear reports of declining stock market investment and loss of faith by individual investors. Many reasons have been suggested, but doubts about market integrity and market stability are heard too often.

“Although many market participants call for reform, they often disagree as to where that reform should occur. Any path to reform must be built on good data and the goals of preserving a competitive market and the interests of long-term investors, while protecting the market from future disruptions. I am encouraged to see the S.E.C. move forward with a comprehensive review of market structure and an initiative for small company stocks that recognizes one size does not fit all. But, pilots and reviews are just a first step. I want to see urgent and thorough attention given to the market structure review so that any corrective measures that would help restore trust in the fairness of our markets are taken as quickly as possible.

“I look forward to the witnesses’ testimony today as the Committee examines whether today’s market structure has the right kind and amount of regulation to maintain a stable, competitive and efficient marketplace and what additional measures would be useful.”