Written Testimony of Ellen Greene

Managing Director, Equity and Options Market Structure, Securities Industry and Financial Markets Association (SIFMA)

before the U.S. House of Representatives

Committee on Financial Services

Subcommittee on Investor Protection, Entrepreneurship and Capital Markets

Hearing Entitled: “Oversight of America’s Stock Exchanges:
Examining Their Role in Our Economy”

Wednesday, March 30, 2022

Chairman Sherman, Chair Waters, Ranking Members McHenry and Huizenga, and distinguished members of the Subcommittee: thank you for the opportunity to testify on behalf of the Securities Industry and Financial Markets Association (SIFMA). SIFMA is the leading trade association for broker-dealers, investment banks, and asset managers operating in the U.S. and global capital markets. SIFMA’s members’ combined businesses represent 75 percent of the U.S. broker-dealer sector by revenue and 50 percent of the asset management sector by assets under management.

On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. Together with our member firms, we are dedicated to driving strong economic growth and job creation and enabling Americans from all walks of life to safely invest and prepare for a financially secure future.

I want to commend and thank the Committee’s leaders for convening this hearing and bringing transparency to the critical – but too often overlooked – role of America’s stock exchanges in our economy. It is an honor to discuss the urgent need to modernize the selfregulatory system that underpins our equity market structure. Congress formally established that system under the Securities Exchange Act of 1934 (the Exchange Act) but has not updated it since 1975 despite the fundamental transformation of America’s exchanges in the 21st Century.

Our equity markets exist to facilitate the capital formation that entrepreneurs, business owners, and companies need to create jobs, grow the economy, and serve their customers and communities. The central goal of the laws governing our equity markets is to protect the interests of the investing public. Most of our federal securities laws meet that standard today, but there are some features of our self-regulatory system that fall short and need to be updated.

In particular, federal securities laws give special privileges to America’s exchanges that benefit the exchanges commercially but do not serve the hundreds of millions of Americans whose retirement, education, and personal savings are invested in the capital markets. I will focus my testimony on five such privileges:

1. The exchanges have historically been exempted by courts from private liability for damages they cause while performing their regulatory duties but have sought to expand this immunity to damages caused while acting as for-profit entities.

2. The exchanges impose non-negotiable limitations on their private liability for damages they cause while acting as for-profit entities, and they set the limitations so low as to have no relation to the financial losses an exchange could cause.

3. The exchanges have the unique right to sell – and monopolistic power to set the prices of – their proprietary data products and related infrastructure, which broker-dealers and other market participants are compelled to purchase for regulatory and competitive reasons.