[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                      OVERSIGHT OF AMERICA'S STOCK
                       EXCHANGES: EXAMINING THEIR
                          ROLE IN OUR ECONOMY

=======================================================================

                             HYBRID HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON INVESTOR PROTECTION,

                 ENTREPRENEURSHIP, AND CAPITAL MARKETS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 30, 2022

                               __________

       Printed for the use of the Committee on Financial Services
       
                           Serial No. 117-75
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-273 PDF                 WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------   
 
                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York             JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina           LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan              WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania         VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   PETE SESSIONS, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
        Subcommittee on Investor Protection, Entrepreneurship, 
                          and Capital Markets

                   BRAD SHERMAN, California, Chairman

CAROLYN B. MALONEY, New York         BILL HUIZENGA, Michigan, Ranking 
DAVID SCOTT, Georgia                     Member
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
GREGORY W. MEEKS, New York           TOM EMMER, Minnesota
JUAN VARGAS, California              ALEXANDER X. MOONEY, West Virginia
JOSH GOTTHEIMER. New Jersey          WARREN DAVIDSON, Ohio
VICENTE GONZALEZ, Texas              TREY HOLLINGSWORTH, Indiana, Vice 
MICHAEL SAN NICOLAS, Guam                Ranking Member
CINDY AXNE, Iowa                     ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois, Vice Chair    BRYAN STEIL, Wisconsin
EMANUEL CLEAVER, Missouri            VAN TAYLOR, Texas
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 30, 2022...............................................     1
Appendix:
    March 30, 2022...............................................    29

                               WITNESSES
                       Wednesday, March 30, 2022

Greene, Ellen, Managing Director, the Securities Industry and 
  Financial Markets Association (SIFMA)..........................     8
Jackson, Robert J., Jr., Professor of Law, New York University 
  School of Law, and former SEC Commissioner.....................     5
Kimmel, Manisha, Chief Policy Officer, MayStreet, Inc............    12
Piwowar, Michael S., Executive Director, Milken Institute Center 
  for Financial Markets, and former Commissioner and acting 
  Chairman, SEC..................................................     7
Sukumar, Nandini, CEO, the World Federation of Exchanges (WFE)...    10

                                APPENDIX

Prepared statements:
    Greene, Ellen................................................    30
    Jackson, Robert J., Jr.......................................    44
    Kimmel, Manisha..............................................    55
    Piwowar, Michael S...........................................    69
    Sukumar, Nandini.............................................    76

              Additional Material Submitted for the Record

Huizenga, Hon. Bill:
    Written statement of Kevin R. Edgar on behalf of the Equity 
      Markets Association........................................    78
    Written responses to questions for the record from Ellen 
      Greene.....................................................    88
    Written responses to questions for the record from Manisha 
      Kimmel.....................................................    92
    Written responses to questions for the record from Michael S. 
      Piwowar....................................................    93
    Written responses to questions for the record from Nandini 
      Sukumar....................................................    95

 
                      OVERSIGHT OF AMERICA'S STOCK
                       EXCHANGES: EXAMINING THEIR
                          ROLE IN OUR ECONOMY

                              ----------                              


                       Wednesday, March 30, 2022

             U.S. House of Representatives,
               Subcommittee on Investor Protection,
             Entrepreneurship, and Capital Markets,
                            Committee on Financial Services
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:03 p.m., in 
room 2128, Rayburn House Office Building, Hon. Brad Sherman 
[chairman of the subcommittee] presiding.
    Members present: Representatives Sherman, Himes, Vargas, 
Gottheimer, Axne, Casten; Huizenga, Wagner, Hill, Emmer, 
Mooney, Davidson, Gonzalez of Ohio, and Steil.
    Ex officio present: Representative Waters.
    Chairman Sherman. The Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of the subcommittee are authorized to 
participate in this hearing.
    Today's hearing is entitled, ``Oversight of America's Stock 
Exchanges: Examining Their Role in Our Economy.'' This will 
serve as the formal hearing on eight bills or discussion drafts 
that have been circulated to Members, and copies of each bill 
or discussion draft will, without objection, be part of the 
record of this hearing.
    I usually thank our witnesses. Today, I am going to thank 
them profusely, because we are going to be interrupted by eight 
votes, during which time those of you who are here in person, 
but not those of you who are appearing virtually, will 
hopefully get some refreshments and otherwise be entertained, 
while we will be voting.
    I now recognize myself for 4 minutes for an opening 
statement.
    The U.S. Stock Exchanges are as old as our nation itself. 
For over 200 years, they have been a symbol of American 
capitalism, serving as drivers of economic growth. Since they 
play such a critical role in our financial system, they have 
long been recognized as self-regulatory organizations (SROs) 
under the Securities Exchange Act of 1934, giving them 
responsibility for creating regulations that oversee the 
securities exchanges. For most of the life of the exchanges, 
they have operated as member-owned, non-profit entities, but in 
the early 2000s, the New York Stock Exchange, NASDAQ, and the 
Chicago Board Options Exchange (CBOE), the three largest 
exchanges, transitioned to becoming publicly-traded, for-profit 
companies.
    Over recent years, the SEC has raised concerns about the 
potential conflicts of interest from acting, on the one hand, 
as a quasi-governmental regulatory entity, and on the other 
hand, as a for-profit entity. This arises, first, in the area 
of selling and providing data. The exchanges sell the basic 
information, sometimes called the tape, at a modest cost, for a 
higher cost. They provide proprietary information, which is 
both delivered more quickly and is more complete.
    In 2020, the SEC issued rules to reform this system, 
requiring the public data to be more detailed and basically 
allowing broker-dealers, the users of the information, to have 
more voting seats on the National Market Systen (NMS) boards 
that oversee the status sales. The exchanges sued and blocked 
that regulation.
    One of the bills before us today is the Securities Exchange 
Reform Act, which would clearly give the SEC the authority to 
adopt that regulation. We saw with the Facebook offering in 
2012, a breakdown of the system. Investors lost as much as $500 
million. They were compensated chiefly by broker-dealers. The 
exchanges used their authority as SROs to establish rules that 
capped their liability. And we will explore here whether it is 
reasonable for them to use their authority as self-regulatory 
organizations to block or limit the liability, and to what 
degree they should limit the liability that they incur in 
operating their for-profit businesses.
    The exchanges have performed well over the last several 
years, and these have been difficult years for everyone in our 
economy. Our hearing will focus on the data-providing process 
of the exchanges and the Regulation National Market System 
(NMS) oversight thereof. We will focus on the liability 
limitations that they have imposed. We hope also to deal with 
the governance standards for those stocks listed on exchanges, 
particularly whether those companies are, for example, overseen 
in their audits by the Public Company Accounting Oversight 
Board (PCAOB), something that Chinese companies have refused.
    In addition to looking at those that are designated as 
exchanges, we should keep in mind that we had our GameStop 
hearings, which focused on the recent trading activity taking 
place off the exchanges, both in the somewhat regulated 
alternative trading systems and the relatively unregulated dark 
pools. And, of course, an increasing part and a large part of 
our trading is taking place there.
    So we look forward to hearing from our witnesses, but 
first, we get an opportunity to hear from the ranking member.
    I now recognize the ranking member of the subcommittee, Mr. 
Huizenga, for an opening statement.
    Mr. Huizenga. Thank you, Mr. Chairman. Today's hearing, 
entitled, ``Oversight of America's Stock Exchanges: Examining 
Their Role in Our Economy,'' I unfortunately believe is another 
example of how off track we have gotten here in this 
subcommittee and in the full committee.
    So, why are we here this afternoon? What even prompted this 
hearing with this timing? Our equity markets have served both 
investors and businesses, powering economic growth and 
expanding wealth that has benefited investors, savers, and 
businesses. But instead of focusing on areas that expand 
opportunities for retail investors, promoting capital formation 
for small businesses, or even a discussion of recent SEC 
actions, the Majority has decided that this is a timely 
hearing.
    In the 117th Congress, this subcommittee has held 5 
hearings to date, this being the 6th, and the first one in over 
5 months. Since the last time we met as a subcommittee, 
Committee Republicans have highlighted several issues that 
warrant further attention and oversight.
    In October of 2021, Ranking Member McHenry sent a letter to 
SEC Chair Gensler, asking for clarification on the SEC's 
authority to regulate the digital asset ecosystem. The 
subcommittee has taken no action to clarify these statements.
    In November of 2021, Ranking Member McHenry and I called on 
Chairwoman Waters to join Republicans' investigation into the 
Biden Administration's attempt to politicize the PCAOB, the 
Public Company Accounting Oversight Board. To date, Committee 
Democrats have been silent.
    In December, Congressman French Hill sent a letter to Chair 
Gensler with several of our colleagues, sharing concerns over 
new, ``staff guidance,'' on shareholder proposals submitted to 
publicly-traded companies under SEC Rule 14a-8. This guidance 
comes from staff at the SEC who have become arbiters of social 
policy for our financial markets.
    In January, Committee Republicans demanded answers from the 
SEC, raising serious concerns with Chair Gensler's decision to 
limit outside input on rulemaking by providing unreasonably-
short public comment periods. Yet, these 30-day comment periods 
continue to be the norm.
    In February, Congressman Steil and I sent a letter to the 
SEC regarding proposed changes to the 2020 proxy rule, advisor 
rule, a rule, by the way, that was proposed and finalized under 
former SEC Chairman Clayton, that wasn't even allowed to take 
effect before the proposed amendments were put forth.
    And finally, just last week, Republican Members of this 
subcommittee sent a letter to Chair Gensler expressing concerns 
about the upcoming meeting on climate-related disclosure for 
investors. Of course, Republican concerns were ignored in the 
meeting, and the proposed rule went forward.
    Time and time again, subcommittee and Democrat leadership 
have chosen to focus on issues that fail to shine a light on 
the SEC and its Chairman, who is embarking on an aggressive 
rulemaking agenda, and, I might add, leaving us constitutional 
players in this whole system by the roadside. It is 
unacceptable that we have not had the full Commission before 
the committee in 3 years. I hope Chairman Sherman will see the 
importance in this hearing, of having all of those 
Commissioners here, and will join me in requesting its 
prioritization.
    And finally, today we are having a hearing where no 
exchange is here to testify. Let me remind you, the hearing is 
entitled, ``Oversight of America's Stock Exchanges: Examining 
Their Role in Our Economy.'' So, I am perplexed why we are 
having a hearing that does not include the viewpoint from one 
of the exchanges, or all of them, as was proposed by them, is 
my understanding. I would hope my Democrat colleagues would 
want to have a productive hearing focused on the issues that 
matter to American investors and that includes all parties 
involved.
    We as lawmakers should be working to create an atmosphere 
that helps promote more capital formation to allow the free 
flow of capital, strengthen job creation, and increase economic 
growth, and Committee Republicans look forward to discussing 
how to do that today. But I, again, will note that this is not 
a fulsome conversation, and I have been assured by at least the 
participants that they would like to have a fulsome 
conversation. We are missing some key elements, and I am not 
sure what final outcome the Chair plans with his proposed 
discussion language, and where these bills are going to go. 
There is a lot more work to be done before there are any kind 
of markups, and I hope that is going to be taken into 
consideration.
    And with that, I yield back.
    Chairman Sherman. Thank you. I would like to clarify a 
couple of things about the hearing. The first is this that is 
the Capital Markets Subcommittee, so, it seems in order to have 
a hearing overseeing our capital markets, and any question 
dealing with our stock exchanges is within the scope of this 
hearing.
    The second is that the ranking member decries the absence 
of representatives from the New York Stock Exchange and from 
NASDAQ. I join with him in that. They both refused to come. We 
were able to get a representative from the International 
Xchange Organization.
    Mr. Huizenga. Mr. Chairman?
    Chairman Sherman. Yes?
    Mr. Huizenga. Parliamentary inquiry. What time are you 
taking to opine about all of this?
    Chairman Sherman. The need to clarify the purpose of the 
hearing so that Members understand what questions are in order.
    Mr. Huizenga. So, you will be, of course, offering equal 
time, then?
    Chairman Sherman. If you have comments about which 
questions are in order, you can bring them up.
    Mr. Huizenga. Mr. Chairman, it just seems that you could 
deal with that on your time. We know that we have votes. If you 
would like to take this time, and grant us equal time, we can 
have that debate. This needed to be pointed out.
    Chairman Sherman. Sir, in your opening statement, you 
criticized me for not inviting two relevant witnesses. It is 
appropriate for me to inform you that those witnesses were 
invited.
    I now recognize the Chair of the full Financial Services 
Committee, Chairwoman Maxine Waters, for 1 minute.
    Chairwoman Waters. Thank you very much, Mr. Chairman, for 
holding this hearing.
    In the United States, there are thousands of companies and 
exchange-traded funds (ETFs) traded on our stock exchanges, 
representing $47 million in market capitalization. Stock 
exchanges have a dual role of helping businesses raise funds to 
support their business and creating transparent opportunities 
for people to invest their funds. Unfortunately, despite being 
invited to testify, the major exchanges, as the Chair has 
said--the New York Stock Exchange, NASDAQ, and CBOE--are not 
here today to describe their role in our economy or to help us 
assess how to reform them. That said, I am very pleased that we 
are considering, among other reforms, proposals to strengthen 
corporate governance and limitations on exchange legal 
immunity.
    Thank you very much, Chairman Sherman.
    Chairman Sherman. Now, I will introduce our first witness. 
We have Professor Robert J. Jackson, Jr., a professor of law at 
New York University School of Law, and a former Commissioner of 
the SEC.

STATEMENT OF ROBERT J. JACKSON, JR., PROFESSOR OF LAW, NEW YORK 
     UNIVERSITY SCHOOL OF LAW, AND FORMER SEC COMMISSIONER

    Mr. Jackson. Thank you, Chairman Sherman, and Ranking 
Member Huizenga, for the opportunity to testify about the 
oversight of the nation's stock exchanges today. For someone 
like me, our stock exchanges are a symbol of how investing can 
change the lives of American middle-class families. You see, I 
was born in the Bronx, New York, to a big Irish Catholic 
family. My mother is one of nine kids, my father is one of 
five, and the day I was born, none of them had been to college. 
So my parents plowed their paychecks into the stock market 
every week, confident that their savings could give their son 
the chance to go to school.
    Forty years later, my parents sat behind me at my Senate 
confirmation hearing to be a Commissioner of the Securities and 
Exchange Commission. So, to me, our stock exchanges are not 
only to encourage investment, and entrepreneurship, and growth; 
they make it possible for two middle-class parents to change 
their son's life. Our stock exchanges are at the core of the 
American Dream, and that is why it is so crucial that our 
exchanges give investors a level playing field and that is why 
today's hearing is so important.
    When I served as a Commissioner, I was fortunate enough to 
give two speeches, one hosted by George Mason University and 
the Healthy Markets Association, and the other by the Open 
Markets Institute, on what I think is the uniquely American 
solution to the problems that plague our exchanges: 
competition. Both institutions are very different 
ideologically, but they reflect strong bipartisan support for 
ensuring that exchanges compete, like all American businesses 
should, by adding value, not leveraging their market power and 
legal status.
    During my time at the SEC, my office led a series of 
initiatives designed to achieve just that. Unfortunately, 
exchanges have responded with litigation and lobbying to stall 
important progress on these issues. Several of the bills you 
are considering today would leave no doubt that the SEC has the 
authority it needs to make our exchanges more than just symbols 
of competition instead of businesses that thrive based on 
innovation, not litigation, and I will address two issues in 
those bills shortly.
    When I first took office at the SEC, I asked our staff to 
explain a puzzling fact. Even though we had 13 public stock 
exchanges at the time, 12 of them were owned by just 3 
companies. Now, I have worked on mergers and acquisitions as an 
investment banker and a corporate lawyer, so I am familiar with 
the economies of scale that justify acquisitions, but I rarely 
come across an industry where conglomerates buy and then 
continue to run identical businesses.
    So, I asked the SEC staff, why are our markets structured 
this way, and the answer lies in who decides what data 
investors get on stock prices. We have a two-tiered system of 
stock price information in this country: a lower-quality public 
feed; and generally higher-quality private ones. The key is we 
allow the exchanges to run them both while profiting from 
private feeds. The more exchanges a company owns, the more 
private data feeds they can charge for, even if doing so 
conflicts with overall market efficiency. As a result, the 
public feed is lower and less reliable than the private feed 
the exchanges sell. That is because exchanges have 
understandably underinvested in the public feed. It is a 
product they compete with. As I said before, it is like letting 
Barnes & Noble run our public libraries. Nobody could be 
surprised to find out that our libraries don't have enough 
books.
    And as I said, during my tenure, the SEC took two key steps 
to address exchanges' power over stock price data. First, we 
adopted rules requiring exchanges to upgrade the public feed by 
including additional information that has become essential to 
trading in modern markets. Second, we adopted rules requiring 
the exchanges to propose reforms to the governance of the feeds 
so other stakeholders have a say in the quality and price of 
the information available to investors.
    Unfortunately, as I mentioned, exchanges responded by 
suing, exercising the free option our courts had given 
regulated entities to block changes to market structure. The 
result is that much of the market structure reforms that we 
pursued while I was a Commissioner still haven't happened. And 
that is why the Securities Exchange Reform Act of 2022 is so 
important. Among other things, the Act would leave no doubt 
about the SEC's authority to require exchanges to give 
stakeholders a say about the pricing and quality of the public 
feed. The Act ensures that Congress, rather than the exchanges' 
lawyers, will determine when these key reforms arrive.
    The Act would also address another vestige of our outdated 
regulatory structure. Although exchanges are now private, 
profit-making entities, when they are sued, they seek the 
shield of government immunity. Generally, market participants 
expect to be held liable for the harm that they cause, and this 
expectation gives them incentives to take care when dealing 
with others. Government actors, by contrast, are usually held 
harmless from liability so that their decisions reflect optimal 
policy.
    Exchanges claim that they are regulatory entities, so they 
should be immune from liability when their profit-maximizing 
decisions harm investors. Now, back when I was a corporate 
lawyer, that was a better argument. Back then, exchanges 
actually developed meaningful corporate governance rules that 
gave investors a chance to hold insiders accountable. But 
today, exchanges' profit motive leads them to pursue listings, 
not investor protection. And since exchanges have exited the 
business of corporate governance, they can't have it both ways, 
pursuing profit when it suits them, and the shield of 
regulatory immunity when it doesn't.
    We have learned through hard experience that extending the 
government's protections to profit-making actors gives them a 
reason to take excessive risk, since they privatize gains from 
their actions, but don't bear the losses. Moreover, exchange 
rule books impose low liability limits, even when exchanges are 
found liable for investor losses. Both of these are 
inconsistent with the accountability we see in truly 
competitive markets and both put investors at risk of losses 
from decisions that are shielded--
    Chairman Sherman. Professor, your time has expired. Perhaps 
one more sentence to summarize?
    Mr. Jackson. Of course. Let me just say that while it is 
understandable that market participants seek legal advantage 
where they can, we owe it to investors like my mom and dad to 
give them confidence that the biggest participants in our 
markets compete on a level playing field. Thank you again for 
the opportunity to testify today.
    [The prepared statement of Mr. Jackson can be found on page 
44 of the appendix.]
    Chairman Sherman. Witnesses are reminded their oral 
testimony should be limited to 5 minutes. You should be able to 
see the timer that will indicate how much time you have left.
    And without objection, all of the witnesses' written 
statements will be made a part of the record. It is the Chair's 
intention to hear from two more of our witnesses, and then 
adjourn so that we can vote.
    We will now hear from, Mr. Michael Piwowar, who is the 
executive director of the Milken Institute Center for Financial 
Markets, and a former Commissioner and acting Chairman of the 
SEC.

  STATEMENT OF MICHAEL S. PIWOWAR, EXECUTIVE DIRECTOR, MILKEN 
INSTITUTE CENTER FOR FINANCIAL MARKETS, AND FORMER COMMISSIONER 
                    AND ACTING CHAIRMAN, SEC

    Mr. Piwowar. Yes. Thank you, Chairman Sherman. You can just 
call me Mike. It is easier to pronounce than my last name. And 
thank you for inviting me here today. Ranking Member Huizenga 
and members of the subcommittee, it is great to see you, many 
of you in person. It is great to see so many familiar faces in 
person today.
    For those of you who don't know me, as Chairman Sherman 
mentioned, I am the executive director of the Milken Institute 
Center for Financial Markets. Over the course of my career, 
most relevant to today's hearing, I spent 9 years serving at 
the U.S. Securities and Exchange Commission. Earlier, I spent 4 
years there as a visiting academic scholar and a senior 
financial economist. More recently, I had a 5-year term as a 
Commissioner, and also served as acting Chairman. During my SEC 
tenure, I always appreciated the thoughtful work of this 
subcommittee to help ensure that the SEC remained focused on 
its noble mission to ensure that capital markets work, and to 
make sure that they work well for everyone.
    The U.S. capital markets are the envy of the world, due in 
large part to the role that our stock exchanges play. America's 
stock exchanges list the thousands of public companies that 
millions of Americans invest in. They trade literally billions 
of shares every single day, representing more than trillions of 
dollars every single year.
    As this subcommittee evaluates various legislative 
proposals to change regulatory policies affecting U.S. stock 
exchanges, my written testimony contains details that I won't 
cover now, but I thought I would mention two broad areas. One 
is guiding principles that I use when thinking about general 
market structure policy, and then also, some comments on some 
of the specific policy proposals listed for this hearing. I am 
happy to provide more information about any of them during 
today's hearing.
    Our capital markets help make America's future bright for 
everyone. For some, that future is to take their 
entrepreneurial spirit and put it into action, take a risk, 
start a company, raise capital from investors, hire workers, 
and bring a product or service to market, thereby improving the 
standards of living of the customers they serve, the employees 
they hire, and the investors who share in their success.
    For others, that future is to take their hard-earned 
savings and invest in the job-creating entrepreneurs, and to 
take the proceeds from those investments and provide for 
retirement and security investments in their children's 
education, and then reinvest some of those proceeds into other 
job-creating entrepreneurs in their community and throughout 
our great nation. So, when all is said and done, our capital 
markets help all Americans invest in America's future by 
investing in each other.
    Mr. Chairman, thank you for bringing attention to the 
critical role that exchanges play in our capital markets, our 
economy, and America's future. Thank you again for the 
opportunity to testify here today. I look forward to answering 
all of the questions that you and your colleagues have.
    [The prepared statement of Mr. Piwowar can be found on page 
69 of the appendix.]
    Chairman Sherman. Thank you for your brevity.
    We now move to Ms. Ellen Greene, who is the managing 
director at the Securities Industry and Financial Markets 
Association (SIFMA).

 STATEMENT OF ELLEN GREENE, MANAGING DIRECTOR, THE SECURITIES 
       INDUSTRY AND FINANCIAL MARKETS ASSOCIATION (SIFMA)

    Ms. Greene. Chairman Sherman, Chairwoman Waters, Ranking 
Member Huizenga, Ranking Member McHenry, and distinguished 
members of the subcommittee, thank you for the opportunity to 
testify today on behalf of the Securities Industry and 
Financial Markets Association (SIFMA). I commend you for 
bringing transparency to the urgent need to modernize the self-
regulatory system underpinning the U.S. equity markets. SIFMA 
is the leading trade association for broker-dealers, investment 
banks, and asset managers. Our 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.
    It is an honor to testify on behalf of our industry's 1 
million employees and the hundreds of millions of Americans 
they serve, whose retirement, education, and personal savings 
are invested in the capital markets. This puts me in the 
privileged position of being the only witness today who 
represents communities in every district served by members of 
this subcommittee: the former schoolteacher whose pension 
allows her to retire comfortably; the working parent saving to 
send their kids to college; the recent graduate who invests a 
portion of her paycheck each month; and many more like them. 
Those are your constituents, they are our clients, and it is 
the financial future that should be our focus for today's 
discussion.
    Our equity markets facilitate the capital formation that is 
the lifeblood of our economy. Government's primary objective is 
to protect the interests of the investing public. Most 
securities laws meet that standard, but there are features of 
the self-regulatory system that fall short and need to be 
updated.
    In the Securities Exchange Act of 1934, Congress codified 
exchanges as self-regulatory organizations known as SROs. As 
such, each exchange is required to enforce compliance with both 
its own trading rules and Federal securities laws. This 
includes the power to examine, investigate, and bring 
disciplinary actions against broker-dealers. This system made 
sense in 1934 when exchanges were organized as non-profit 
cooperatives owned by their broker-dealer members who operated 
them like utilities. But starting in the early 2000s, America's 
exchanges became for-profit entities, and many are part of 
publicly-traded companies.
    Driven by their duty to maximize profits, exchanges now 
sell market data and other products to broker-dealers who 
compete against them for order flow and execution services. In 
other words, the institutions upon which our self-regulatory 
system was built no longer exist. Like other for-profit 
companies, exchanges act in the best interest of their 
shareholders, but there is a fundamental conflict of interest 
between that duty and their regulatory duties to protect the 
interests of the investing public. This conflict is made worse 
by special privileges granted to the exchanges prior to them 
becoming for-profit entities. For example, 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.
    Exchanges also impose non-negotiable, unreasonably low 
limitations on their private liability for damages they cause. 
In fact, the exchanges try to impose a $500 limitation of 
liability on broker-dealers in the event of a cyber breach of 
the Consolidated Audit Trail, known as CAT. Exchanges have the 
unique right to sell their data products, and monopolistic 
power to set their prices, while broker-dealers and others are 
captive customers with no alternatives. Exchanges exclude their 
competitors from fully participating in but require them to 
comply with and help finance major initiatives developed as NMS 
plans. And exchanges' overlapping regulatory jurisdictions give 
them access to broker-dealers' highly-valuable trading data 
through their access to CAT. In sum, the powers that for-profit 
exchanges have to regulate and set the costs for their 
customers and competitors make our equity markets less fair, 
competitive, efficient, transparent, and inclusive. This harms 
the investing public.
    My written testimony discusses five reforms targeted at 
these unfair privileges. Enacting them will modernize our self-
regulatory system and make our equity markets fairer and more 
efficient. They offer a rare chance for bipartisan cooperation 
to serve the interests of individual investors. We stand ready 
to work with anyone who shares this goal. We have a unique 
opportunity to make a positive difference in the lives of 
hundreds of Americans in every State and congressional district 
in the country whose financial futures are invested in the 
capital markets. We should not let it pass.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Ms. Greene can be found on page 
30 of the appendix.]
    Chairman Sherman. Thank you. The Chair notes that over 300 
Members have yet to vote, and, accordingly, we will recognize 
at least one more witness.
    I now recognize Nandini Sukumar, the CEO of The World 
Federation of Exchanges, and our one witness who is willing to 
come before us representing the exchanges, both here in the 
United States and elsewhere. Ms. Sukumar, you are recognized 
for an oral presentation of your testimony.

  STATEMENT OF NANDINI SUKUMAR, CEO, THE WORLD FEDERATION OF 
                        EXCHANGES (WFE)

    Ms. Sukumar. Good afternoon, Chairman Sherman, Ranking 
Member Huizenga, and members of the subcommittee. It is a 
pleasure to be here, and I'm happy to do it anytime. We 
represent not only U.S. exchanges, but exchanges around the 
world. Our U.S. members have a solid history with the WFE. We 
are an old trade association founded in 1961. So, U.S. 
exchanges here today have indeed been active participants 
engaged in leadership roles across the world in the world of 
exchanges.
    As I mentioned, the WFE is the global trade body for 
regulated exchanges and clearinghouses. Since the beginning, we 
have focused on improving markets. We now represent over 300 
pieces of market infrastructure, exchanges, and CCPs. All of 
them are highly-regulated businesses.
    As a preliminary point, I would like to note that exchanges 
work very hard to ensure robust infrastructure, including 
cybersecurity and operational resilience, more generally. They 
demonstrated this extensively through one of the most testing 
times for financial markets during the pandemic, of course, a 
period when broker-dealers by contrast very clearly faced 
operational difficulties.
    In all cases, WFE member exchanges fulfill a function that 
we see as critical to capital markets and price formation. 
Without clear, unbiased, authoritative, and up-to-the minute 
information about the ever-changing value of financial assets, 
markets would simply struggle to serve society. This is why it 
is one of the key criterion of membership of the WFE that an 
exchange performs such a role, ensuring a properly-structured 
setting for establishing the consensus price of financial 
assets at any given moment.
    At the same time, the modern exchange has to be a dynamic 
and competitive business, constantly investing in new capacity 
in order to meet the ever-increasing demands of investors, of 
issuers, of securities, and of financial service companies 
globally. The exchange, therefore, performs a valuable role 
from which financial service intermediaries benefit 
particularly greatly, and which has broader public benefits 
serving the businesses that need capital to grow and the 
investors whose savings can be put to worth.
    Our members have many things in common, but the deeper, 
more fundamental shared characteristic is that they are the 
core of capital markets in their respective jurisdictions. 
Supporting fair and transparent trading is their purpose and, 
in our view, an essential component of public trust in the 
financial system. Our members recognize that the central role 
has always come with significant responsibility and will 
continue to do so.
    There are many ways in which this responsibility manifests 
itself, including setting the rules for who can participate and 
how, ensuring surveillance of the trading process and 
overseeing everything from listing requirements to trading 
halts to stock splits. These functions relating to the 
operation and oversight of their markets are highly regulated 
and complex and are all conducted in furtherance of fair and 
orderly markets and protection of investors.
    I want to stress that the exchange really creates the 
marketplace and flow of price information, but it does not 
participate in it. In other words, the great strength of the 
exchange model is that they act as an impartial facilitator of 
business, ensuring that transactions can take place in a safe 
and efficient manner while staying at arm's length from the 
back and forth that characterizes the typical trading day. This 
is a very important distinction, and just as importantly, it 
applies whatever the ownership and governance structure of the 
exchange. The very nature of the exchange role is to be a 
trusted third party that must fulfill considerable statutory 
obligations every single day. The U.S. securities exchanges are 
not only very highly regulated, but incredibly transparent. All 
rules and charges are filed with the SEC and publicly 
available, something that cannot be said for many other 
entities in capital markets.
    I started by talking about the exchange business being 
modern in outlook, but it is built on well-established 
principles, much longer than the WFE's own history. It is a 
blend of these well-established principles and state-of-the-art 
operations that makes exchanges so effective for the full range 
of market participants, including everyday investors as well as 
Wall Street.
    In summary, exchanges take their role and responsibility 
seriously because this is what makes them effective and 
valuable. Thank you.
    [The prepared statement of Ms. Sukumar can be found on page 
76 of the appendix.]
    Chairman Sherman. Thank you. I am now going to recognize 
our fifth witness, with the warning that if we get down to only 
70 Members not voting, I may ask you to suspend.
    We have with us Manisha Kimmel, who is the chief policy 
officer of MayStreet.

 STATEMENT OF MANISHA KIMMEL, CHIEF POLICY OFFICER, MAYSTREET, 
                              INC.

    Ms. Kimmel. Thank you for holding this hearing and for 
offering me the opportunity to appear before you today. My name 
is Manisha Kimmel. I am the chief policy officer at MayStreet, 
and throughout my 25-year career, I have worked at the 
intersection of regulation and technology. At MayStreet, I 
focus on the policy issues that impact market data and our 
business model.
    MayStreet is a fast-growing fintech. Our software processes 
market data from hundreds of trading venues across multiple 
asset classes worldwide. Market data from the U.S. stock 
exchanges is a big part of what we do. We are active in the 
market structure through our comment letters and membership and 
industry associations, including the Healthy Markets 
Association and the Financial Information Forum. I look forward 
to offering our view on the important role American exchanges 
play in our capital markets and on how Congress can improve 
oversight of the national market system.
    The exchange world has changed. I would like to highlight a 
few of these changes. First, the major exchanges are now 
publicly-traded companies. Second, broker-dealers are not just 
customers of the exchanges; they are competitors to them. 
Third, exchanges sell their raw data and package it into a 
number of products. The sale of their own data as well as their 
allocation of sales from the public market data stream are 
significant sources of revenue. Fourth, exchanges seek to 
innovate in terms of order types, product offerings, and 
pricing models, and to support those business decisions, the 
exchanges filed over 1,300 rules in 2021 alone. Over 700 of 
those were immediately effective. Compare that to 20 years ago, 
when exchange filings numbered in the dozens.
    In light of these market dynamics, we believe this 
subcommittee should take action in the following areas. Our 
first recommendation is that Congress give the SEC direct 
control over the public market data stream. Industry and 
investor groups have raised concerns that the current NMS plans 
structure that administers the public data stream is not 
serving investors. The SEC has tried to address these concerns 
through recent rules, specifically the CT Plan and the Market 
Data Infrastructure Rule, also known as the MDI Rule. The CT 
Plan, among other things, includes the industry and investors 
as voting members of the governance of the NMS plan. The MDI 
Rule would expand the content of the public data stream and 
bring competition to its production and distribution. Both of 
these rules are tied up in litigation between the SEC and major 
exchanges.
    This conflict calls into question the value of operating 
the public data streams as NMS plans. Why? Because there is a 
fundamental misalignment of interests. On the one hand, the 
congressional mandate to ensure timely access to core market 
data at a reasonable price, and on the other hand, the 
commercial interests of the major exchanges seeking to maintain 
revenue, the over $400 million in revenue from the public 
market data stream and revenues associated with the exchange's 
own data products that directly compete with that public data 
stream. While adding investors and brokers to the NMS plan 
governance is a step in the right direction, we believe that 
Congress should go further and give the Commission control of 
the public market data stream.
    Our second recommendation is that Congress eliminate 
immediately effective exchange fee filings. Subjecting exchange 
fee filings to notice and comment would mean that fee changes 
cannot be retroactive, nor can they be effective until after 
the SEC reviews and approves them. Exchange fees matter to 
investors because they directly affect order routing decisions 
and the ability of broker-dealers to achieve best execution for 
their customers.
    Market participants should be given a voice in how and when 
fee changes go into effect. To that end, MayStreet supports the 
discussion draft legislation posted in connection with today's 
hearing that would amend the Exchange Act to modernize the 
filing and approval requirements for these fee filings. 
Specifically, by requiring exchange fee filings to go through 
the regular Commission review and approval process, the 
proposed legislation will allow the SEC to discharge its 
statutory duty to affirm the Exchange Act standards are met, 
namely that exchange files are reasonable, equitably allocated, 
not unduly burdensome, and not discriminatory.
    Our third recommendation is that Congress create a clear 
mechanism for the SEC to review and remand filings already on 
the books. The SEC attempted to summarily remand over 400 
filings for review. Unfortunately, the SEC's efforts were 
overturned by the courts, so Congress should step in. Investors 
and others should not continue to pay fees that are 
inappropriate, given the application of the Exchange Act 
standard in today's environment.
    Our fourth recommendation is that Congress and the SEC 
provide definitive guidance on the Exchange Act standard as it 
relates to exchange fee filings. While Congress has explicitly 
declared that exchange fees need to meet Exchange Act 
standards, it has not defined what that means. Having the 
exchanges and the Commission on the same page helps investors, 
because when you set expectations properly, the process is less 
time-consuming and more consistent.
    Thank you for your consideration of our recommendations, 
and for the opportunity to share my thoughts on these important 
topics.
    [The prepared statement of Ms. Kimmel can be found on page 
55 of the appendix.]
    Chairman Sherman. Thank you for your testimony.
    The subcommittee will now stand in recess, and we will 
reconvene immediately following the conclusion of this series 
of votes.
    [recess]
    Chairman Sherman. The subcommittee is back in session.
    I now recognize myself for 5 minutes for questions.
    Ms. Greene, in your written testimony, you highlight that 
when NASDAQ was sued by market participants for mishandling 
Facebook's 2012 IPO, the exchange argued that it was immune 
from liability because it was also an SRO. However, handling 
the Facebook IPO is something they did in their proprietary 
capacity, and, in fact, they charged for it. My discussion 
draft, the Securities Exchange Reform Act, which has been 
noticed for this hearing, would clarify that exchanges are 
shielded by immunity only when carrying out their regulatory 
functions. Could you speak to how a clarification of this 
standard would help market participants?
    Ms. Greene. Certainly. A clarification of this standard 
would help clarify some of the judicial standings that we have 
today where 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 for 
damages caused while acting as for-profit entities. And making 
changes to this and having the exchanges be responsible for 
damages that are caused when they are acting in a for-profit 
capacity, we think is important, because we do see them 
increasingly hiding behind their regulatory shield. And that 
was adopted back in 1934, in the Exchange Act, and certainly, 
we have seen a lot of evolution in the exchanges in the early 
2000s to for-profit companies.
    So, it seems that some of these special privileges that 
they enjoy today really need to be addressed through some of 
the legislation that has been put forth so that they are more 
similar to other publicly-traded companies that don't enjoy 
immunity from commercial activities. And also, looking at 
things like limitation of liability, prohibiting the exchanges 
from setting an artificially-low cap so that when there are 
incidents like Facebook, there is adequate funding or the 
ability to sue them in court so that there is able to be 
compensation to cover investor losses.
    Chairman Sherman. I would point out that my discussion 
draft provides that there would be or allows for some cap with 
the intention that we would set that cap at a level where the 
exchanges could get insurance. The goal here is not to endanger 
them, even if there should be something like what happened with 
Facebook, which some have said was a $500 million item, but 
rather to make sure that we put liability where the negligence 
resides.
    Ms. Kimmel, as you know, data is the lifeblood of all 
financial markets. Through their control of the National Market 
System (NMS) plans, which govern the collection, aggregation, 
and distribution of public stock market data, the exchanges 
have control over what investors rely on that data in their 
market trading decisions. They have the, ``public data, the 
tape,'' which is provided for one price, but then they 
simultaneously sell separate proprietary data to market 
participants, which is more detailed, and delivered more 
quickly than the public market data. Would you agree this 
creates a disincentive for the exchanges to improve the quality 
of the tape, the market public data, when they have a competing 
product that sells for more?
    Ms. Kimmel. I think it absolutely does, but just to explain 
it, the exchanges actually sell two types of proprietary feeds. 
One type is the top-of-book feeds, and the other type is the 
depth feeds. The depth feeds are the ones that you are talking 
about that are more expensive, have lower latency and every 
order of data. But it is important to understand that this top-
of-book data they sell is less expensive, has less data, and is 
chosen by retail broker-dealers instead of the consolidated 
tape because of those reasons. Because of that, we think it is 
very important that this market data infrastructure rule 
proceed, which would expand the content on the tape.
    Chairman Sherman. In my remaining seconds, I would note 
that of roughly 44 percent of stock trading happening off the 
exchanges, 70 percent of that was Citadel and Virtu. And I am 
going to ask Professor Jackson for comments on the record 
regarding that as my time has expired.
    And I now recognize the ranking member of the subcommittee, 
Mr. Huizenga.
    Mr. Huizenga. Mr. Chairman, before I ask my questions, I 
ask unanimous consent that the testimony of Kevin Edgar on 
behalf of the Equity Markets Association be entered into the 
record.
    Chairman Sherman. Without objection, it is so ordered.
    Mr. Huizenga. Thank you. Ms. Greene, it is my understanding 
that this is your first time testifying in front of Congress. 
Well, welcome to the circus. I won't ask you to identify the 
clowns, but we try to be productive here. So, yes, that is 
looking in a mirror every day, right?
    I wanted to take a moment to the discuss Consolidated Audit 
Trail (CAT). This is something that we have discussed before. 
Currently, the SEC has it before it, and because I believe that 
this is an issue that is important for everyone represented in 
the room, I just wanted to touch on that. Frankly, it has been 
an issue we have been discussing for quite a while. In fact, in 
2017, when I chaired this subcommittee, we had a hearing on 
that topic, and at the time, I discussed a proposal I had 
introduced that was meant to safeguard and govern the security 
of the information reported to, stored by, and accessed by the 
Consolidated Audit Trail.
    Fast forward to August 2020, and the SEC proposed 
amendments to the National Market System Plan governing the 
Consolidated Audit Trail to bolster its data security. I think 
it is important to remember that the CAT will be the largest 
database of customer and institutional trading data ever 
created, and will include a lot of very sensitive information, 
to say the least. So given this, I think it is imperative for 
all market participants that the SEC get this right. They have 
to have the confidence of investors that their information is 
going to be safe and will not be at risk of a data breach. 
Would you mind sharing your perspective on: one, the SEC 
getting it right; and two, the SEC moving quickly to approve 
the proposal?
    Ms. Greene. Yes, of course. Thank you. SIFMA remains in 
full support of the CAT. We do agree with you that there 
remains a lot of data security issues and privacy concerns that 
haven't been addressed to this day. Certainly, the SEC proposal 
that was put forth by former SEC Chair Clayton was something 
that SIFMA supported. We did have minor modifications to it, 
yet we thought that the Commission's concept of keeping the 
data within CAT in a secure environment that they could work on 
was a big improvement to having them download the data out of 
CAT. And, in fact, we saw many of the exchanges file comment 
letters opposing that proposal and their ability to take data 
out of the CAT. When we do look at CAT, we really think that a 
breach is more of a win, and if, again, we continue--
    Mr. Huizenga. And, in fact, it has happened.
    Ms. Greene. Yes, it has. And as I said, we continue to 
raise this issue with FINRA CAT, the SROs, and the SEC, as well 
as this committee. And we were very supportive of your 
legislation back in 2018, Congressman Huizenga, and we think 
that the American Customer Information Protection Act that 
would prohibit the collection of personally-identifiable 
information was something that was very important. SIFMA did 
work with the SROs to keep Social Security numbers out of CAT, 
but we do remain concerned about that data and think those 
changes are really long overdue.
    Mr. Huizenga. I appreciate that. I have a minute-and-a-half 
left, and we can continue this discussion about how fast the 
SEC is moving or not.
    Mr. Piwowar, you are a former Commissioner, as well as a 
former acting Chair of the SEC. There is lots of concern, at 
least on this side of the aisle, about the impact of the short 
comment periods that the SEC is giving market participants. 
Could you touch on that very quickly? And then, somewhat 
related to that, by the SEC's own admission, there are economic 
consequences and potential negative unintended consequences 
that are there. SEC's climate-related disclosures are estimated 
to cost $10.2 billion in paperwork burden alone, and some 
estimates have it at greater than that.
    So if you could couple those things, short comment periods 
and dramatic, huge moves like that coming out of the SEC?
    Mr. Piwowar. No, that is absolutely right. When I was on 
the Commission, I was an advocate for 90-day comment periods, 
the longer, the better. Some people think it is a way to sort 
of keep special interests from weighing in during the comment 
period, but it has the opposite effect. The trade associations 
can hire lawyers to do this. It is everyday Americans who don't 
have time to read through these huge, long proposals--the 
climate proposals more than 500 pages. And the other thing is 
that there are so many proposals out at the same time, right? 
It is not that you have 30 days--
    Mr. Huizenga. They are just flooding the zone at this 
point.
    Mr. Piwowar. Flooding the zone. Chairman Gensler is very 
smart, and he has run an agency before. And when he was at the 
Commodity Futures Trading Commission (CFTC), he was very famous 
for putting something very important into Footnote 513 on a 
cross-border rule. So, folks have to read these rules very, 
very carefully, and they need the time to do that.
    Mr. Huizenga. My time has expired. I appreciate it.
    Chairman Sherman. Without objection, I would like to submit 
for the record a statement from Fidelity Investments, and a 
letter sent to the committee for this hearing from OTC Markets, 
American Securities Association, Insured Retirement Institute, 
and Public Citizen.
    Without objection, it is so ordered.
    I now recognize the gentleman from Illinois, Mr. Casten.
    Mr. Casten. Thank you, Mr. Chairman. And thank you to the 
witnesses. I want to talk about something or ask questions on 
something that is off the topic here, but certainly top of 
news, and that's Russian money laundering. This is as much as 
just sort of background for me because I feel like, as a member 
of this committee, I should be smarter on this issue than I am. 
In 2017, there was the whole Deutsche Bank mirror trade scandal 
with folks buying on a Russian market a dual-listed security, 
and then selling it on a London market and essentially 
converting Russian assets into hard currency.
    And I guess I want to start with you, Mr. Jackson. Just 
walk me through, if you can, from an exchange perspective, if 
you have a same party or a related party executing the same 
trade on two different markets that are obviously connected, do 
you, as the U.S. exchange, as a U.S.-domiciled exchange, have 
any obligation? Do you have the data? Do you have any 
monitoring of that trade, or is the only compliance on the 
trader in Deutsche Bank? And I realize this was 2017, so it was 
a lifetime ago in Russian money laundering, but I just want to 
understand what you are monitoring right now, and are we 
satisfied that barn door is closed?
    Mr. Jackson. Thank you, Congressman, and I certainly think 
it is a crucial issue. And I share the concern about the degree 
to which foreign money finds its way into U.S. companies and 
exchanges. I think on this front, the exchanges have done very 
well to collaborate internationally with exchanges all around 
the world about the flow of funds into various kinds of 
companies.
    But, Congressman, I do want to highlight a concern about 
this. You might know that Congress just last year unanimously 
passed what I think is a very important statute, the Holding 
Foreign Companies Accountable Act, which requires the listing 
of firms, particularly those from China, that refuse to have 
auditors' books inspected. And to me, audit inspection of the 
company's books is the basic lifeblood. It is the most basic 
rule of the road that we have in American capital markets.
    And a question that someone could ask, sir, and the 
question that I would like to ask is, why was it necessary for 
Congress to pass a law letting exchanges know that they 
shouldn't be listing companies that refuse to have their books 
inspected? Here, too, I would think that the exchanges, if they 
were going to take their regulatory role more seriously, would 
not require a Federal law to be more careful about the kinds of 
companies that Americans are investing in. So, I do think the 
concerns you have raised are quite serious. The exchanges face 
a serious problem, a serious challenge there. And they have 
done important and very hard work on questions around money 
laundering and foreign investment, but I think we have a long 
way to go.
    Mr. Casten. Okay. Ms. Sukumar, same question for you, but 
from your vantage point of seeing a lot of different 
international markets that are all in somewhat different 
regulatory regimes. And I want to frame this question by 
saying, if your answer to this question is, we should talk off 
the record, that is fine. But are there gaps in regulatory 
structures between the reporting structures, the compliance 
between these markets, so that if you had a dual listed 
security, maybe I can't go straight from Russia to London 
anymore. But are there other international markets, are there 
areas where you are concerned about so that we can ensure that 
we are not using our markets to launder money?
    Ms. Sukumar. Thank you very much for the question and the 
opportunity. I would start by saying that every exchange in the 
world, every public market in the world is incredibly focused 
on ensuring that there is integrity of their markets. So, money 
laundering is a key concern, I think, that every exchange, not 
just in America, but across the world, shares that focus, 
shares that drive, that vision really of having clean money, 
and stringent standards across markets globally.
    I have two things, really, at this point to offer you. One 
is that every member of the WFE has to pass membership 
criteria. So we do a kind of assessment, and a really important 
membership criteria for us is, do the members comply or 
conform? Do they recognize international money laundering 
standards, and the answer is a resounding, ``yes.''
    And the second is that, among our membership criteria, 
almost the first rule is where we look at regulatory 
jurisdiction, and we say, is your regulator a member of the 
international regulatory association, the International 
Organization of Securities Commissioners (IOSCO). And the 
reason that is particularly important is because regulators 
internationally have a memorandum of understanding (MOU). So, 
they sign this agreement where there is information sharing 
that helps them crack down on international crime.
    I would say to you, it is obviously a complex topic. It is 
obviously a topic that worries everyone. And I think the 
exchanges have been doing a remarkable job at keeping markets 
clean. It helps, of course, that in that DNA exchanges are 
transparent markets, right? We live by corporate disclosure. 
Thank you. I see I am out of time.
    Mr. Casten. Now, I am out of time. And I guess I will just 
leave it at, I still don't understand whether this was Deutsche 
Bank that was not reporting information that the exchanges 
should have had access to, or whether the exchanges weren't 
monitoring that information. And I would be happy to continue 
with any of you offline should you have more to share. I yield 
back.
    Chairman Sherman. Thank you. I now recognize the gentleman 
from Ohio, Mr. Davidson.
    Mr. Davidson. Thank you, Mr. Chairman. I thank our 
witnesses and appreciate the chance to talk to you about this. 
Frankly, Ms. Kimmel, when I heard your testimony, there are a 
lot of things I would love to go into, but we have a hard time 
in the Minority picking topics for hearings. So, I am going to 
stretch some of the experience that you have had, and Mr. 
Piwowar, in particular, with your time at the SEC.
    While this hearing discusses regulatory proposals to 
enhance our current market structure, I would like to focus for 
a second on what we have learned from our existing structure 
and how that can help us craft a framework for the future with 
respect to crypto exchanges. It is inevitable that crypto 
exchanges will continue to expand and become accepted over the 
course of the next few years. We can probably all agree that 
they will need to be regulated by someone. And an inherent part 
of that regulation will include an adequate disclosure regime 
like we have in place today with respect to equity markets.
    In your testimony, Mr. Piwowar, you do a good job of laying 
out the guiding principles for market structure for traditional 
equities markets. In your opinion, what are some of the 
principles or perhaps some of the aspects of Reg NMS that we 
could emulate for a future crypto exchange framework?
    Mr. Piwowar. Yes, thank you, Congressman. The first thing 
to recognize is that the U.S. equity markets are very complex. 
As has been mentioned here, it is not just exchanges, there are 
market makers, and there are alternative trading systems, and 
the like. We have the same thing in the crypto world. We have 
exchanges. We have wallets. We have all kinds of different 
things.
    And so to recognize that this is a dynamic and changing 
environment, and you want to set down the rules of the road, so 
you sort of balance the two pieces of the sort of two of the 
three parts of the SEC's mission. On the one hand, you want to 
protect investors, but on the other hand, you want to 
facilitate capital formation and innovation, and the key is 
getting that right. And the way you do that is through economic 
analysis, cost-benefit analysis, and then continuing to look at 
it over time to see whether or not we need to make changes over 
time based upon when markets change and what type of 
technologies change.
    Mr. Davidson. Are long, drawn-out enforcement actions 
selectively applied effective, or is a clear rulemaking process 
more effective?
    Mr. Piwowar. Yes, clear rulemaking, obviously. Throughout 
my entire term, I was against rulemaking by enforcement. It is 
not fair to the people who aren't parties to the enforcement 
action. Oftentimes, you have a settlement that is entered into 
by one party and the Commission. And then, there are 
undertakings that become de facto rulemakings, that were not 
put out for notice and comment, that were not put out for other 
people to weigh in on, and now, that becomes a de facto 
rulemaking with which they have to comply.
    Mr. Davidson. And investors are hurt when that happens, 
correct?
    Mr. Piwowar. That is correct.
    Mr. Davidson. Yes. And I think that it becomes incumbent 
upon Congress at some point to really provide that clarity and 
not just for the investors, but for the innovators, and 
frankly, for the regulators, because then you know there is a 
bright line. You are on this side of it or that side of it. And 
if can I shift, Ms. Sukumar, on a similar note, how do you 
think we could effectively build a framework that prevents 
market fragmentation and promotes transparency? Obviously, the 
crypto market has inherent differences such as a global reach; 
75 to 90 percent of the liquidity is offshore; and it runs 24/
7. But here in the United States, how can we entice future 
exchanges to build their presence here in the United States 
versus offshore?
    Ms. Sukumar. Thank you, Congressman. That is a great 
question. The crypto, I think, continues to preoccupy us all, 
partly because we do want that innovation to occur, but I would 
also say to you, innovation isn't innovation if it is breaking 
the rules. So, we have had a question on Russia, and I am 
really thinking, I wake up every morning, and there is a 
headline about crypto platforms. I can't think of any that are 
registered as licensed exchanges, crypto platforms, saying, we 
are not going to follow sanctions dictates. So, I think really 
what would be incredibly helpful in thinking about crypto, 
because crypto is an asset class, is it needs to be traded in a 
way the retail investors in the world--
    Mr. Davidson. Yes. Let me interrupt you there for a second, 
because if you are asking a foreign exchange to do something 
that has Know Your Customer (KYC) provisions, that is a 
different question. If you are asking for something like a node 
to be able to do it, you don't even know the identity of who 
owns which wallet, and frankly, you can't do that and not try 
to kill the entire concept. So, I think there are a lot of 
people who don't really actually understand the space, which is 
a barrier to creating regulatory clarity. I do hope that we can 
have future hearings where we deal with these topics because we 
touch on a lot of topics with--
    Chairman Sherman. The time of the gentleman has expired.
    I now recognize the gentleman from West Virginia, Mr. 
Mooney.
    Mr. Mooney. Thank you, Mr. Chairman. SEC Chairman Gary 
Gensler assumed office on April 17, 2021, so we are approaching 
the 1-year anniversary of Mr. Gensler's tenure. Already, I have 
some concerns about the direction of the Commission under Mr. 
Gensler's leadership. Mr. Piwowar, you spent 5 years on the 
Commission, and you know the way it functions as well as 
anyone. So, Mr. Piwowar, in your testimony today, you wrote at 
length about pilot studies as a tool for the Commission to 
measure and test the impact of changes in policy before 
implementation. Can you further elaborate on the pilot studies 
and how they have helped the Commission avoid bad policy 
changes in the past?
    Mr. Piwowar. Yes, thank you for your question. I am a big 
proponent of pilot studies. At the same time, I recognize there 
are limitations and we need to put some guardrails around them. 
One of the examples of a successful pilot study was the Tick 
Size Pilot program that the SEC did, and also the Reg SHO Pilot 
where it got rid of short sale restrictions.
    The Tick Size Pilot, which they were proponents of for a 
long time, said if we increase the tick size for small cap 
securities, it would improve liquidity. Some people thought 
that it would increase analyst coverage. We did that pilot, and 
it showed that neither one of those happened. It wasn't a 
success in that it wasn't a success because it didn't help 
small cap companies, but it allowed us to sort of say, okay, 
that is not a problem. We can move on and look at other things 
to help improve the liquidity there.
    In terms of limitations, I recognize that pilot studies can 
be costly for market participants to implement, so the SEC 
needs to do a robust cost-benefit analysis to make sure that it 
is proper. On that note, I will note that some pilot studies 
like the Tick Size Pilot were done through an NMS plan, and I 
know that NMS plans are a large part of this hearing. I would 
prefer the pilot studies be done through notice-and-comment 
rulemaking so that everyone has a chance to weigh in and can 
say what they believe in terms of the cost and the benefits of 
any particular pilot program.
    Mr. Mooney. Thank you. I have a general concern about the 
Administration, all levels of government making law, which is 
the rule of Congress, not the Administration. But at least if 
you are going to issue new rules and regulations, I think a 
pilot study and being cautious would make sense.
    Mr. Piwowar. Yes. And if I may, one of the unfortunate 
things that came out of the access fee pilot was challenged in 
court, and the D.C. Circuit said in there that the SEC did not 
have the authority to conduct a pilot study. And I think what 
would be helpful, a great role for this committee, if I may, 
would be to clarify that the Commission does, in fact, have the 
authority to engage in pilot studies, and maybe also put some 
guardrails around that where it should be done through notice-
and-comment rulemaking rather through an NMS plan.
    Mr. Mooney. Thank you. We will look into that. Second 
question, capital formation is a core part of the SEC's three-
part mission if the Commission's current agenda does not 
include any capital formation proposals. So, Mr. Piwowar, can 
you speak to the importance of reducing burdens for companies 
seeking access to capital?
    Mr. Piwowar. Yes. As a matter of fact, next week is the 
10th anniversary of the hugely bipartisan JOBS Act. It was 
probably the most successful piece of bipartisan legislation 
during the Obama Administration. And what we saw there was that 
if you can do some tweaks around the edges, lessening some of 
the burden for companies going public--the IPO on-ramp was 
probably the most successful provision in that legislation--
that works. So, I would encourage this committee and the 
Commission to keep looking at what are some new ideas, 10 years 
later, that we could continue to do while protecting investors, 
but to improve the formation of capital.
    Mr. Mooney. Fair enough. And I will just make some closing 
comments in the minute I have left, but I am concerned that the 
Commission's current leadership seems more interested in 
regulating broadly and asking questions later. Mr. Gensler has 
repeatedly said that digital assets are securities. Imminently, 
for Mr. Gensler, that legal interpretation could give the SEC 
broader authority to regulate the entire industry. On the issue 
of climate disclosure, the SEC has decided to play the role of 
social activist by requiring that Scope 1 and Scope 2 emissions 
be disclosed by all public companies, whether or not those 
emissions are material to investors. So, regardless of whether 
they are sought by the average investor, the SEC has decided 
that public issuers must provide them.
    It is not at all clear how this climate requirement fits 
within the three pillars of the SEC's mission of protecting 
investors; maintaining fair, orderly, and efficient markets; 
and facilitating capital formation. Yet, Mr. Gensler has 
prioritized his agenda item over making any single rule related 
to the capital formation. So, unfortunately, the Commission's 
current leadership is not adhering to the restrained, measured 
approaches that characterize good government, and I wish he 
would look more carefully at your testimony instead of pursuing 
the priorities of climate change activists.
    Thank you, Mr. Chairman. I yield back.
    Chairman Sherman. Those watching the hearing will notice 
that we don't have as many Members as usual. They should be 
aware that there is now a classified briefing regarding Ukraine 
going on, and Members had a tough decision.
    The gentleman from Ohio, Mr. Gonzalez, is now recognized 
for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Mr. Chairman. And thank 
you to our witnesses. Let me start by thanking you and 
Chairwoman Waters for attaching the bipartisan Registration for 
Index-Linked Annuities Act that I introduced with my friend, 
Alma Adams. It is my hope that this committee can advance this 
common-sense legislation in the coming weeks. It has strong 
support from Members on both sides of the aisle. I look forward 
to debating that, hopefully soon.
    Mr. Piwowar, I want to start specifically with you. You 
mentioned the JOBS Act's 10-year anniversary. I know you are 
very familiar with it. I want to give you some time to maybe 
comment on areas where you think we can go further to improve 
that IPO on-ramp, to make sure that there are more companies 
going public and that they can do so in an efficient manner. I 
would love any of your thoughts on that.
    Mr. Piwowar. Sure, I have some. I see Congressman Emmer is 
here. We are going to get into his Venture Exchange Bill a 
little bit later. I think that could be a nice piece of the 
puzzle. What the JOBS Act showed was that we can make some 
differences around the edges. What it also showed was that 
there were a number of provisions in the JOBS Act that a lot of 
people ahead of time ex ante thought were going to be taken up 
and be used, and they weren't. But other ones, we didn't 
realize were going to be as important as they ended up to be. 
So, for example, the ability of companies to do confidential 
filings with the SEC has proven to be a huge success that 
allows companies to go through that process, and if they decide 
not to go through with the offering, it is not like there is 
some sort of stain on the company or whatever.
    Mr. Gonzalez of Ohio. Yes.
    Mr. Piwowar. Biotech companies really like that idea 
because it allows them to keep proprietary information from 
their competitors, but then that information becomes public in 
enough time for investors to move forward. So, just as a 
general matter, I would encourage this subcommittee, and the 
committee at large, and Congress to come up with as many 
different ideas as possible, because we don't know which ones 
are going to be used.
    Now, having said that, I think venture exchanges are one 
potential way to go forward, but there are things you could do 
in that area. The other one is, I think, opening up the 
accredited investor definition to allow more investment in 
private companies is something--
    Mr. Gonzalez of Ohio. I totally agree.
    Mr. Piwowar. --that we could do. And then, just anything in 
the IPO. There are other types of burdens and regulations to 
take a look at. So, 10 years later, are there new things now 
that are burdening companies? There is what is called the, 
``pebbles in the stream,'' analogy in terms of regulatory 
accumulation.
    The Commission does a good job of looking at, on an 
individual basis, cost-benefit analysis, but over time, those 
regulatory burdens can go over time. And they are like, 
``pebbles in a stream,'' where each individual pebble doesn't 
stop the flow of the stream, but cumulatively, they can, and 
you can't look back and say it was any one of those. So, I 
would encourage folks to look back and say, well, what has 
accumulated over the last 10 years that could potentially be 
scaled back for these smaller emerging growth companies.
    Mr. Gonzalez of Ohio. Yes, I think the accredited investor 
rule, in particular, just by definition, shuts out so many 
Americans. And we know that the bulk of the returns or a lot of 
the returns of our fastest-growing companies are now happening 
in private markets. So, we are excluding minorities, and we are 
excluding lower-income retail investors from being able to get 
involved at the ground level at some of these exciting 
companies. I think it is a horrible rule. I would love to see 
bipartisan support around coming up with something more 
sensible. Sure, we have to protect folks, but good God, let's 
give them an opportunity.
    Mr. Piwowar, I am going to ask for your quick thoughts on 
another SEC rule that has been considered, which is to require 
U.S. private companies to disclose more information as if they 
were public, but without any of the benefits of accessing the 
public markets. Do you have any concerns with that approach? Do 
you think it is the right approach? And how do you feel about 
it with respect to capital formation?
    Mr. Piwowar. Yes, I do have concerns. We obviously have a 
regime for public companies and a regime for private companies. 
And I worry about the unintended consequences from these. 
Obviously, if you overburden public companies, you are going to 
have more private companies. And I worry about the fact that 
these companies will just go overseas, and then U.S. investors 
won't have access to the potentially great growing companies 
and the entrepreneurs of the future.
    Mr. Gonzalez of Ohio. I only have 30 seconds left, so I 
don't know if I can get this out, but it was a similar concern 
with the ESG disclosures, and I was talking to a friend of mine 
who works in the investment industry, and he said, look, this 
is a total giveaway to the private equity industry because what 
is going to happen is smaller companies, who aren't going to be 
able to make or don't want to make those disclosures, are going 
to have trouble making those disclosures. It is just going to 
be easier for them to sell. So, we'll see a wave of 
consolidation when I think we should be promoting more 
competition, and more capital formation. Hopefully, we will 
have a hearing on that. Hopefully, we can get Chair Gensler and 
others to come before our committee again.
    With that, I yield back.
    Chairman Sherman. The gentleman yields back.
    Now, I recognize the gentleman from Minnesota, Mr. Emmer.
    Mr. Emmer. Thank you, Chairman Sherman, and Ranking Member 
Huizenga. I was pleasantly surprised and proud to see my bill, 
the Main Street Growth Act, noticed for this hearing. The Main 
Street Growth Act would allow the Securities and Exchange 
Commission to provide for the creation of venture exchanges so 
that small- and medium-cap companies can go public through a 
more streamlined process. This bill passed out of this 
committee unanimously in the 115th Congress, and it passed the 
House as well. In fact, I would like to thank Chairman Sherman, 
Mr. Scott, Mr. Himes, Mr. Foster, Mr. Meeks, Mr. Gottheimer, 
and Mr. Gonzalez on this subcommittee for voting in support of 
this bill, and I hope to have your support again.
    We have a capital formation problem in this country, and 
ultimately the compliance burden borne by government 
overregulation is making the initial public offering process 
unrealistic for a large segment of private American companies. 
This hurts everyday American investors the most, much like Mr. 
Piwowar and Representative Gonzalez were just talking about. 
Small, private companies that need capital are at a 
disadvantage today because the trading and listing environment 
is geared for much larger IPO companies than it was 25 years 
ago. How do we know? The participation in the IPO process has 
significantly declined since the 1990s.
    Let's look at the facts. The number of IPOs declined more 
than 63 percent from the 1990s to the 2000s, and has stayed 
relatively flat up to 2020. At the same time, the United States 
has doubled the regulatory compliance costs the business has to 
take on for going public in a traditional IPO. Just to give you 
an idea, it costs an average of $2.5 million for a company to 
achieve just the initial regulatory compliance for going 
public, and then, it is an additional . $1.5 million on an 
annual basis thereafter. These are SEC estimates.
    In the past 2 years, we have seen a surge in companies 
going public through alternative strategies, like Special 
Purpose Acquisition Companies (SPACs), indicating that the 
traditional IPO process is not feasible for emerging innovative 
companies. The small start-up IPO should not be on the 
superhighway designed for trading Apple and Microsoft. We need 
to move away from the one-size-fits-all SEC regulatory posture 
and allow the market to try new innovative strategies. After 
all, capital formation starts when a company can list its 
shares on a quality electronic venue plugged into the full 
force of America's investment potential.
    I appreciate my colleagues' willingness to advance 
legislation that creates new exchanges tailored to small- and 
medium-cap companies because exchanges are integral in the 
capital formation process. And America's capital markets are 
the envy of the world. The broader discussion of this hearing, 
I worry, centers around making it harder for exchanges to 
operate, which could impose barriers on the new small 
competitors in the venture exchange space, and ultimately make 
our capital markets less competitive and accessible. When we 
set up structures that allow for more companies to go public, 
we give the American people more access to our capital markets. 
We give them more opportunities to build financial wealth.
    Mr. Piwowar, do you believe that my legislation, the Main 
Street Growth Act, can eliminate some of the barriers currently 
deterring small emerging growth companies from going public?
    Mr. Piwowar. Thank you, Congressman. Yes, you pointed out 
the streamlined IPO process, and those are for existing private 
companies that do want to go public. In addition, as you point 
out, it also addresses the fact that the exchanges, the trading 
system is set up for the larger public companies. And, frankly, 
the exchanges don't have the incentive to try to do innovative 
things, like you said, and experiment because of unlisted 
trading privileges. So, in your bill, you would give exclusive 
trading rights to the venture exchange.
    The Commission is looking at that. It is going to look at 
that very, very carefully, and we need to be very careful about 
that. The reason for that is you want to encourage the 
experimentation by the exchanges to compete with one another, 
to make the market more conducive for that. It is my hope that 
would be the case--you mentioned tick sizes and potentially 
doing call markets instead of continuous trading. But there are 
probably some other things the exchanges could do if they were 
granted that exclusivity.
    Mr. Emmer. Great point. And on that note, with the majority 
of American companies searching for alternative avenues from 
the traditional IPO process to form capital, such as SPACs, as 
I referred to earlier, are simply staying private. Do you 
believe that there is a timely need for Congress to pass this 
legislation?
    Mr. Piwowar. In a word, yes. Whatever you can do in 
Congress, and the SEC can do to encourage more companies to go 
public at the appropriate time--you mentioned SPACs, right? 
Another one is direct public listings, and those are instances 
where you have companies that have grown very large in the 
private sector. And the only reason why they are going public 
is to have a liquidity event. They don't even need to raise 
capital at that point, so the more, the better.
    Mr. Emmer. Thank you. I appreciate it. Thank you, Mr. 
Chairman.
    Chairman Sherman. Thank you. I now recognize the gentleman 
from Wisconsin, Mr. Steil.
    Mr. Steil. Thank you very much, Mr. Chairman. We have had a 
really interesting discussion today about the friction between 
exchanges, broker-dealers, investment banks, and asset managers 
on the liability question. And one of the things that I've been 
kind of pondering up here is, have there been any instructive 
kind of global examples that we could look at outside the U.S. 
structure? In many ways, the U.S. capital markets are 
significantly stronger, bigger, and different than the global 
markets, but I'm curious if that gives us any light into this 
conversation, and I will open it up to you, if I can, Ms. 
Greene, for a quick comment on that. And I would like to come 
to you, Ms. Sukumar, as well, if you have a brief comment on 
that.
    Ms. Greene. Sure. When we look at the markets, my 
understanding is, and we can certainly come back to you and 
confirm this, but that the regulatory structure in the U.S. is 
unique in these special privileges that it does provide to the 
exchanges, things like immunity, rules-based liability caps, 
and even on the SEC plans that we see, the exclusion of 
industry members, so clearly things that can be improved here 
in this structure. And I would defer to Nandini on her views on 
how the global markets are structured here.
    Mr. Steil. Thank you for that feedback. Ms. Sukumar, would 
you like to comment?
    Ms. Sukumar. Yes, with pleasure. I would like to start 
perhaps by just saying that across the world, across our 
members, and we have 300-odd, this kind of regulatory immunity 
is the standard model. And why is that? It is because the 
exchange, by nature, the nature of its work, the nature of its 
business, needs to do things, counseling trades, invoking 
volatility mechanisms, all of these kinds of things, and these 
are often unpopular. So, they need to be able to do it. They 
are a neutral, trusted third party that operates markets, so 
they need to be able to have regulatory immunity.
    Mr. Steil. I appreciate that comment. So, you see certain 
consistency in that?
    Ms. Sukumar. Yes, absolutely.
    Mr. Steil. Mr. Piwowar, do you see that as well, or are 
there any comments you'd like to offer on that?
    Mr. Piwowar. No further comments on that.
    Mr. Steil. No further comments. Let me shift gears 
slightly, if I can, because I think we have had interesting 
conversations. I would like to go to you, Mr. Piwowar, if I 
can. You commented in your testimony, and particularly on an 
area that I have an interest in, that banning restricting dual 
class stocks would lead some companies to delist, I think was 
your testimony. I am always concerned about proposals that 
reduce retail investors' options, especially when the purported 
benefits are questioned. And as you may know, the vast majority 
of Americans can't invest in many companies because they are 
not accredited investors under our U.S. rules and our U.S. 
structure.
    So, you have essentially made a large number of promising 
investment opportunities off limits to all but the rich, which 
seems a bit counterintuitive to me. We could get in the weeds 
if we had more time, but would any other bills attached to 
today's hearing lead to a reduction in the number of public 
companies, in your opinion?
    Mr. Piwowar. I think anything that increases the burden on 
being a public company vis-a-vis a private company, creates 
incentives for either private companies to stay private or 
public companies to either go private or to simply move to 
other capital markets, right? What we forget is that there is 
not only a competition between the public markets and the 
private markets here, but Nandini's members are all competing 
to try to get listings around the world, and capital is truly 
global. So, I worry about not only companies going private, but 
then also companies leaving the U.S. markets altogether.
    Mr. Steil. Shifting more specifically to the accredited 
investor, do you think Congress should revisit the accredited 
investor standard?
    Mr. Piwowar. Congress or the SEC has the ability to do it. 
They don't need additional authority. But I think potentially, 
from this committee's perspective, if you could direct the SEC 
to do something with that, to put the focus on it, I think that 
would be very helpful.
    Mr. Steil. Thank you very much. And thank you very much for 
holding today's hearing, Mr. Chairman. I yield back.
    Chairman Sherman. Thank you for your brevity.
    I now recognize the ranking member for a 1-minute closing 
statement.
    Mr. Huizenga. Thank you, Mr. Chairman. And, yes, we are 
missing some briefings, and it is unfortunate that this was 
interrupted with votes. I appreciate the time, especially the 
additional time that all of the panelists have put forward.
    To kind of underscore my point from earlier, with all of 
the things that are going on and Mr. Piwowar has highlighted, 
as we talked about SEC actions, the SEC came out with another 
rulemaking today on SPACs. And it is like we can't even catch 
up to where we currently are or where they currently are. And 
the capacity and bandwidth of the SEC, much less everybody else 
who is being affected by all of these things, is just getting 
stretched to the absolute limits, and we ought to be talking 
about that, not that this isn't an important issue. The 
structure of markets is very important. It is what guarantees 
we have the liquidity and the depth, and makes this the premier 
place to invest in the world. But we are killing the goose that 
lays the golden egg here, in my opinion, and we have to do 
better at tending to that.
    My time has expired. I yield back.
    Chairman Sherman. I recognize myself for a 1-minute closing 
statement, and then the obligatory housekeeping.
    First, Mr. Piwowar, thank you for bringing to our attention 
that we may need legislation to provide for pilot studies by 
the SEC. The Republican side has constantly advocated to get 
poor and middle-class people the opportunity to make high-risk 
investments in low-information securities. I would point out 
that the vast majority of middle-class and poor people's 
investments in the markets is through their interest in pension 
plans, plus, of course, mutual funds and business development 
companies.
    I thank Mr. Davidson, an advocate of cryptocurrency, for 
explaining it to us clearly that you ruin the whole purpose of 
cryptocurrency if you require them to adhere to Anti-Money 
Laundering and Know Your Customer (AML/KYC) rules. After all, 
cryptocurrency literally means, ``hidden money.'' And if it 
can't be hidden money, why would anybody prefer it over the 
currency we have now?
    And finally, Ms. Sukumar, I thank you for bringing to my 
attention the fact that crypto exchanges call themselves 
exchanges, but aren't regulated exchanges. You can't call 
yourself a bank if you are not a bank. I will ask you to 
comment on for that for the record.
    My time has expired. I want to thank our witnesses for 
their testimony today.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 5:09 p.m., the hearing was adjourned.]

                            A P P E N D I X


                             March 30, 2022
                             
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                  [all]