    [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

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