February 23, 2016
Good morning. It’s a pleasure to be here today for a meeting of the reconstituted Technology Advisory Committee. The Committee clearly has its work cut out for it today so I’ll be brief. As I have said before, changing technology is causing a sea change in how our markets operate, and that’s particularly true of the three issues the Committee will be discussing. I have already spoken several times about the remarkable changes being wrought by the rise of algorithmic trading and the positive impact that I believe our proposed Regulation on Automated Trading will have on market stability. However, this regulation is to me only a first cut. If our new rule is failing to address aspects of algorithmic trading that pose systemic risks or pose undue risks to ordinary investors, I am absolutely willing to take additional steps to craft additional, appropriate regulations on this nascent technology. In that regard, I am very much looking forward to the Committee’s thoughts on our proposal, including whether we have over-reached or even under-reached.
The second topic before us today, swap data standardization and harmonization, may be a less heralded change than algorithmic trading, but I believe it is no less important. Our new rules aimed at regulating the swaps market have, I believe, substantially increased systemic stability and reduced the risk of major market events. But our rules cannot work without accurate data, and to have workable data requires robust, widely-accepted data standards. Our staff has made great strides in the last few years toward standardizing the most important aspects of data, but more work remains. And until all our key data is standardized and easily usable for analytics and surveillance, we cannot say that the Dodd-Frank regime is complete.
Finally, what can I say about the blockchain that has not already been said; I am fairly confident that the vast majority of press covering today’s event have spent significant time discussing or reporting some aspect of this new innovation, from crypto-currencies’ value swings to legions of bitcoin miners, from blockchain cybersecurity developments to the technology’s myriad early adopters. This technology, even more nascent than algorithmic trading, carries with it tremendous potential for electronic trading and electronic commerce more broadly. Yet, before we can make use of this technology, we need to understand it. Not one, from industry to regulators to consumers, is served if we run head-long toward adopting a new technology that we all do not understand. I therefore hope that today’s discussion on the blockchain’s ledger technology, its public data file of all the transactions, can be safely distributed to the derivatives markets. Now, to date myself, I graduated from law school before Apple introduced the Mac, so I’ve been a securities lawyer in the pre-digital world. I’ve been following news about the blockchain and crypto-currencies generally, but like many people in the general public, I’m still learning. So I look forward to the discussion, but want to urge everyone to try and make sure we don’t skip over some baseline facts as we delve into this issue. For those of you who are experts, who perhaps spend hours in the bitcoin sub-forum on Reddit or elsewhere on the Internet, be patient with the rest of us. Thank you.
Last Updated: February 23, 2016