Hybrid Hearing -Oversight of America's Stock Exchanges: Examining Their Role in.. (EventID=114563)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Wednesday, March 30, 2022, at 2:00 p.m. (ET) Investor Protection, Entrepreneurship, and Capital Markets Subcommittee Chairman Sherman and Ranking Member Huizenga will host a virtual hearing entitled, “Oversight of America's Stock Exchanges: Examining Their Role in Our Economy." ___________________________________ Witnesses for this one-panel hearing will be: • Robert J. Jackson Jr., Professor of Law, New York University School of Law; former Commissioner, SEC; • Michael S. Piwowar, Executive Director, Milken Institute Center for Financial Markets; former Commissioner and Acting Chairman, SEC; • Ellen Greene, Managing Director, SIFMA • Nandini Sukumar, CEO, The World Federation of Exchanges • Manisha Kimmel, Chief Policy Officer, MayStreet ___________________________________ Overview In the United States, there are 4,147 domestic companies and 2,404 exchange traded funds (ETFs) listed for trading on U.S. stock exchanges, representing approximately $47 trillion in total market capitalization. Trades in these securities are carried out across a variety of different trading venues including broker-dealers that internalize orders and alternative trading systems (ATS) and National Stock Exchanges (NSE). There are a total of 24 stock exchanges in the U.S. registered with the Securities and Exchange Commission (SEC) as NSEs under section 6(a) of the Securities Exchange Act of 1933. Among these 24 exchanges, 17 are owned by three companies:the Intercontinental Exchange (ICE), Nasdaq,Inc.; and Cboe Global Markets, Inc. On average, more than 52 percent of daily equity trading activity takes place on these 17 exchanges. Nasdaq and New York Stock Exchange (NYSE, owned by ICE) are the two primary “listings exchanges” in the U.S. through which companies conduct new public stock offerings. Prior to 2010, NYSE, Nasdaq, and Cboe were each member-owned and not-for-profit entities. Between 2000 and 2010 all three exchanges carried out the process of “demutualization” to become for-profit, publicly traded companies. In a 2005 concept release issued by the SEC soliciting public comment on the potential demutualization of Nasdaq and the NYSE, the SEC noted that “SRO demutualization raises the concern that the profit motive of a shareholder-owned SRO could detract from proper selfregulation.” Exchanges as Self-Regulatory Organizations Under Section 3(a)(26) of the Exchange Act, each NSE registered with the SEC is granted selfregulatory organization (SRO) status. As an SRO, exchanges have the responsibility of enforcing federal securities laws and putting in place standards to promote “just and equitable principles of trade,” and the exchanges also are required to have listing standards that would apply to any issuer that decides to list or maintain the listing of their securities on a particular exchange. Enforcement activities carried out by exchanges include trading halts and suspensions, and the delisting of a company’s stock if that company fails to follow listing (or other regulatory) requirements. Over the past several decades, a series of court rulings have established that exchanges, premised on their status as SROs, are shielded “from liability for any action that is ‘incident to’ or ‘consistent with’ an exchange’s quasi-governmental power.” In 2012, while carrying out the initial public offering (IPO) for Facebook, technological problems in Nasdaq systems led to delays in the initial opening of the stock. As a result of this disruption in trading, Facebook investors reportedly experienced an estimated $200 - $350 million in losses. Following these disruptions, a group of Facebook investors brought a class action lawsuit against Nasdaq.11 In response to the suit, Nasdaq argued that it was immune from liability on the basis that it is an SRO. The exchange later agreed to a $26.5 million settlement with the plaintiffs. Exchange Liability Limits Section 19(b)(1) of the Securities Exchange Act of 1934 grants NSEs, the authority to set their own rules as SROs. These rules are required to be filed with the SEC for public consideration and pertain to a wide variety of issues related to an exchange’s operations. This includes the fees that are charged by the exchanges for market data that they provide. Section 916 of the Dodd-Frank Act established new requirements that the SEC must follow in its consideration of new rules filed by each exchange. Among the provisions of section 916 is a requirement that each new rule filed by an exchange becomes effective upon filing unless the SEC objects. 16 The SEC receives hundreds of new rule filings... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=409152