Ted Kaufman - United States Senator for Delaware

Kaufman Applauds SEC Chair’s Assertion that Raising Capital, Serving Investors are Most Important Market Functions

Responding to Senate Banking Subcommittee hearing today, Senator also says May 6 plunge underscores call for comprehensive market structure reform

May 20, 2010

WASHINGTON, D.C. — Senator Ted Kaufman (D-DE) issued the following statement in response to a hearing Thursday conducted by Senator Jack Reed (D-RI), Chairman of the Senate Banking Subcommittee for Securities, Insurance, and Investment, on the May 6 market plunge.

“In today’s hearing, SEC Chairman Mary Schapiro stated clearly that our equity markets exist primarily to serve two important functions:  for companies to raise capital and for those Americans who want to invest to help facilitate that function. I could not agree more.  Last October, when I testified before Chairman Reed’s Subcommittee <http://kaufman.senate.gov/press/press_releases/release/?id=d5f50545-be53-4472-8d70-62f0f6d15a9b> on these same topics, I warned: “[R]apid advances in technology, which can produce impressive results, combined with market fragmentation, are moving us from an investor’s market to a trader’s market.”

“While we don’t have all the answers about the causes of the unusual market activity on May 6, I am deeply concerned that for our markets to be strong and credible, they must be a level playing field for all investors and serve the needs of companies seeking to raise capital in order to innovate, create jobs and grow.   I fear the market plunge on May 6 is a manifestation of a market structure that has moved away from those central functions and now favors speed over substance and black-box rapid-fire algorithms employed by short term traders over the interests of long-term investors.  Our market structure might be broken, and as I urged on August 21 <http://kaufman.senate.gov/imo/media/doc/SEC.08.21.091.pdf> , a ground-up review by the SEC of all ideas to fix it is needed urgently, especially if that means overcoming the interests of entrenched financial players that benefit from the current design.  America cannot succeed without strong and credible capital markets that fulfill their central functions.

“Given the acknowledged deficiencies in the SEC’s data collection system, it is not altogether surprising that – even after today’s hearing and the joint SEC/CFTC report issued on Tuesday – we still do not know what caused the May 6 flash crash.  That is why the SEC must quickly implement the ‘large trader’ tagging rule, proposed on April 14, as well as the proposed consolidated audit trail that the Commission will consider next week.”

Read Kaufman’s August 21, 2009 letter to SEC Chairman Schapiro here <http://kaufman.senate.gov/imo/media/doc/SEC.08.21.091.pdf> .

Read Kaufman’s testimony from the October 28, 2009 Banking Subcommittee hearing on market structure here <http://kaufman.senate.gov/press/press_releases/release/?id=7f8d4089-b451-4534-9320-672761b755f4> .

Read Kaufman’s November 20, 2009 letter to SEC Chairman Schapiro, written in response to October 28 subcommittee hearing here <http://kaufman.senate.gov/imo/media/doc/Schapiro%20Mary%2011%2020%20091.pdf> .

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