The Future of Market Structure

Hello, my name is Jared Carney, founder and CEO of Lightdale LLC, and welcome to the Future of Market Structure panel at the 2020 Milken Institute Global Conference. The global conference this year is obviously a bit different in the sense that we're not together physically, but we still count ourselves extremely fortunate in this panel that we are active participants in the marketplace of ideas. This panel is extremely important in the marketplace of ideas because it describes not only the future of market structure but really the interaction and interplay between technology, regulation, market demand, and flexibility — hallmarks we hope, as a former executive of the Milken Institute myself, that are held in high esteem by not only the panelists and viewers of this panel but by all the people who will be watching this panel worldwide. With that, I want to welcome my esteemed fellow panelists to the virtual dais. First, if you're looking at the screen, upper right is Annette Nazareth, partner at Davis Polk & Wardwell and also a former U.S. Securities and Exchange Commission commissioner. Welcome, Annette. I also want to then welcome, lower left, Anya O'Flynn, who is the head of global equity products and research at Capital Markets, zooming in from Canada. Anya, I think that's correct, right? Great to have you, the global flavor. Lower right-hand, you can see Rick McVey. Rick is chairman and CEO of MarketAxess, a $20 billion market cap company that we'll hear more about in terms of innovation in the fixed income market globally, not just in the United States and Western Europe. He also sits on the Securities and Exchange Commission's Fixed Income Structure Advisory Committee, the inaugural such body. Welcome, Rick. Good to see you all. We will have, hopefully, calling in a fourth panelist, Kim from Jefferies, who is managing director and joint head of their municipal finance practice. There are some technical challenges for us all in this, and of course what the COVID-19 pandemic has shown all of us is that we have to maintain extreme flexibility in the face of whatever challenges come our way. And perhaps that's a really good place to start: flexibility. Here in this pandemic, I wonder if you could do us a favor and just give us a quick overview from your perspective, having been a long-time market participant, advisor, and regulator, on the state of health of market structures right now in the United States at least, and whether you think we have seen our market structures behave in a resilient and productive fashion during what has been one of the most extraordinary economic disruptions of our time.

Well, thanks for that question and thanks so much for having me join the panel. Look, I think that the U.S. markets have functioned extraordinarily well. I found it really quite unnerving right after the pandemic hit when there were calls for closing the market. It made absolutely no sense. I mean, markets go up and markets go down, but if markets function, that is one of the most important things in a developed economy. And I believe the markets have functioned extraordinarily well, and perhaps they've been a little more robust than we expected. I don't think anybody would have thought, for instance, that we would see such a phenomenal amount of new people, particularly young people, entering the markets through online brokerage and the like. But the fact of the matter is that when we talk about market structure, a lot of that focus is on the infrastructure, and I think it's worked remarkably well. And I think that there is an important confidence in the markets that has remained throughout this very challenging period.

Rick McVey, one of the paradoxes for many people during this time of market performance, as Annette points out, is that some people feel like it's actually been — and there are indications that it's been — the best of times for some people. We'll get to how it hasn't been the best of times for many other people, but from an innovator's perspective and from somebody who really creates liquidity for enormous swaths of the fixed income market, do you agree? Has...