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Now I'll introduce the first session of the day. The Honorable Hester M. Peirce will share an update with us on today's regulatory landscape. Well, I'm sorry Andre Bulovic, our CEO, is unable to join us as planned. I'm excited to moderate this discussion with Commissioner Peirce, who has served as Commissioner since 2018 and has been a steady hand and thoughtful voice in the regulatory policy area. She spent time earlier in her career on staff at the SEC, the Senate Banking Committee, and in private practice. So, she brings a well-rounded perspective to her role. She's currently leading the SEC's crypto task force, which is charting a practical approach to the regulation of crypto assets. So, please welcome the Honorable Hester Peirce.
Welcome. Sit here, right? How are you?
Great to be here. Thanks for having me.
I think the biggest question that everyone's waiting to hear is if you're a golfer or not.
I am not a golfer. I tried golfing one time. I went to the driving range and I realized this is not my sport. So, no, I'm not.
You won't be making it out to the course?
Thank you for joining us today. We really appreciate it. I know at OCC we've met many times at the commission in DC and we were fortunate enough to have you come to the company and speak to our employees. Very well received and appreciated your perspective and insight. I think where I wanted to start today is what I had just talked about with the volatility, the market volumes, all of the throughput whether front office, middle office, back office, and the operational professionals and everything that made this highly volatile intraday volatility, all the volume work smoothly. And from your perspective at your position at the commission, how has that gone? Have you received good reports and also are there things that we can do as an industry that you may be wanting us to tackle or deal with?
Yeah. And before I start, I should say that my views are my own views as a commissioner, not necessarily those of the SEC or my fellow commissioners. But I do think that we all have been really pleased to see that even with the volatility and volume the markets have worked very well and I think it's a testament to the work that the industry has put in over recent years. And so I guess it's just a reminder that it's always good to be prepared for the unexpected. And so continuing to make those investments in technology and personnel and training, I think that all pays off and we've seen that.
Okay, great. Let's move into the options industry right now. The retail investors are really taking an active role with short-dated options, zero DTE, other things. When you consider these trends, what do you see as positives of this increase in retail to the market?
I mean, I think the positives certainly from retail's own perspective is it does give them the opportunity to use these tools to benefit themselves, their own trading strategies. It allows them to protect themselves in ways that they wouldn't if they didn't use these products. So, I think that part is positive. And I think it's always good to have markets that you have more participants in. So I think that's all good. You know, retail investors should be entering eyes wide open and I think that's an important reminder too to keep the education component going. Make sure that people know the tools that they're using. I think that serves everyone better if retail is aware of what the tools are for and how they can use them. But I think in general the trend is good and it suggests too that the markets are serving them well. I mean I think again we have great market structure and great markets on the equity side but also on the option side.
Do you think there's anything we can do further to increase that or take care of any issues that may have come to the commission's attention with retail investors and their ability to understand the products even further?
Well, I mean, I think it's going to be an ongoing thing to try to keep the education going and trying to take advantage of new tools that we have to make that education stick and to help people figure out how to use these products wisely. I think that's just a continuing job. But in general, I think it's again a positive market for retail investors. I'm a big believer that people should be able to make decisions for themselves. So, I'm not a very paternalistic regulator or maternalistic regulator. I think that as long as people have the information to decide, yes, this is for me or no, this is not for me. And you all are working to help them get that base knowledge that they need. I think that's positive.
Great. Well, we know Chairman Atkins just arrived at the SEC. He sends his greetings to everyone. By the way, you both have worked together many years. What's on the agenda, options or not options, that you've talked about and what do you think are priorities in the next year or two that we should be aware of?
Well, I mean, there are a lot of options, no pun intended, for what he could spend his time on. And I think given that he's about two weeks into the job, we can't expect him to have a fully baked agenda, but there certainly are things that I think we all need to be thinking about. Some are sort of hangovers from what happened during the last four years. Part of it is figuring out which of the proposals that are out there we want to move forward with or not. And then I think part of it is also addressing some areas where we didn't spend time that we should have spent time on capital formation. It's one prong of our mission and I think we haven't spent as much time on thinking about a bunch of aspects of that. So whether it's small businesses figuring out better ways for them to access capital, even though we all have been thinking about this for a long time there are I think some fixes that we can make whether it's changing the rules around crowdfunding regulation, whether it's creating a micro offering exemption, those are some things on the very small side but then also thinking about why companies aren't going public. I think we all know that there are a lot of companies, large companies that are deciding either to wait longer or to just never go public and what is behind that. I don't think there's an easy one answer to that, but I think we certainly can do something on the SEC side. Because I think regulation does play a role in why companies don't want to go public. So, trying to figure out how to scale requirements so that companies can work their way into the full panoply of requirements and then trying to make sure that our SEC disclosure rules are geared toward meeting the information needs of investors, not of random third parties who have come upon the SEC disclosure regime and decided it's a good way to get companies to talk about whatever the hottest and most controversial social and political issues of the day are. That's just not an appropriate function for SEC disclosures. And so I think walking back from some of that. So that's on that side. I mean every chairman comes in and is going to look at market structure issues. Equity market structure got a lot of attention during the last two administrations, but there are still some areas that I think could get attention. Chairman Atkins was here as a commissioner when Reg NMS was adopted. And he had some pretty sharp words about it at the time. I think some of what he said in his dissent actually has come to pass. And so looking at things like the order protection rule on the equity side. I think all of you probably are aware that the SEC as a commission spends a lot less time focused on options markets issues as compared to equity markets issues given the importance of those markets. I'm not sure that that's a proper balance and so I'd love to see us spend some more time thinking about options markets issues. Now I don't know that that means we jump right in with a solution because you should identify a problem before you identify solutions. It's good general practice. So maybe starting with something like a roundtable where we could identify issues and then go from there and figuring out whether there are regulatory solutions to those issues or whether the market is solving any problems that we see.
Can you tell us a little bit about his leadership style or management style since you've worked together and what we can expect?
Yeah, I mean I think he's someone who really enjoys both the markets and he and I share a belief that the capital markets are one of the things that makes the American economy as strong as it is. But he also has a real interest in talking to market participants and he enjoys people. So I think he'll be someone who wants to hear from you, whose door is always open. He is not someone who comes with all of the solutions baked out in his head. He wants to get that, it should be a collaborative process involving both people on the SEC staff as well as people outside. He was a fantastic boss and I think that will be very positive for the agency. It's a time of a lot of change in Washington DC as you know and so having someone who's been at the agency and also who has an open and collaborative leadership style I think will be quite helpful.
And with the agency, I know we've read in the press a little bit about the DOGE cuts and other things. Is there any concern with people leaving or do you feel that there's enough knowledge and experience there with the changes?
Well some people did take the fork in the road and decided to leave that way. Some we had a voluntary program and others did decide to take that. The SEC is an agency that has a lot of expertise. Some of it did walk out the door with those programs, but we have a deep bench. I think that we have a lot of people who are willing to step up and fill the gaps that we have. And we have, you know, just really people who are committed to investor protection and market function. And so I think we will do the work with the people that we have and so I'm quite confident that we can figure out how to move people as we need to and we can keep doing the job that we have to do.
And one of the things I know you're a big proponent and leader in the crypto space, managing the crypto task force. Can you tell us a little bit about that, the goals and what you've been hearing and what you plan to do there?
Yes. So, acting Chairman Ueda when he was acting, he set up the crypto task force and the goal of the task force is really to rethink the approach that we've taken to crypto over the last several years. That approach has been using enforcement to write regulatory policy. And that's never a good way to write regulatory policy. I always underscore the fact that we're a regulatory agency with an enforcement arm and the enforcement division has a role to play, but its role should not be spelling out policy in the first place. So the first step of what we needed to do as a task force is really pull back from that and say, 'Okay, let's put some of those resources that we were spending on thinking about bringing enforcement actions into the hard work upfront of thinking through these regulatory issues.' And one of those issues is to just say some of this crypto activity really is not SEC activity. It's pretty typical for regulators to try to grab as much jurisdiction as they can, but I think from a very practical perspective, the capital markets, the securities markets are so important and Congress has given us the authority over those markets. It's really irresponsible of us to try to say, 'Oh, and we want to regulate this thing and this thing and this thing.' Let's just focus on the stuff we have. So, I think part of what the task force has already started to do is to work with staff in the agency to say some of these things really aren't in our space. And then when we decide that something is within our space and we talk to people, we tell people that, we also invite people to come in and work with us to figure out, okay, how do we need to make any adjustments to the rules? If so, what do those adjustments look like? And then laying the groundwork for rulemaking where that's necessary and working with Congress and other agencies as Congress thinks about the longer term legislative framework around the crypto industry. So I think it's been really encouraging so far. I've put out a request for comment with lots of questions. I've gotten a lot of really good feedback and it's people who are not interested in escaping SEC jurisdiction but in working within SEC jurisdiction to figure out how the technology underlying crypto assets or crypto assets themselves will be integrated into the traditional financial markets. There's definitely space too for crypto-native firms, but I think a lot of more traditional market participants are coming in and saying, 'Hey, we have an interest in this or our clients have an interest in this.'
On the crypto side with the legislation that's pending in Congress right now, anything in there that will affect this jurisdiction or are there highlights that you're looking forward to coming out of that legislation?
I mean, I think all of us are looking forward to having a framework that we can point to and more easily figure out whether something's, you know, this question of whether something's a security or not has really been hard for a lot of people. It's been hard for the agency itself. We haven't been able to provide people a clear answer and it's very frustrating for people on the outside who are trying to figure out are they subject to SEC rules or not. So, I think the legislation will provide some clarity there. We can provide some clarity already there and we're trying to do that now. But I think also just if you're going to have a regulator of the crypto spot markets, it's helpful for Congress to identify clearly who that regulator is. In the drafts that we've seen, it's the CFTC. What I would like to get on the SEC side is to the extent entities that we regulate want to have pairs trading for example with a crypto asset and a security, it would be helpful if we got explicit regulatory authority over the crypto side of that transaction. And I think the goal, in my mind, of trying to have a streamlined regulatory framework so that you don't necessarily have to register with the CFTC and the NFA, but you can focus on being registered with the SEC and perhaps FINRA. So, that's one of the things I'm thinking about. I know Congress is working through some really difficult issues. So, we'll see how all this comes out, but we're trying to provide them some technical assistance and think 10 years down the road, what does this system actually look like when it's in place? And, you know, they've been really wonderful to work with.
Great. So, you've been a leader over the years in the effort to ensure CFTC SEC work well together, try to align thought as much as you can. Are you optimistic about the agencies working together with the new leadership in place?
Yeah, I'm very optimistic. Brian Quintenz, who's the nominee for chairman of the CFTC, is someone that I worked with on those issues around SEC CFTC coordination and the swaps and security-based swaps markets. So having him back as chairman I think will be really helpful. He's got a great relationship with Chairman Atkins as well. And then the other commissioners there, we have great relationships. I did an event last week with Commissioner Mersinger over at the CFTC. So I think given that we're in a mode now where neither of the agencies is trying to say this has to all be ours, it's a much easier way to work together. As you all know, I'm sure there are areas over the years where the SEC and CFTC's jurisdictions meet and we don't always agree on who has jurisdiction over what. So there's always progress we can make on that front, but I'm looking forward to this era with the chairmen that we have.
