Mary Schapiro, SEC Chief: New Congress Won't Slow Reform

CHICAGO (By James B. Kelleher) - The top securities regulator said on Tuesday she doubts her agency's overhaul of the country's financial rules will be affected by the recent U.S. election, where pro-business Republicans seized control of the House of Representatives and made gains in the Senate.

Mary Schapiro said that as long as Dodd-Frank -- the regulatory overhaul passed earlier this year by the outgoing Congress -- remains on the books, her agency would continue to implement it.

"The law's passed," the SEC chairman told reporters after a speech at Northwestern University. "And while it could change, obviously, until it does, we have a responsibility to implement the law as it was passed."

Asked what her agency's top priority was, Schapiro said, "we have a long list." Under Dodd-Frank, the SEC must craft more than 100 rules for the financial industry, including new regulations for the $615 trillion over-the-counter derivatives market and hedge funds.

But she acknowledged that a focus on circuit breakers, that were implemented in the aftermath of the "flash crash", was "timely" because the current program ends December 10.

The circuit breakers give a company's stock a temporary reprieve from trading when it is in free fall.

She said that the circuit breakers had been triggered 15 times since the May 6 "flash crash," a plunge that briefly sent the equities market and related futures into a tailspin.

"We don't have a roadmap yet for you on exactly what we're going to do," she said of the modifications the SEC is mulling to the circuit breaker program.

"We're leaning toward a limit-up, limit-down approach -- but we're not settled yet."

The limit-up, limit-down approach, already used in futures markets, would set temporary price ceilings and floors for single stocks and could slow big price changes without stopping trading.

The SEC also is mulling tighter rules for market makers to ensure they will be able to provide liquidity to markets and avoid a repeat of what happened on May 6 when some market makers and big trading firms stopped trading and there were few buy orders for stocks.

Schapiro also said that an advisory panel set up to investigate the May 6 plunge had raised the idea of requiring algorithmic trading programs -- which have been implicated in the flash crash -- to be tested before they're deployed in the market.

"What's the level of understanding about how algos perform under different market conditions?" she said. "What are the issues with respect to an algo having an unintended effect in the marketplace? ... These are not issues for us so much as it is for the people who create them and introduce and make available to their customers."

(Reporting by James B. Kelleher; editing by Carol Bishopric)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[joeneri]

07:08 PM on 11/11/2010

The last people to engage and participate in 'free markets' before the current crop of Wall Street criminals, were the 16th and 17th century Pirates of the Caribbean.

[zelduh]

04:17 PM on 11/11/2010

I'm keeping my fingers crossed and my eyes wide open.

(And I'm not hopeful.)

[blueken]

04:07 PM on 11/11/2010

Where did all the money go, how about "$615 trillion over-the-counter derivatives market and hedge funds." This is what happens when you have twenty years of wealth going into fewer and fewer hands. After they buy their private jet and mansion they look to invest. The sharks on Wall Street run out of legit investments and poof, magic paper. No hard working stiff has money on the table, just rich guys. Too much money in the hands of a few. Working people might invest in a mutual fund or a house, but the rest gets spent in the real economy.

[Sundialsvc4]

06:55 AM on 11/11/2010

If Ms. Schapiro had any intention whatsoever of enforcing the law of the land, as the Securities and Exchange Act proscribes, then she would have done so long before now.

What she is really saying is, "watch out ... my bribe-price just went way up."

But, "who's afraid of the S - E - C? The S - E - C? The S - E - C? Nyahh, nyahh, nyahh, nyahh, NYAHH nyahh..."

(Chuckle.)

Pathetic ...

"Here's another ten million dollars, lady. Now, shaddup and go back to your office. Oh, here. Make it twenty. I'm feeling generous tonight."

[Grimway]

05:43 AM on 11/11/2010

Calling this crap reform is like saying Health care was about ppl. Stop misusing the deffinition. It is Crap! Use the true word for the true meaning.

[chaupper]

07:22 PM on 11/10/2010

Yo SEC Regulator, if your listening... These bankers have discovered the holy grail algorithm for High Frequency Trading: A simple 12 line program that always wins and never loses.

10 WHILE FEDMONEY>0
20 IF (RAND(0)>0.5)
30 BUY
40 ELSE
50 SELL
60 END
70 IF PROFIT >0
80 COLLECT(BONUS)
90 ELSE
100 COLLECT(BAILOUT)
110 END
120 END

What are you going to do? Bury the investigation file, resign and take early retirement and go work for them?

[Grimway]

05:44 AM on 11/11/2010

Thats funny! true and funny.

[hellboundtrain]

03:48 PM on 11/10/2010

Mary, don't forget that German Chancellor, Angela Merkel's , approval ratings went up to the low 70's % when she banned derivatives, particularly with investors. Wouldn't it be good to gain the investors confidence?

[hellboundtrain]

03:56 PM on 11/10/2010

I had to come back and fix this. It was the fraud of naked shorting she banned.
But, do go check. I too.

[gerald4]

03:17 PM on 11/10/2010

Maybe all of the recently created new financial products, and similar new toxic asset products created by the master financial geniuses that created various derivative and other junk bond type freshly printed paper securities out of the thin air should require a separate application and a separate license granted by the SEC for the creation, existence and/or sale of each and/or any new financial product.

Maybe the SEC should grant license only to those that have intrinsic collateral value, are easily understood, are transparent, forthright, and are not deceptive in their sworn financial statements filed with the SEC.

Maybe the SEC should also require a study to justify the need and define the value of any new derivative type instrument created, similar to an Environmental Impact Statement.

When the financial risks are several layers or completely removed from the title to the actual asset that has some actual collateral value (like a Mortgage, Bond, Property Title, Stock Share, Promissory note), and this instrument is insured from most of the investment risk, how much due diligence will an investor perform before he will commit to purchase, as compared to the investing into a primary mortgage or similar instrument that is collateralized for the event of failure?

If I were driving a car without insurance, I would probably drive more carefully than if I had insurance since my exposure for loss is lessened with insurance coverage.

[Sundialsvc4]

06:57 AM on 11/11/2010

Not so much of a problem if you print cars.

And these guys have chauffeurs to drive them around, anyway.

You don't need a license to print paper like this. It comes in rolls. Nice and soft, you know.

[gerald4]

10:36 AM on 11/11/2010

Good explanation!

I tried to utilize "finanmcial products" in that manner, but they were not as comfortable to use, even if they were less expensive.

[mrspiffy]

12:35 PM on 11/10/2010

While everyone's head is spinning to repeal the Healthcare law...most folks (save for those owned by the big banks) have been MIGHTY quite about FinReg...Hmmmmm
http://yieldpig.blogspot.com/

[verycold]

12:00 PM on 11/10/2010

There has never been a shortage of regulations, but there is a huge shortage of regulators that do their job including this woman.  She got rich, very rich, making grand speeches and not doing her job and of course she was rewarded for that bad behavior. 

The more regulations the more people that get added to do the regulating.  That means government grows.  That means the system gets bogged down even more because the more people employed the more finger point goes on.  Nobody will be held accountable.

The too big to fail is still the elephant in the room.  The Volker rule, while a good try, is watered down and all the loopholes are being ferreted out by the players.  When you get the banksters to agree with policy from Washington, you know that the movers and shakers made some phonecalls and used their clout to water down the bill.  That is what happened here. 

The layers of government are staggering.

[Sundialsvc4]

06:59 AM on 11/11/2010

The layers of government CRIME are even more so.

[Inkosi]

11:21 AM on 11/10/2010

We witnessed the FREE MARKET gone wild with Enron! We witnessed deregulation with the rolling blackouts in California, the looting of retirement accounts of investors and employees. The behavoior of the Enron CEO's is, unfortunatly, typical of all CEO's. Remember - Goldman Sach's - "We are doing God's work". Corporations have no social responsibility. They will do anything for profit. They will sell you poison and market it as healthy if it increases the bottom line... Oh, they already did that with the peanut butter and spinach. they need to be regulated! The too big to fail Banks need to be broken up.

[2garen]

10:58 AM on 11/10/2010

Of course no one in the congress is going to overturn the Dodd Frank overhaul. It is a watered down window dressing piece of legislation that will let the banksters continue to do what they have been doing for the last 10 years.This legislation is for the banksters, by the banskters and just giving them a free ride to rip off the American public again.
Our economy will not get any better until we as a nation demand real laws and real enforcement of those laws.

[hellboundtrain]

10:16 AM on 11/10/2010

Nonsense - as long as tbtf is lurking in the shadows nothing has changed.
If the SEC is to uphold the laws why has nothing been done or said about the fraud naked short selling. Words ring hollow.

[Mr Hankey]

09:32 AM on 11/10/2010

Circuit breakers triggered 15 times since the "fat finger" incident in May this year?- interesting. I wonder which stocks were saved from falling off the cliff.....hmmm

[SharonWantsToTalk]

10:40 AM on 11/10/2010

Agreed. Guess the free market mantra we are bombarded with isn't as solid as they wish we would believe.

[GENERATIONaleX]

11:05 AM on 11/10/2010

The free market gives you the opportunity to succeed OR fail. No economic policy or government intervention can guarantee wealth and prosperity for everyone.

[VinnieTheSnake]

02:55 PM on 11/10/2010

There has been no 'free market' in the United States for at least the past 100 years, maybe longer... I'm old, but not that old.
Free markets do not include subsidies for any businesses. Free markets do not include tax incentives. Free markets do not include interest rates determined by the privately owned Federal Reserve. And free markets do not include rules and regulations regarding who can be hired and fired by businesses.