limits us. that is true whether it is domestic help customers -- domestic customers or international customers. >> on the same point about foreign banks, is it true that foreign banks are not required to disclose the name of their customers to u.s. broker- dealers? >> u.s. broker-dealers have an obligation to know their customer and that comes out in a variety of other requirements. what exact requirements those u.s. broker-dealers have to know not just the customer but the customer of the customer is an area that has been somewhat

vague over the years. again, i would point to what the commission has put forward in terms of its rulemaking. it is mostly about what could potentially be used to add greater teeth to those know your customer requirements. it is just a holding entities for the real customer, we try to look through to have the customer of the customer be treated as a customer of the broker-dealer. i think there is more interpretive rule making and enforcement the needs to be done. >> he made reference to certain unfair aspects that exist in some participants. can you expand on what those unfair aspects of our? >> i will do my best. basically, in the united states

equity markets, the vast majority of exchanges observe what is known as price time orders, that is orders that arrive at the exchange at a particular price get first priority to execute against inbound orders based on their arrival time. if your order arrives before mine and somebody wants to trade at that price and actively, they will give you a sell before they give me a cell. because of some technicalities associated with the order protection role -- protection role, the long-term investors who are attempting to trade, very often lose their priority to certain proprietary trading firms that have the ability to

utilize a special kind of order. what happens is that price time priority is violated. you can empirically calculate what price time prairie is worth. it is worth a lot of money. -- price time priority is worth. it is worth a lot of money. there is an incentive for investors to use these techniques to put into the pockets of high frequency traders who actively use this capability. i do not think high-frequency trading firms should be faulted for using that capability because there is no intention nullity behind that. what happens is that when a long-term investor goes to take an offer and post and new bit in price, the exchange will hold up that bed until the price is formed by somebody who has a different type of order. so, the user of the order does not need to know why it is happening.

they just need to know there is a two cent spread and they want a $0.10 spread. the high-frequency trader is acting in the interest of the market and their own interests, but that is not a fair proposition. that is one of the few unfair aspects of market structure that i know about. the other is securing a rebate. the past exchanges a notable exception. many other exchanges get a higher liquid and rebates for frequency traders then smaller traders. i think that violates competitive practice and should be seriously examined. by and large, i do not want to give the impression that the equities market is unfair. it is one of the fairest and most well functioning in the world. the grilling etch -- the glitch in the rule 611 is what causes

exchanges to route orders to other exchanges rather than posting them if they appear to block the the notion of the best better offer. they have the ability to be virtually guaranteed to get order flows from other exchanges. that is why the market centers have proliferated to the extent that they have since that went into effect in 2007. >> thank you. one last question. we asked about an apparent short squeeze by goldman traders using the default swap. if one of your members was to

attempt a short squeeze but was not successful, would you investigate this activity to determine whether it violated your rules, such as the rule about high standards of commercial honor and just and equitable principles of trade? >> absolutely. that is a scenario where i was not privy to the facts before this. there is some question about whether those were securities at the time. that pattern in the current environment, attempted trading practices with the specific manipulative attempt, would be something that would be investigated and we think could lead to further action. >> does anybody want to add anything before we bring our hearing to a close?

>> i would like to just thank the chairman for investigating these very important issues. there was high quality in your opening speech and i want to encourage you to keep up the good work. >> i'm glad i gave you the opportunity to say that. [laughter] anyone else? no, i better quit while i am ahead. there may be some questions that we would like to ask each of you for the record. we may come to you. you are not obligated to answer them but we surely would appreciate the answers. we will stand adjourned, again, with our thanks to each of you, not just for your testimony, and your direct answers, but also for very graciously moving about

to satisfy a very crazy senate schedule. crazy as usual. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> in his weekly white house address, president obama talks about the tax cut compromise reached with republican leaders. the republican from south dakota gives the response. >> right now, there's a big debate taking place in washington that will affect how much you pay in taxes next year. if congress doesn't act, tax rates will automatically go up for just about everyone in our country. typical middle class families would end up paying an extra

$3,000. that's unacceptable to me. not when we know that it's the middle class that was hit the hardest by the recession. and not when we know that taking this money out of the pockets of working people is exactly the wrong thing to do to get our economy growing faster. economists tell us that this tax hike on working families could actually cost us well over a million jobs. that's why i've been fighting so hard to cut middle class taxes. and that's why i brought both democrats and republicans to the table -- to put together a compromise, and work through our differences, so we could get this done. now, the republicans in congress strongly favored permanent tax breaks for the wealthiest taxpayers and the wealthiest estates, most of which would go to millionaires and even billionaires. but i didn't believe that these

tax cuts were worth the cost. they'd add to our deficits without really boosting the economy. i believed that the best way to help the economy, and working families, was to keep middle class tax rates low, and cut taxes for working parents, college students, and small businesses. and i believed that with millions of people looking for jobs, it would be a terrible mistake to end unemployment insurance -- not only for people who are out of work, but for our entire economy. so we hammered out a deal that reflects ideas from both sides. it wasn't easy, and it's by no means perfect. and as with any compromise, everybody had to live with elements they didn't like. but this is a good deal for the american people. the vast majority of the tax cuts in this plan will help the middle class, including a new cut in payroll taxes that will save the average family about $1,000. and as this plan is debated in congress, what i want to make clear is the real difference it will make in people's lives. it's going to make a difference for a single mom with two kids in ohio working as a cashier. with this plan, she'd get a new payroll tax cut and a bigger child tax credit together worth more than $2,300.

it's going to make a difference for a couple in florida earning about $50,000 and trying to put one of their two kids through college. they'd save more than $4,000 because of the middle class tax cuts -- including a $2,500 tax credit to go toward college tuition. and it's going to make an enormous difference for people looking for jobs. for many of these families, emergency unemployment insurance is the last line of defense between hardship and catastrophe. and i'd point out, if these folks stop spending money, it will also hurt businesses, which will hurt hiring, which will damage our recovery. so this plan is going to help millions of families to make ends meet, through tax cuts and unemployment insurance for people who've lost their jobs by no fault of their own. and we included tax relief for businesses, too -- making it easier for them to invest and expand. all told, this will not only directly help families and businesses. by putting more money in people's pockets, and helping companies grow, we're going to see people being able to spend a little more, we're going to spur hiring -- we're going to strengthen our entire economy.

now, i recognize that many of my friends in my own party are uncomfortable with some of what's in this agreement, in particular the temporary tax cuts for the wealthy. and i share their concerns. it's clear that over the long run, if we're serious about balancing the budget, we cannot afford to continue these tax breaks for the wealthiest taxpayers -- especially when we know that cutting the deficit is going to demand sacrifice from everyone. that's the reality. but at the same time, we cannot allow the middle class in this country to be caught in the political crossfire of washington. people want us to find solutions, not score points. and i will not allow middle class families to be treated like pawns on a chessboard. the opportunity for families to send their kids to college hinges on this debate. the ability of parents to put food on the table while looking for a job depends on this debate. and our recovery will be strengthened or weakened based on the choice that now rests with congress.

so i strongly urge members of both parties to pass this plan. and i'm confident that they will do the right thing, strengthening the middle class and our economic recovery. thank you. >> hi, i'm kristi noem, congresswoman-elect from the state of south dakota. i'm honored to represent the people of my state as part of a new majority committed to being humble, more modest, and more focused on addressing the challenges our nation faces. while washington has been busy doing what's best for washington things have gotten worse, not better for families and small businesses. with unemployment still rising, the number one thing our family-owned small businesses need right now is certainty. they need to know that the government is not going to come in and do anything to jeopardize their ability to keep their doors open. so it's certainly encouraging to see that president obama has proposed a potential agreement to stop all the tax hikes

scheduled to take effect on january 1st. failing to stop all the tax hikes would mean taxes would go up for small businesses all across this country, destroying more jobs. the american people want to see all the tax hikes stopped, and they won't tolerate games that might get in the way. they won't put up with any celebrating and back-slapping, either. putting the games aside and doing the right thing for the people shouldn't be the exception it should be the rule. while stopping all the tax hikes would be a good first step, this alone won't eliminate the job- killing uncertainty hanging over our employers and entrepreneurs. that's why we need to focus on cutting spending and reducing the size of government. the american people want us to stop spending dollars we don't have. to do that, we need to start taking a long, hard look at the size and scope of government and find new ways to resist washington's urge to grow and to grow. let's do a better job of following the money and following the money and evaluating the effectiveness of