do you have any comment, chairman schapiro? >> the only thing i might add to the scenario that chairman gensler went through, we also saw because of the skittishness in the markets i think a lot of stop loss orders had been entered by investors hoping to limit their losses. those were run through and as a result, the market continued to drive down. one of the things we want to look at is the use of stop loss orders and market ord is which get you a fast execution but maybe at a terrible price along the lines of the chairman comments at the very beginning. >> yeah. seems there should have been some obligation by the brokers not to execute an order on a $30 stock at a penny. that's just good -- i would think that's a few dush areary relationship. . >> thank you. >> we'll hear from the gentleman from texas. >> thank you, mr. chairman. thank you for having this hearing. before i make a statement and ask some questions, i ask unanimous consent to enter into the record the joint cftc and s.e.c. advisory committee on emerging regulato

asde chairman schapiro pointed. out, circuit breakers including circuit breakers for individual stocks such as those implemented t, for dividuross the market that we would stop loss function of t should be adopted acrossnyse margaret on a product by produco basis. to prevent cascading downward market movements.uld the circuit breakers levels of n 10, 20 and 30% and the duration of the halt and timeless of which triggers are triggered. day at w to determine whetherhi any chans are warranted.d be in a such changes must be a limited across all market venue anyt i thank the committee for the opportunity to share these views and i look forward toimlec i than theyour questions. >> thank you very much. >> now we'll move on to >>estion. i will take my question thank pd first. >> mov mr. noll and mr. leibowitz, mr. ening to your testimony, i'm not sure anything happened on thursday.z, everything worked, is that correct? happene >> oh, i don't think any of useg would say everything worked. wo. i think, in fact what mr. noll w

leibowitz and chairwoman schapiro on how they are operating in the marketplace. i think that the evidence is to they provide the value in this since they provide a deep market and tight spread and reduce cost for all market participants to act. i do think however we need to also look at how they interactwe on this basis providing they provide real liquidity. >> obviously last week they were the cause of the absence of they liquidity but i believe my time is expired. you canabse respond further fore record.ime >> privacy we are not sure that you that is the case. furtheror i think is an overstatement toss say we know the high frequency i trader.s that is an issue we areent to continuing to look at at this point and if years there would be a broad market sell-off with. many market purchase opens on rticipantsh-frequency traders. >> thank you. the gentleman from alabama >> history teachers there been a dramatic falls in the market before we had even an electronic trading and so i don't think the elec culprit's high-frequency trading. so i don't i guess that is part

sec chairman mary schapiro said there was a severe mis-match in liquidity, which was made worse by different trading rules among exchanges. "...possibly exacerbated by the withdrawal of liquidity by electronic market makers and the use of market orders, including automated stop loss market orders..." she said the situation was possibly exacerbated by the withdrawl of liquidity by electronic market makers and the use of market orders, including automated stop loss market orders. at the end of this month, the sec is expected yo approve a new circuit breaker for single stocks. under the new rule, if a single stock in the s&p 500 index drops 10% or more within 5 minutes - trading will be halted for 5 minutes. that's across all exchanges. after a trial period, the s-e-c may decide to expand that rule to all market indexes. from the drop in the euro to banks' toxic assets. we're answering viewer's questions in today's viewer mail segment. but first, one money manager tells where he's finding opportunity in today's market. that's coming up next. woman on p.a.: cassandra mirasson. [radio transmissio

mary schapiro is chair of the securities and exchange commission. >> been two weeks, our staffs have been working around the clock. but there is an extraordinary amount of data that we have to plow through. we had 19 billion shares traded that day and 66 million different trades. 17 million of them alone were between 2:00 and 3:00. so the enormous amount of data coming from multiple sources in different format, captured in different ways is creating an enormous amount of work for us. >> brown: also under the mike scope today the 21,000-- trades cancelled on may 6th. they were determined to be erroneous but kentucky republican jim bunning noted that many traders had to live with their losses. >> i am very concerned that trades were cancelled on an arbitrary basis. very concerned. that is unfair, undermines market discipline, and is nothing more than a bailout of sellers who would have faced losses from their own decisions to use market orders. >> brown: as they pursue the answers to may 6th, the sec and the major exchanges have already announced a new circuit breaker plan. it would ha

i disagree with chairman genslerr and chairman schapiro. i think now we will be forced into taking some of these o.t.c. products we may not have an opportunity to get to our banking in time. i think it is important even though we have never gone to the discount window to borrow, that we still have that ability, and not just under emergency procedures. >> let me put this on the table. there was a presumption a decade ago that security zation -- securitization of mortgages were not dangerous, because after all, who defaults on their mortgage. but the mortgage of 1999 was not the mortgage of 2005. nothing down, no income statement, no fica, and yet we were still treating those and securitizing those. essentially, we are going to ask clearing platforms to take what they are -- that they are clearing today, in fact, if they weren't so risky, you would do it yourself. i think that goes to the point that in rare circumstances, there might be need for support. >> in is no question, sir. it also calls for the clearinghouse to have an over-the-counte

schapiro expressed her frustration at why the fdic could not do more. and the reason they couldn't do they were unable to do to curtail this fiasco because the fed had lobbied to recall glass steagall. and they were the architect of themselves, taking the tools of the toolbox so to speak. and then going to congress and saying that we had no way of stopping this because we didn't have enough tools. i was just wondering -- >> caller, nomi prin. >> you're right. you're pointing to a real disingenuous kind of component on the whole argument on the both sides. glass-steagall was repealed in 1999. that allowed big banks to safe deposit their money and a deal with creating loans and also bet. betting requires speculative trading requires putting capital behind it. you can choose where you can put that capital and you still can. instead of putting capital behind creating or renegotiating new loans with individuals, we want to put capital against betting subprime loans or oil on food on anything else we want to bet on. that's just the choice. we will move it on

the mention that chairman schapiro was talking about, supo trying tuesday that across the securitiestive. >> one last brief question. so if we do determine what happens what are the odds will be something of a proprietaryake nature? >> we plan to make our findingss public both to congress and thid committee. next week will just be annext wl initial finding. if there was a need to talko about individual trading information we would work with would rk witee to do that in the appropriate setting. >> i look forward to letting th they may. where ips fa >> thank you. >> i yield back, mr. chairman.,m >> and now we willr. hear from lucas.man from georgia. >> thank you very much,gia, mr.. mr. chairman. first let me commend you. your presentations certainly give us all confidence that yous have got your hands around theau problem while you are looking for the causes. you have certainly shown thatort you have put certain measures io give confidence to measu investors to keep on investing investor with confidence. it seems to me, though, that what we really have here is a way we are trying to fi

witnesses include mary schapiro. the committee is chaired by illinois senator durvin. -- durbin. this is about 50 minutes. >> the budget request would allow us to better pursue our mission of facilitating capital formation and regulating markets. when i joined the commission, we were emerging from an economic crisis. markets were trying to regain a firm footing. confidence in government generally and the sec specifically was badly shaken. thanks to the song support this -- the strong support this subcommittee has provided, we have made significant changes to virtually every aspect of our operation. we brought in new leadership, streamlined procedures, and reformed operations. we employ new technologies and initiated a significant investor focus rulemaking agenda. we undertook a top to bottom review leading to a restructuring. things limiting internal communication were torn down. a layer of management was eliminated, freeing professionals for front-line duty. we created specialized units that will build a focus to market abuse and structured products. these efforts are paying div

commissioner -- chairman mary schapiro's credit and to her real credit she began a process of studyinghigh-frequency trading last october. i have to say however the pace of the commission's progress has been slow, indeed as many of my colleagues know, i have come to the the floor repeatedly to call for a greater sense of urgency. for example, last year, september 23, i spoke on the senate floor and asked about high-frequency trading strategies. and i quote from that september 23 2009, speech. "to these high-tech practices and the about ballooning daily volumes pose a systemic risk?" question number one. "what do rewe willly know about the cumulative effect of all of these changes on the stability of our capital markets? in order to maximize speefd execution, many sponsored access participants may neglect important pretrade credit and compliance checks that ensure faultial algorithms cannot set out erroneous trades." that was my quote. on november 20, 2009, i wrote a letter to the s.e.c. chair mary schapiro asserting that "transparency, disclosure, and risk compliance requirements ojt t

schapiro is attempting to address this feather, but i'm concerned that this won't be enough, that the basic, if you look back over the years, the focus of he sec, the way it has been overboard by those who, for me, who didn't have the technical knowledge about the markets in the sec, to rely uncover things like the ponzi schemes that are out there. has always been a problem, institutionally. could you comment on that? >> look, let me comment on my perspective on accunting and auditing. our office is approximately 50 people. the vast majority are folks who were prticing either in accounts or as auditors. from thaterspective our office, again, the vast majority are auditors, but to the heart of whether we can be more forward-looking, what market practices are out there, i think we have taken significant steps just as one example, we are hiring the deputy within the office of chief accountant whose job will be to monitor market actices, to look at new standards that have been put in place. >> just very quickly. the sec official in boston who did understand it had been a portfolio manager

there are others like sheila bear in the treasury department' and mary schapiro ad gary gensler and -- back in the clinton administration was dubious about regulating these instruments. he has come back and has been one of the most particulates advocates within the administration for the kind of legislation working its way through congress. host: there is talk about one approaching chairman greenspan and been rejected. there is a piece yes today that i read talking about that she came up with concepts for regulating the derivatives. but she never put forth proposals for this. even that was not received well. guest: there is a pbs frontline documented in -- documentary the details this entire experience. i am sure it is on the website. in early 1998, we saw the market was developing. at that time it was $27 trillion. we saw this market had no transparency. it did not have capital been brought to the table. people were making billions of dollars with commitment and nothing in the bank to back it up. that is like selling a stock to a bond or insurance. everybody has to have capital, but

there are others like sheila bear in the treasury department' and mary schapiro ad gary gensler and -- back in the clinton administration was dubious about regulating these instruments. he has come back and has been one of the most particulates advocates within the administration for the kind of legislation working its way through congress. host: there is talk about one approaching chairman greenspan and been rejected. there is a piece yes today that i read talking about that she came up with concepts for regulating the derivatives. but she never put forth proposals for this. even that was not received well. guest: there is a pbs frontline documented in -- documentary the details this entire experience. i am sure it is on the website. in early 1998, we saw the market was developing. at that time it was $27 trillion. we saw this market had no transparency. it did not have capital been brought to the table. people were making billions of dollars with commitment and nothing in the bank to back it up. that is like selling a stock to a bond or insurance. everybody has to have capital, but

other aspects of the sec the chairman cox described nor when he was there, nor now under chairman schapiro>> if i could, thank you. mr. sirri could you talk a little bit about some technical aspects. i have heard a number of people who have talked to me about a couple of things in a related transparency and disclosure. are there differences in the disclosure requirements for long positions versus short positions and also specifically mutual funds birches-- versus hedge funds and do you think if there are differences, do you think they play a role in some of what has been talked about today with regard to market activities and potential manipulation? >> let me see if i can be helpful. let's start with hedge funds versus mutual funds. the regime for reporting for mutual funds is very particular because mutual funds are regulated investment companies. there is a particular regime for disclosure about those administered by the investment management. you can find out information about every security that they hold, a listing that will be provided periodically. that kind of information is provid

there are others like sheila bear in the treasury department' and mary schapiro ad gary gensler and -ack in the clinton administration was dubious about regulating these instruments. he has come back and has been one of the most particulates advocates within the administration for the kind of legislation working its way through congress. host: there is talk about one approaching chairman greenspan and been rejected. there is a piece yes today that i read talking about that she came up with concepts for regulating the derivatives. but she never put forth proposals for this. even that was not received well. guest: there is a pbs frontline documented in -- documentary the details this entire experience. i am sure it is on the website. in early 1998, we saw the market was developing. at that time it was $27 trillion. we saw this market had no transparency. it did not have capital been brought to the table. people were making billions of dollars with commitment and nothing in the bank to back it up. that is like selling a stock to a bond or insurance. everybody has to have capital, but not

view with respect to other aspects of the sec, nor when he was there, nor now, under chairman mary schapiro. >> could you talk about some technical aspects? are there differences in the disclosure requirements for long positions against short positions, generally speaking, and then, maybe more specifically, mutual funds against hedge funds? if there are differences, do you think a play a role in some of what we have been talking about today with regard to potential manipulation of market activities? >> let me see if i can be helpful. let's start with hedge funds and mutual funds. the regime for reporting mutual funds is very particular, because mutual funds are regulated investment companies. there is a particular regime for disclosure. you can find out information on every security that they hold, a listing will be provided periodically, that kind of information is provided to you. that is because mutual-fund are -- that is because mitchell funds are an individual product -- and mutual funds and individual product. hedge funds are different. the advisor could be registered. there is no reg

schapiro is attempting to address this feather, but i'm concerned that this won't be enough, that theasic, if you look back over the years, the focus of the sec, the way it has been overboard by those who, for me, who didn't have e technal knowledge about the markets in the sec, to really uncover thing like the ponzi schemes that are out there. has always been a problem, institutionally. could you comment on that? >> look, let me comment on my perspective on accounting and auditing. our office is approximately 50 people. the vast majority are folks who were practicing either in accounts or as auditors. from that perspective our office, again, the vast majority are auditors, but to the heart of whether we can be more forward-looking, what market practices are out there, i think we have taken significant steps just as one example, we are hiring the deputy within the office of chief accountant whose job it will be to monitor market practices, to look at new standards that have been put in lace. >> just very quickly. the sec official in boston who did understand it had been a portfolio ma