Opening Statement Before the Technology Advisory Committee

Commissioner Michael V. Dunn

October 12, 2010

I would like to thank Chairman O’Malia for holding this very timely Technology Advisory Committee Meeting today. I would further like to thank those that are on panels today making presentations, and a special thanks to the members of the Technology Advisory Committee who will help the commission as we try to understand the impact technology is having on all types of derivatives trading.

Dodd-Frank mandates the Commission to promulgate rules in the areas of data record keeping and reporting, and real time reporting, as well as oversee swap data repositories and swap execution facilities. All of these duties require the commission to have a greater understanding of, and reliance on technology. Investment in technological hardware and the recruitment and retention of qualified employees to deploy this technology will undoubtedly strain the commission’s budget. It is imperative that we understand how to optimize the scarce resources we have so we aren't left behind by the people we are charged with regulating.

After the Flash Crash of 5/6 and with the new disruptive trading practices and anti-manipulation requirements in Dodd-Frank, the commission must understand the potential negative impact that today’s technology may have in our industry. Weekly we hear concerns about high frequency traders and how they are affecting the markets - positively and negatively. Phrases like “quote stuffing” and “spoofing” are bantered about as ways that algorithmic traders are gaming the market place. Sadly, there is real concern that investors are sitting on the sidelines because they don’t think there is a level playing field. Perhaps my greatest concern is that a runaway algo will trigger a cascade of events by other algo driven traders that will totally collapse the markets.

Many questions need to be answered. Who is responsible for oversight? Who should be privy to what the algorithms are based on? Should they be regulated? How can they be regulated? Should they be allowed at all? Hopefully we will begin addressing these questions today.

Once again, I thank Chairman O’Malia, the staff and all the participants for helping the commission face these most important issues.

Last Updated: October 12, 2010