SEC Chair Shapiro gave testimony in Congressional hearing SEC Oversight: Current State and Agenda
Parsing over the testimony, which EP readers should also scan via the link, some interesting sections.
Firstly it appears the SEC will monitor credit ratings agencies, and appear to be going after paid for ratings requests, which was at the heart of financial crisis. This Friday Night Video has some detailed video interviews, clips on credit ratings agencies and how they enabled the financial meltdown.
require NRSROs to disclose ratings history information for 100% of all issuer-paid credit ratings.12 Finally, on the same date, the Commission re-proposed an amendment that would prohibit an NRSRO from issuing a rating for a structured finance product paid for by the product's issuer, sponsor, or underwriter unless the information about the product provided to the NRSRO is made available to other NRSROs
Ritzholtz, in SEC’s Shapiro: Ratings Agencies Need Supervision says in addition monitoring what credit rating agencies are doing, the field plain needs to be opened up to competition and not requiring special SEC status.
From the testimony is also appears the SEC is way behind the 8 ball in using software algorithms, data mining, to monitor electronic trading systems and various proprietary software systems. Frankly one of the problems with getting good geeks involved in these areas is a security clearance. Based on arcane metrics and simply taking forever to complete the process, plus the cost involved, this is one major bureaucratic bottleneck in terms of obtaining the expertise needed.
We are also working to improve systems for surveillance, risk-based targeting and use of data. OCIE staff is working with the Office of Risk Assessment and other offices and divisions to identify the key data points that would improve surveillance and risk-targeting of firms and issues for examination, as well as to strengthen the use of data by examination staff, including developing a platform for delivery of analytics to examiners in the field. In addition, we are seeking to develop systems to mine data from multiple sources (including examinations, investigations, filings and tips), link the data together, and combine it with data sources from outside the SEC to assist us in determining which firms or practices raise red flags and require greater scrutiny.
Ever heard of Dark Pools? This is one of the issues associated with the Goldman Sachs' Stolen Software. Zero Hedge has been covering extensively the shady dealings of dark pools and very interesting events with electronic trading systems.
Below is Shapiro's testimony:
Our staff has begun exploring transparency issues related to markets known as dark pools. Dark pools are defined in various ways, but generally refer to automated trading systems that do not display quotes in the public quote stream. We have heard concerns that dark pools may lead to a lack of transparency, may result in the development of significant private markets that exclude public investors (through the use of "indications-of-interest" that function similar to public quotes except with implicit pricing), and may potentially impair the public price discovery function if they divert a significant amount of marketable order flow away from the more traditional and transparent markets. Given the potential risks posed by dark pools, the Commission will take a serious look at what regulatory actions may be warranted to respond to the potential investor protection and market integrity concerns that dark pools may raise.
Hmmmm, who thinks the SEC needs to get a good team of geeks, i.e. financial software architects, networking engineers, mathematicians, folks who can really monitor what is going on with engineering systems. Are we finally going to see a realization that regulation needs to be implemented all the way down to the software, mathematical models, the technology itself?