SEC Chair Gary Gensler on new T+1 settlement cycle, market manipulation and crypto regulation

SEC Chair Gary Gensler on new T+1 settlement cycle, market manipulation and crypto regulation

you’re up here to talk about something that I think we all wish it happened a long time ago which is the which is T1 and I thought you should explain because it means a lot to our viewers without them knowing it look this is a really good thing if you sell your stock on a Monday you will get your cash on a Tuesday that’s that’s the easiest way to think about it and uh in the past just a week or so ago it took two days if you sold your stock on a Monday you got it Wednesday um uh so we worked at the Securities and Exchange Commission on a rule to shorten that settlement cycle because today’s technology allows that but here’s the interesting thing we’re just back to where we were in the 1920s there was actually if you sold your stock on a Monday in the 1920s you got your cash on a Tuesday and because of everything going on they lengthened it all the way to a week and we’ve had to slow walk it back um but everybody worked well together then the stock exchanges the custodians the Clearing Houses and this thing works smoothly Mexico and Canada Argentina Jamaica all joined us um I’m really proud of the work uh of the SEC but it was a collaboration across industry the one thing I worry about is I I’m very close to Nvidia and Nvidia created me uh very easily it created me they created my voice created my face uh basically so are are you human or are you just artificial we wonder sometimes uh David am I human or am I it’s unclear you may be a simulation I’m a dollar sign represented by a man that we know um yes and Mr musk one said I was a simulation so I can’t be sure but what I think is interesting is is that uh you are very worried about Ai and the power of it and uh you I know I would say I I think that artificial intelligence is the most transformative uh technology of our time and I talked about the 1920s then it was the automobile electrification of of the whole economy but now we’re taking human decision making and more and more putting it in the Box in the algorithm so I think that’s transformative it’s a good thing for Capital markets but it’s also raises real risk risks of conflicts what if the algorithm is in essence trading against you uh risk of fraud what if the algorithm is trying to defraud you or mislead you and also risk if we’re all riant on one or two models then the whole Capital markets might basically you know drive off the cliff together and um but you’re aware of that and you can protect us uh Jim fraud is fraud and so somebody shouldn’t be doing fraud but these are more difficult challenges more real challenges and the conflicts are real too okay well let’s say let’s try to figure out what fraud is fraud let’s say I buy a lot of uh contracts use random stock I I buy contracts options on GameStop uh I then publish this just a hypothetical totally hypothetical because I don’t want to I mean I don’t want to really try to hurt anybody why not can’t we just ask about roaring Kitty I mean why would if someone publishes da you you ask about a specific thing I just want to talk to your viewers for a second the SEC runs a civil law enforcement agency we’re a cop on the beat and you would expect us to investigate where we investigate but we don’t talk about it publicly because we follow the facts and the law and only if we think there’s something to bring in front of a court do we then talk about it hypothetical let’s say we’re you’re Paul White You’re My Lord okay I say to you look I want to put up a a a I I want to put up a a cryptogram and it’s of a chair leaning up which we know from video game playing means come on this is the ninth inning get ready uh and we know that I’m a person who happens to like the stock of games up this is the singal come on get ready is this something hypothetically that is that the SEC should worry about so look again it’s not so hypothetical because you’re describing things that are in the public domain and and the public is is uh you know interested in so but generally speaking you have to make sure that you don’t mislead the public and that you don’t in any way do things in the markets that may be manipulative or misleading and so that’s the key thing in our Capital Market no the key thing is if you can cure it with disclosure this is brandise you know if they disclose that this is something that they are called action then you can’t go after them disclosure is one really key part of our Capital markets when you buy the stock of a company you expect that they give you full and fair disclosure that’s by the way not what you’re getting right now in this crypto field so I just you know cautionary tail there that disclosure but disclosure doesn’t necessarily protect a bad actor if they’re manipulating a market you can’t just simply disclose that away particular if you’re misleading the public not cured disclosure not cured very good can I ask a broader question about the public markets because it comes up a lot now in particular sometimes from those who are actually very active in these very large private markets but the idea that our public markets are broken that we have seven companies that represent 30 plus% for example of the market cap uh that we have far fewer public companies than we did 10 or 20 years ago I’m curious how you think about that and whether you agree or disagree with those who would argue that the public markets don’t work the way they should I think I believe deeply in competition and we in the US benefit from very large Capital markets which are five times our banking system 23 trillion dollar banking system 110 plus trillion dollar Capital markets not Europe not Asia that competition but I also believe in competition between public markets and private markets maybe it’s CU my dad had a small business of 30 people maybe it’s CU I did work at Goldman Sachs that when I was there and Jim you were there yeah yeah yeah you were on a different floor no I was on a different Flor I was on a better floor higher Pace don’t lose track here don’t lose track but I really do think that public and private can compete with each other and benefit the American public the key is to make sure that there standard rules that people get the proper disclosure if you’re investing in something that basic bargain they get full and complete information on material aspects of the companies but also that the capital markets like this here yeah are operating free of Fraud and manipulation but what about the private credit Market markets I mean they’ve grown enormously for example there is you could argue a lack of transparency but that may go along with it because you have typically a contract between one borrower and one lender but there what we have is we have competition between private provision of credit yep and the banks and generally that’s a competition that we you know promote now at the same time do we have to make sure the investors in those private credit funds are getting you know the disclosure they need and they’re not getting misled and so forth you have a really active uh following on social media uh when you you posted yesterday you’d be on tons of replies and thanks did it did it help your viewership we’ll see well that’s why we’re talking the two issues that I saw they wanted to learn most about was the timing of the ethereum ETF approval and I think that happened a week and what pressures you felt to to make that happen and then second would be Trading patterns among members of Congress can you talk about the two um we have in the US already a way that you can invest in various uh underlying Securities and underlying Commodities called exchange traded products in January we approved an exchange traded product on bitcoin um and about a week and a half ago similar filings to list on the New York Stock exchange list on NASDAQ and the like exchange traded products on ethereum ethereum had been traded on the Chicago merti Exchange futures for three plus years and the staff looked at that closely and that was approved now the underlying exchange Tred products still need to go through a process to have the disclosure about that and that will take some time but they’re working on that right now how about Congressional uh Trading well look everybody in the markets 330 million Americans should understand that um you have to play by the rules of our Capital markets and one of those things is that when you trade you don’t trade on what’s called inside information information from a company uh that it’s not made disclosed to everybody else but but the same rules apply uh uh to all of us to make sure that we do right by the uh the law so we could conceivably investigate someone for inside information is in Congress well historically that has happened um in the past okay now uh polka dot cordana Cosmos immutable Ronin Bonk osmosis Sushi swap my neighbor Alice have all traded Millions I’m talking about millions of dollars this very morning now do we should we have a sushi swap with maybe an ETF or the proprietary comp just I would think that Bonk is a natural and osmosis these are trading Mill Gary these are millions of dollars these things are traded shouldn’t we have it shouldn’t we have some sort of product let me let me say something more broadly about the crypto markets right now without prejudging anyone these tokens whether they’re the ones Jim listed or other tokens have not given you the disclosures that you not only need to make your investment decisions but also that are required by the law it’s a basic concept in our Securities Market we the SEC tomorrow are turning 90 happy birthday SEC 90 and what president Rosevelt did is he created this commission to oversee that you the investors get disclosure and in the crypto markets they aren’t giving you that disclosure and secondly that exchanges like like here this floor the New York St Stock Exchange get properly regulated to protect against fraud and manipulation and they don’t trade against you and these crypto exchanges Jim are doing things we would never allow this New York Stock Exchange to do our laws don’t allow you to trade against your customers and so you’ve seen the bankruptcies in this space and there are there are some of the most leading lights in this field are either in jail about to go to jail or waiting extradition okay it’s a suboptimal situation for them but I’m looking at the but it’s a suboptimal situation for investors you’re investing in a field right now that you’re not getting the proper disclosure agree there’s Securities for people actually I know I mean their names and there’s nothing you know that too that’s funny yeah I mean some people even in this room have their names detached to a coin for no reason makes no sense I’m sorry you guys have coins no I we don’t there’s a Cramer coin there should be but there isn’t is a crer coin I hope it’s I hope it’s properly registered well I wasn’t going to bring it up cuz now it’s a pump and dump like wow Kramer coin I was not going to bring it up but there you go CH gor wait can I in that we have a little only a little bit of time the FCC versus Ripple Labs R Dave what do you want to ask there you go I got the floor thanks what I want to ask is you know I used to uh text a lot of my sources uh and now they say please don’t text me at that number because we’ve already been find by the SEC it’s the personal you a use of uh personal devices for work many describe it as a money grab it’s tens of millions and fins you guys have leveled at this it’s actually something quite different and it frustrates a lot of people who say come on this is ridiculous how especially during Co how could you have expected us not to use our personal devices for some work Dave it’s very simple for the SEC for your cou in the beat to do its job companies need to keep proper books and records and this goes back to the 1930s this is not a new thing and when Banks or Brokers investment advisors are not keeping those books and Records properly then we can’t we can’t be that proper cop on the beat but what’s more the broker dealer can actually manage its risk it can’t properly manage its risk so even when I was in On The Wall Street and Jim and I were wrote the Gman sacks we knew that they actually recorded the phone calls on the that you know and they they kept the books and records that that’s what this is and we found a lot of the big broker dealers and Banks were not doing that they were doing off Channel Communications and I’ll tell you this when I was at in the served President Obama over at the commodity Futures Trading commission one of the big things that we saw there was manipulation in the foreign currency markets and people were doing it in off Channel Communications

SEC Chair Gary Gensler joins ‘Squawk on the Street’ to discuss the transition to the new ‘T+1’ settlement cycle, state of the AI technology, market regulation, Congressional trading, crypto regulation, and more.