In order to address the pressing market structure issues we face today, it’s important to understand not just where we are now, but also how we got here. Over the past several decades, our capital markets have undergone a series of extraordinary changes. Some of those changes have come about organically, that is, as the result of market participants innovating with new products and ideas. Other changes, however — many others — have been imposed by the SEC and Congress. Or, they were developed by market participants in order to respond to and comply with new and constantly changing laws and regulations. In short, understanding the structure of our capital markets today requires acknowledging that in recent years, changes to the structure of our equities markets have been driven as much, if not more by legislative and regulatory action than by the private sector.

As you well know, this wasn’t always the case. From the earliest days of our nation to the Great Depression, self-regulation, rather than government regulation, played the primary role in growing and shaping the markets, with little or no federal regulation and limited state regulation. Indeed, the origins of U.S. capital market self-regulation can be traced back a long time ago but not so far away — about a ten-minute walk from here to 68 Wall Street, where in 1792, 24 traders signed the famous Buttonwood Agreement. In the Agreement, those traders pledged to conduct their stock trading directly with one another, rather than through an auctioneer, and to limit their commissions to one quarter of a percent. Within three decades of those humble beginnings, the organization that grew out of the Buttonwood Agreement — then referred to as the New York Stock & Exchange Board — had in place a constitution and detailed by-laws. Our capital markets began, and then grew and flourished, on the back of self-regulation.

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