SEC Chair Clayton Says Securities Markets Functioning Well Despite Volatility

In an address to the Financial Stability Oversight Council, SEC Chair Jay Clayton provided an overview of the operations of securities markets since the start of the pandemic.

Mr. Clayton reported that, despite high volatility and very significant trading volume, market infrastructure has functioned well. He said that the SEC has not seen any "systemically adverse operational issues with respect to [the] key securities market infrastructure."

Mr. Clayton reported that much of the SEC's activity in March had been geared towards granting targeted regulatory relief, particularly in connection with health and safety measures that would allow market participants to continue to focus on matters such as transaction execution and investor protection. However, Mr. Clayton stated, much of the relief issued in March was no longer necessary and remained appropriate only in some cases (e.g., "accommodating telephonic meetings and other remote activities").

Mr. Clayton also highlighted the work of the cross-divisional COVID-19 Market Monitoring Group formalized by the SEC in April. In particular, he noted two initiatives by the group: (i) assessing the potential risks and effects of various investment strategies that are "procyclical" as a result of being "subject to mechanistic rules, guidelines or restrictions on holdings of assets" (e.g., investment strategies referencing credit ratings and downgrades), and (ii) analyzing whether there were "significant channels of risk exposure and risk transfer in the financial system" that could subject markets to vulnerability.

Mr. Clayton stated that an analysis based on the COVID-19 Market Monitoring Group's findings is forthcoming.