00:00Senator Britt. Thank you so much Mr. Chairman ranking member and witnesses
00:05for being here today just to comment on what Senator Reid said I think when
00:09we're looking at this kind of sort of uncharted territory what I don't want to
00:13see is us end up in a space where we are like social media right now or other
00:17things where you can't put the genie back in the bottle. Figuring out having
00:21tough conversations putting up guardrails in this space so that we can
00:24allow for innovation to flourish here in America versus other places I think is
00:29critically important and I hope that this body takes that seriously so that we
00:33can continue to lead because we know that this is the race that matters so I'm
00:38eager to work with my colleagues on this and certainly certainly appreciate the
00:42willingness to have the hearing today since this hearing is focused on capital
00:46markets I'm gonna just start there obviously about the strength and
00:51dominance of our US capital markets take any meaningful metrics whether it's size
00:56or a market share liquidity innovation accessibility etc all types of
01:02investors we have far exceeded the remainder of the world which is why it is
01:07so troubling to me during the last administration to see individuals in
01:11financial regulatory positions push policies that in my belief could severely
01:15damage that you look at for instance Chairman Gensler's predictive analysis rule
01:20proposal which just completely undermined it the well-established
01:23technologies used by financial firms for years now contrary to this I want to
01:29point out the Alabama Securities Commission and what they have done being
01:32forward-thinking and supportive of responsible innovation they just
01:37established a financial innovation division in the state to help facilitate the
01:41responsible use of AI particularly for our smallest businesses we know that
01:47industries are using AI for things like underwriting or personal financial
01:52products or to save operational costs that otherwise would be passed down to the
01:57consumer but of course we know they're also risk and we've heard a little bit
02:01about that today the massive surge in financial fraud in forms of AI powered
02:05impersonation schemes and deep fakes or synthetic identities and and I heard the
02:10ranking member obviously mentioned social media would love to partner on that
02:15because we see that getting out of control we see what it's doing to the next
02:18generation and I think we've got to be forward-looking on that and and today is
02:23today is the day but if you're talking about financial fraud consumers lost 12.5
02:29billion dollars in fraud last year that's a 25 percent increase from 2023 and if
02:36you're looking at you know impersonation scams I think it's a 148 percent increase
02:42from April of 2024 to March of 2025 I mean that is frightening and we know that the American
02:51citizen is ultimately literally paying the price so we've got to think through these factors and one of
02:57the things that's been raised to me time and time again is AI powered trading bots in
03:03equity trading and I want to get your thoughts on that because on one hand this type of real market
03:08analysis can mean better liquidity it can mean better price discovery a but on the
03:15other hand there are certainly risk when there is minimal human intervention and so
03:22I'll start dr. Cohen with you or mr. Cohen perhaps you can speak to that I'm
03:27curious of how these AI generated tools can facilitate trading and execution while
03:31preserving you know the incredible integrity of our markets thank you for your
03:37question senator and and I think it builds on on senator Warren's question and there's
03:42a there's a few things to note there one is the firms themselves are they
03:47regulated or not we have to ask ourselves that question if they're not related
03:51firms then they're accessing our markets through regulated firms and those
03:55regulated firms have to have proper controls in place there are market access
03:59rules that exist today that we probably need to build on and make sure that
04:02we're taking into consideration any additional risk posed by AI if the firm
04:07itself is registered then it has accountability for testing any algorithms
04:12they put into the market testing any of the models that they would then present it to
04:17market for trading visit you may recall in 2012 we had the night capital
04:22incident where they had an algorithm that went rogue and as a result of that
04:26there was a lot of rules that were put in place into the markets one was on the
04:30broker dealer side two was on the market access side more generally and three on
04:35the exchange side they asked us to put tools in place to mitigate any of the
04:40risks that would appear in the market and maybe again to the broader question we
04:45then collaborate with other markets and harmonize to make sure that our rule sets
04:50are clear about how we're going to handle that situation and and the last thing we
04:54want to see is a tsunami come through the market where there's a
04:57deconstruction of demand or deconstruction of supply and not know how to handle that
05:02not only at our market but more broadly across the entire market so there's been
05:07work over the last 10 years plus to ensure that we're putting rules in place we're
05:11gonna have to revisit them to make sure that you know belts and braces are there for any
05:16new if you will new new innovation or new risk that will be posed by if you will
05:21agentic AI and especially models that are hard to reproduce the issue so if you
05:28can't reproduce the issue quickly you can't fix the issue so those are the
05:33kinds of things we're going to be thinking about and mr. chairman I'm out of
05:35time but I have some questions for everyone I'll submit those for the record
05:38thank you
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