00:00Why are we so focused on Reg NMS and what's happening here? Sure, Tim and Scarlett, thank you for having
00:05me again. So regulation national market system was passed in 2005. I remember when it happened. So for over 20
00:12years, Reg NMS has been the constitution under which U.S. capital markets and particularly trading has happened. And within
00:21that, rule 611 basically is a rule that is called the order protection rule that basically says that any trade
00:29that's done
00:30on any U.S. equity has to be done to the national bid and ask offer. So basically it means
00:35very simply using a thought about what would be a simple analogy. So imagine if you go to a supermarket,
00:42you want to buy a product. The supermarket has to first check what's the best price of the product on
00:48all supermarkets across the country and cannot offer that at an inferior price. So that's the kind of idea, right?
00:55And that's what we've operated the last 25 years. And it's actually worked pretty well.
00:59Now the markets are very liquid. We have to call it the best environment possible for U.S. investors. So
01:04Chairman Atkins has decided that it's probably the right time to rethink and rescind rule 611, which in my case,
01:12I cover crypto, would have major implications for crypto and tokenized assets. Because rule 611 could be a major stumbling
01:20block for the way that DeFi and tokenized securities operate.
01:23All right. Let's talk about tokenized assets. Tokenized equities. There's been a lot of talk. We talk about it constantly
01:28here on Bloomberg Crypto. And there is some progress that we're seeing there.
01:31But there's still some obstacles that stand in the way to tokenized equities being a real thing, a mainstream thing.
01:38What are those?
01:38Sure, Scott. And so the biggest issue, of course, for tokenized assets and DeFi securities is actually this rule 611.
01:45With that, it's called the NBBO national bid ask offer.
01:48So if that gets rescinded, that's a major impetus. Having said that, there are a number of other obstacles.
01:55Three that I'll mention is one is around corporate actions, one is around custody, and one is around securities title.
02:01The big picture here is that technology, as we've seen in some of the other aspects of our business lives,
02:08is moving much faster than our laws can actually accommodate.
02:11That's basically the bottom line. So if you take custody, for example, for 50 years, you've got custody rules to
02:17protect investor assets that you can have your money with BlackRock, but actually the money is custodied at State Street.
02:25In the decentralized finance space, you're basically looking at collapsing all the intermediaries. So you do not need the number
02:31of intermediaries that we have in traditional finance.
02:34That cleared out model with few intermediaries is incompatible with things like custodial rules. So custody has to catch up
02:42with that. So is with corporate actions. That's basically the big picture here.
02:45Dee, you're here in New York City, usually based in Boston. We always love it when you come to New
02:50York. The reason you're here today is because the Bloomberg Market Structure Conference this afternoon, more than 500 people are
02:55registered for this event.
02:56Is this the hot topic? Is this what you're talking about? Tokenization, the regulatory environment? Is this what you're covering?
03:02Actually, the hot topic today, the theme of today's event is around the importance of the retail investor having driven
03:09the market for the last 10 years.
03:11So even more than that. In fact, when you think about tokenization, crypto prediction markets, it's driven by the retail
03:16investors.
03:17Actually, our theme of a conference today is the major influence of the retail investor, whether it's driving U.S.
03:23equity volume, crypto markets, 24-7 prediction markets.
03:28That's the theme of a conference. But of course, we'll be talking about market structure and tokenization as well.
03:32So the innovation that we're seeing is all catered to getting more retail participation?
03:37It's actually in response to it's not like we want necessarily retail participation.
03:41We just want to catch up. It's already a protective environment for retail investors to operate.
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