U.S. Rep. Barry Loudermilk (R-GA) introduced legislation last week to update the definition of a stock exchange under the Securities Exchange Act of 1934 to account for new business models.
The Exchange Regulatory Improvement Act (H.R. 3555) proposes to change the definition to say that a facility of stock exchange does not include businesses that are not “for the purpose of effecting or reporting a transaction on an exchange” for regulatory purposes.
The bill takes into consideration that stock exchanges have evolved since the law was written. Various stock exchanges have recently established subsidiaries involving data management services, regulatory compliance technology, and others.
The legislation would ensure that business activities that are unrelated to effecting or reporting a transaction on an exchange are not subject to regulation as an exchange. However, it would not exempt functions of exchanges that are material to securities trading from Securities and Exchange Commission supervision, such as market data, listing standards, and colocation.
“Regulatory agencies have a tendency to expand their reach into areas they should not be regulating and engage in mission creep, which can stifle innovation,” Loudermilk said. “As a small business owner, we embraced new technology and used it to benefit our customers. Instead of trying to make new ideas fit into old, one-size-fits-all regulations, agencies should adjust to allow business and individuals the opportunity to grow.”
Currently, companies face compliance burdens on parts of their businesses that should not be regulated as exchanges. Loudermilk said his bill would prevent overregulation.
“We need a new, fresh approach, and this bipartisan legislation will go a long way in bringing a 1930s law into the 21st century,” he said.
Co-sponsors of the legislation are Reps. David Scott (D-GA), Randy Hultgren (R-IL), Greg Meeks (D-NY), and Lee Zeldin (R-NY).