Securities regulation is under extraordinary stress today. Part of the stress is political, as we debate the right balance among investor protection, the public’s interest in a safe and stable financial system, and the needs of private enterprise for access to capital, as well as the capacity of a government agency like the Securities and Exchange Commission (SEC) to carry out its sensitive mission in a complex economy. Much is asked of regulators, but regulatory budgets and resources are severely crimped. How much securities regulation we want and how much we are willing or able to pay for have become disconnected and heavily partisan.

The stress is also technological, played out through increasingly rapid innova- tion in financial products and financial markets. There are countless examples of technology and innovation upsetting seemingly solid institutional arrange- ments. Markets are increasingly fragmented and often opaque, even as transparency has become the dominant regulatory objective; new entrants and new arrangements appear constantly, putting regulators under relentless pressure to respond. Regulators’ ability to respond well to all this takes us back to the first form of stress, so that the political and technological stresses are inextricably linked.