SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION

STATEMENT OF PROGRAM SERVICE ACCOMPLISHMENTS CONTINUED DEVELOPMENT AND MAINTENANCE OF BEST PRACTICES THAT ARE CONDUCIVE TO EFFICIENT CONDUCT OF THE BUSINESS AND MEMBERS OF THE ORGANIZATION: BUSINESS CONTINUITY PLANNING: WWW.SIFMA.ORG/BCP THE FINANCIAL SERVICES SECTOR IS IDENTIFIED AS CRITICAL INFRASTRUCTURE BY THE U.S. DEPARTMENT OF HOMELAND SECURITY. SIFMA AND ITS MEMBER FIRMS ARE DEDICATED TO PREPARING FOR THE RISK OF POTENTIAL DISRUPTIONS AT BOTH THE FIRM AND BROADER INDUSTRY LEVELS. SIFMA PLAYS A KEY ROLE IN COORDINATING THE INDUSTRY'S RESPONSE TO INCIDENTS THAT CAN INTERRUPT BUSINESS AND MARKET FUNCTIONS AND WORKS TO SUPPORT FIRM-LEVEL BCP PLANNING AS WELL. INDUSTRY-WIDE BUSINESS CONTINUITY TEST: WWW.SIFMA.ORG/BCP-TEST THE INDUSTRY-WIDE BUSINESS CONTINUITY TEST IS A CRITICAL EXERCISE THAT HIGHLIGHTS OUR INDUSTRY'S ABILITY TO OPERATE THROUGH A SIGNIFICANT EMERGENCY USING BACKUP SITES, RECOVERY FACILITIES AND BACKUP COMMUNICATIONS CAPABILITIES ACROSS THE INDUSTRY. THE TEST IS SUPPORTED BY ALL MAJOR EXCHANGES, MARKETS AND INDUSTRY UTILITIES. IT INVOLVES TEST TRANSACTIONS FOR COMMERCIAL PAPER, EQUITIES, OPTIONS, FUTURES, FIXED INCOME, SETTLEMENT, PAYMENTS, TREASURY AUCTIONS AND MARKET DATA. SIFMA ALSO FACILITATES A COORDINATED REG SCI TESTING PROGRAM WHICH IS COMPLETED IN PARALLEL WITH THE SIFMA INDUSTRY TEST. THE TEST OCCURS ON THE SAME DAY AS FUTURES MARKET TESTING COORDINATED BY THE FUTURES INDUSTRY ASSOCIATION (FIA), AND ON ALTERNATE YEARS WITH CANADIAN MARKET PARTICIPANT TEST THROUGH THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA (IIROC). EMERGENCY CRISIS MANAGEMENT COMMAND CENTER: WWW.SIFMA.ORG/EMERGENCY IN THE EVENT OF AN INDUSTRY-WIDE INCIDENT, SIFMA CONVENES MARKET PARTICIPANTS; ISSUES MARKET CLOSE RECOMMENDATIONS; AND COORDINATES WITH MARKET INFRASTRUCTURE PROVIDERS, REGULATORS AND EMERGENCY PERSONNEL INCLUDING THE U.S. DEPARTMENT OF THE TREASURY, U.S. DEPARTMENT OF HOMELAND SECURITY, NEW YORK CITY OFFICE OF EMERGENCY MANAGEMENT, LAW ENFORCEMENT AND OTHER OFFICIAL SECTOR PARTICIPANTS. SIFMA ORGANIZES MARKET RESPONSE COMMITTEES FOR THE FIXED INCOME AND EQUITY MARKETS TO DELIVER AN INDUSTRY PERSPECTIVE IN THE EVENT OF DISRUPTIONS TO MARKET INFRASTRUCTURE WHICH MAY MAKE UNSCHEDULED MARKET CLOSES OR CHANGES TO SETTLEMENT CONVENTION NECESSARY. THE COMMITTEES HAVE DEVELOPED PRINCIPLES AND OBJECTIVE DECISION MAKING PROCESSES THAT RECOGNIZE THE SIGNIFICANT IMPROVEMENTS THE INDUSTRY HAS MADE WITH RESPECT TO BUSINESS CONTINUITY AND THE EXPECTATIONS OF REGULATORS. THESE PRINCIPLES ALSO REFLECT EXPECTATIONS FOR STRONG RESILIENCY PLANS OF CRITICAL FINANCIAL MARKET INFRASTRUCTURE AND FINANCIAL INSTITUTIONS. FOR FIXED INCOME, THE COMMITTEE HAS DEVELOPED PROCEDURES TO DETERMINE IF IT IS NECESSARY FOR SIFMA TO RECOMMEND AN UNSCHEDULED CLOSE IN U.S. FIXED INCOME MARKETS. CYBERSECURITY: WWW.SIFMA.ORG/CYBERSECURITY CYBERATTACKS HAVE BECOME BOLDER AND THE THREAT HIGHER. HOWEVER, INDUSTRY-WIDE EFFORTS OVER THE LAST DECADE HAVE ALSO EVOLVED AND GROWN TO BUILD EFFECTIVE CYBER DEFENSES. SIFMA IS ACTIVELY ENGAGED IN COORDINATING THE EFFORT TO SUPPORT A SAFE, SECURE INFORMATION INFRASTRUCTURE, WITH CYBERSECURITY RESOURCES INCLUDING BEST PRACTICES FOR INSIDER THREATS, DATA PROTECTION PRINCIPLES, FRAMEWORKS FOR PENETRATION TESTING AND MORE THAT PROVIDE SECURITY OF CUSTOMER INFORMATION AND EFFICIENT, RELIABLE EXECUTION OF TRANSACTIONS. WE CONTINUALLY WORK WITH INDUSTRY AND GOVERNMENT LEADERS TO IDENTIFY AND COMMUNICATE CYBERSECURITY BEST PRACTICES FOR FIRMS OF ALL SIZES AND CAPABILITIES AND EDUCATE THE INDUSTRY ON EVOLVING THREATS AND APPROPRIATE RESPONSES. SIFMA'S CYBER-RESILIENCY EFFORTS SEEK TO: - PROMOTE ENHANCED REGULATORY HARMONIZATION TO ENCOURAGE A MORE EFFECTIVE ALLOCATION OF CYBER RESOURCES; - PROMOTE A ROBUST INDUSTRY-GOVERNMENT PARTNERSHIP GROUNDED IN INFORMATION SHARING; - DESIGN EXERCISES AND INDUSTRY TESTS TO IMPROVE PROTOCOLS FOR INCIDENT PREPAREDNESS, RESPONSE AND RECOVERY; AND - USE THE LESSONS LEARNED TO REFINE INDUSTRY BEST PRACTICES, INCLUDING FOR MANAGING INSIDER THREATS, THIRD PARTY RISK; PENETRATION TESTING AND DATA SECURITY, INCLUDING SECURE DATA STORAGE AND RECOVERY. SHORTENED SETTLEMENT CYCLE: MARKET RESILIENCY IS A TOP PRIORITY FOR SIFMA AND ITS MEMBERS. ENHANCING OUR SECURITIES SETTLEMENT PROCESS IS CRITICAL TO THE CONTINUED RESILIENCY OF OUR MARKETS AND MARKET OPERATIONS. THE T+1 SETTLEMENT CYCLE FOR CORPORATE BONDS, MUNICIPAL BONDS, AND EQUITIES TRANSACTIONS IN THE U.S. IS NOW IN PLACE. THE FINANCIAL INDUSTRY TRANSITIONED TO A T+1 SETTLEMENT CYCLE IN THE UNITED STATES ON TUESDAY, MAY 28, 2024, AND IN CANADA ON MONDAY, MAY 27, 2024. THERE ARE MANY MOVING PIECES AND MANY OPERATIONS PROFESSIONALS INVOLVED IN THIS TRANSITION.

STATEMENT OF PROGRAM SERVICE ACCOMPLISHMENTS ADVOCACY: ADVOCACY FOR ISSUES OF IMPORTANCE TO ITS MEMBERS: SIFMA BRINGS TOGETHER THE SHARED INTERESTS OF HUNDREDS OF BROKER-DEALERS, BANKS AND ASSET MANAGERS. WE ADVOCATE IN SUPPORT OF EFFECTIVE AND RESILIENT CAPITAL MARKETS. SIFMA, ON BEHALF OF THE FINANCIAL SERVICES INDUSTRY, ENGAGES WITH POLICYMAKERS AND REGULATORS ON A STATE, FEDERAL AND GLOBAL LEVEL THROUGH COMMENT LETTERS, TESTIMONY, STUDIES AND MORE. SIFMA'S GOAL IS TO ENSURE REGULATION IS EFFECTIVE, BALANCED AND CONSISTENT WITH ITS INTENDED PURPOSE, APPROPRIATELY COORDINATED WITH OTHER REGULATORS AND REGULATORY REGIMES, AND AVOIDS CONSTRAINING CAPITAL FORMATION AND CREDIT AVAILABILITY, OR OTHERWISE IMPEDING THE FUNCTIONING OF THE MARKETS AND THE INDIVIDUALS THEY SERVE. TREASURY CLEARING: WWW.SIFMA.ORG/EXPLORE-ISSUES/TREASURY-CLEARING THE U.S. TREASURY MARKET IS A BEDROCK OF THE GLOBAL FINANCIAL SYSTEM. TODAY, THERE ARE $28 TRILLION OF TREASURY SECURITIES OUTSTANDING. AN AVERAGE OF OVER $910 BILLION IS TRADED EVERY DAY. NEW RULES FROM THE U.S. SECURITIES EXCHANGE COMMISSION (SEC), FINALIZED IN DECEMBER 2023, WILL REQUIRE MOST MARKET PARTICIPANTS TO CENTRALLY CLEAR CASH AND REPO U.S. TREASURIES. THE RULE CHANGE TRIGGERS A SIGNIFICANT CHANGE IN U.S. TREASURY MARKET STRUCTURE AND WILL HAVE MATERIAL IMPACTS TO MARKET PARTICIPANTS INCLUDING BROKER-DEALERS, INSTITUTIONAL INVESTORS, INTERDEALER BROKERS, PRINCIPAL TRADING FIRMS, AND COVERED CLEARING AGENCIES. TREASURY CASH CLEARING IS REQUIRED TO GO INTO EFFECT BY THE END OF 2025, AND REPO CLEARING IS REQUIRED TO GO INTO EFFECT BY JUNE 30, 2026. THE RULE'S TIMELINE FOR IMPLEMENTATION IS AGGRESSIVE AND, AS WE NEAR THE FIRST DEADLINE, THERE ARE SEVERAL SIGNIFICANT OPEN QUESTIONS REQUIRING FORMAL GUIDANCE FROM REGULATORS AND OTHER MARKET PARTICIPANTS TO ENSURE A SMOOTH TRANSITION TO AVOID UNNECESSARY DISRUPTION IN THE TREASURY MARKET. ON BEHALF OF OUR MEMBERS, SIFMA IS WORKING TO ADVANCE MULTIPLE WORKSTREAMS AND SHORT-TERM DELIVERABLES THAT WILL SET THE STAGE FOR LONG-TERM IMPLEMENTATION. THESE INCLUDE DEVELOPMENT OF MARKET STANDARD DOCUMENTATION, CONSIDERATIONS FOR A FIRM'S IMPLEMENTATION, AND NECESSARY REGULATORY REFORMS. PRUDENTIAL REGULATION: WWW.SIFMA.ORG/EXPLORE-ISSUES/PRUDENTIAL-REGULATION/ PRUDENTIAL REGULATION REQUIRES BANKING ORGANIZATIONS TO PRUDENTLY MEASURE AND MANAGE RISKS, MAINTAIN ADEQUATE CAPITAL AND LIQUIDITY LEVELS, AND HAVE IN PLACE WORKABLE RECOVERY AND RESOLUTION PLANS. OUR REGULATORY REGIME MUST ACCOUNT FOR THE VITAL ROLE THE CAPITAL MARKETS PLAY IN PROVIDING CREDIT AND FINANCING THE REAL ECONOMY, PARTICULARLY AS REGULATORS CONSIDER THE FINALIZATION OF ELEMENTS OF THE BASEL III ENDGAME AND THE GSIB SURCHARGE PROPOSALS. THOSE RULES MUST BE IMPLEMENTED IN A MANNER THAT DOES NOT OVERLY PENALIZE BANKS' CAPITAL MARKETS ACTIVITIES, WHICH IN TURN COULD REDUCE LIQUIDITY IN VITAL CORPORATE AND OTHER FUNDING MARKETS, THEREBY HURTING GROWTH IN THE REAL ECONOMY. WHILE BANK CAPITAL REQUIREMENTS ARE AN UNDOUBTEDLY COMPLEX SUBJECT, THERE IS NO QUESTION THAT THEY HAVE MATERIAL IMPACTS ACROSS THE ENTIRE ECONOMY, AFFECTING THE ABILITY OF CORPORATIONS, SMALL BUSINESSES, GOVERNMENTAL ORGANIZATIONS, AND CONSUMERS TO FUND THEIR ACTIVITIES AND MANAGE ALL TYPES OF RISKS. GIVEN THESE IMPACTS, IT'S CRUCIAL THAT POLICYMAKERS CONDUCT SUFFICIENT ANALYSIS AND OVERSIGHT TO ENSURE THAT BANK CAPITAL REQUIREMENTS STRIKE THE APPROPRIATE BALANCE BETWEEN ENSURING FINANCIAL STABILITY AND MACROECONOMIC GROWTH. IN THIS CONTEXT, IT IS WORTH NOTING THAT THE QUANTITY OF HIGH-QUALITY CAPITAL IN THE U.S. BANKING SYSTEM HAS INCREASED THREE-FOLD SINCE THE GLOBAL FINANCIAL CRISIS, WHILE TOTAL LOSS ABSORBING CAPACITY HAS INCREASED SIX-FOLD AND LIQUIDITY LEVELS HAVE INCREASED TWELVE-FOLD. MANY INDEPENDENT STUDIES HAVE ALSO FOUND CAPITAL LEVELS AT THE LARGEST U.S. BANKS TO EITHER BE AT OR CLOSE TO THEIR "OPTIMAL" LEVELS. AND SENIOR POLICYMAKERS, INCLUDING INCOMING TREASURY SECRETARY SCOTT BESSENT, FORMER TREASURY SECRETARY JANET YELLEN, FEDERAL RESERVE CHAIR JEROME POWELL, AND OUTGOING FEDERAL RESERVE VICE CHAIR FOR SUPERVISION MICHAEL BARR, HAVE CONSISTENTLY STATED THAT THE U.S. BANKING SYSTEM IS STRONG, RESILIENT, AND "WELL-CAPITALIZED." IN OTHER WORDS, CAPITAL LEVELS ARE ALREADY ROBUST AND ANY FURTHER PROPOSED INCREASES SHOULD BE SUFFICIENTLY SCRUTINIZED TO DETERMINE BOTH THE TANGIBLE BENEFITS, AND COSTS TO THE BROADER U.S. ECONOMY. IT IS PARTICULARLY IMPORTANT THAT POLICYMAKERS STRIKE THE RIGHT BALANCE WHEN IT COMES TO CAPITAL REQUIREMENTS AFFECTING THE ABILITY OF LARGE BANKING ORGANIZATIONS TO ACT AS INTERMEDIARIES IN OUR CAPITAL MARKETS, GIVEN THAT THOSE MARKETS FUND ROUGHLY THREE QUARTERS OF ALL ECONOMIC ACTIVITY IN THE UNITED STATES. THIS IS A CRITICAL REASON THAT THE U.S. ECONOMY IS MORE EFFICIENT, RESILIENT AND GROWTH ORIENTED THAN OTHER MAJOR ECONOMIES, WHERE THE VAST MAJORITY OF COMMERCIAL AND ECONOMIC ACTIVITY IS HEAVILY RELIANT ON DIRECT LENDING BY BANKS. IN FACT, THE EU AND MANY ASIAN NATIONS ASPIRE TO DEVELOP THEIR CAPITAL MARKETS TO MIMIC THE U.S. MODEL. EXCESSIVE CAPITAL REQUIREMENTS ON BANKS' MARKETS ACTIVITIES WOULD NEGATIVELY IMPACT THE DEPTH, LIQUIDITY AND RESILIENCY OF THE CAPITAL MARKETS AND INCREASE COSTS AT THE EXPENSE OF CONSUMERS AND COMMERCIAL ENTITIES WHO BENEFIT DIRECTLY AND INDIRECTLY FROM BANK INVOLVEMENT IN SUCH ACTIVITIES. EQUITY MARKET STRUCTURE: WWW.SIFMA.ORG/EXPLORE-ISSUES/EQUITY-MARKET-STRUCTURE/ THE U.S. EQUITY MARKETS FACILITATE CAPITAL FORMATION. THEY ARE THE MOST ROBUST IN THE WORLD AND CONTINUE TO BE AMONG THE DEEPEST, MOST COMPETITIVE, MOST LIQUID AND MOST EFFICIENT. THEY ARE ALSO AMONG THE MOST REGULATED. EFFICIENT AND RESILIENT MARKET STRUCTURE IS KEY TO SUSTAINING INVESTOR CONFIDENCE AND PARTICIPATION IN THE EQUITY MARKETS. MARKET STRUCTURE CAN DRIVE LIQUIDITY AND TRADE COSTS FOR BUSINESSES AND INVESTORS ALIKE. THEREFORE, MARKET PARTICIPANTS CONTINUALLY STRIVE TO CREATE THE MOST EFFICIENT MARKETS. THIS INCLUDES ADAPTING NEW TECHNOLOGIES TO ACHIEVE OPERATIONAL EFFICIENCIES, SEARCHING FOR NEW WAYS TO TRANSACT AND, GENERALLY, OPTIMIZING MARKET STRUCTURE TO MAXIMIZE EFFICIENCIES. MARKET MAKERS EXIST TO PROVIDE LIQUIDITY IN SECURITIES AND EXECUTE CUSTOMER TRADES, PLAYING AN IMPORTANT ROLE IN EQUITY MARKET STRUCTURE BY ENABLING LIQUIDITY AND BALANCING BUY AND SELL DEMAND. IMPORTANTLY, INVESTORS, PARTICULARLY RETAIL INVESTORS, BENEFIT FROM THIS EFFICIENCY AND RESILIENCY THROUGH REDUCED COSTS INCLUDING NO OR LOW COMMISSIONS, BEST EXECUTION AND COMPETITION. ALL MARKET PARTICIPANTS SEEK TO DRIVE INNOVATION TO FURTHER IMPROVE EQUITY MARKET EFFICIENCY, RESILIENCY AND MOST IMPORTANTLY THE BENEFIT TO INVESTORS. HOWEVER, REGULATORS MUST CAREFULLY WEIGH THE IMPACT OF ANY CHANGES ON INVESTORS. SPECIFICALLY, AS THE SEC CONSIDERS PROPOSING MAJOR CHANGES TO OUR CURRENT EQUITY MARKET STRUCTURE SYSTEM, IT IS CRITICAL THAT ANY CHANGES BE DATA-DRIVEN WITH ROBUST COST-BENEFIT ANALYSIS. THERE WERE SEVERAL SIGNIFICANT UPDATES IN 2024: - IN MARCH 2024, THE SEC ADOPTED A FINAL RULE AMENDING RULE 605, MODERNIZING DISCLOSURE REQUIREMENTS FOR ORDER EXECUTION. - IN SEPTEMBER 2024, THE SEC ADOPTED AMENDMENTS TO REGULATION NMS. THE AMENDMENTS ESTABLISH A NEW MINIMUM $0.005 QUOTING INCREMENT FOR CERTAIN TICK CONSTRAINED STOCKS; REDUCES THE MAXIMUM ACCESS FEE CAP FOR EXCHANGE TRANSACTIONS; REQUIRES EXCHANGES TO DISCLOSE TRANSACTION FEES AT THE TIME OF EXECUTION; AND ACCELERATES THE IMPLEMENTATION OF THE NEW ROUND LOT REQUIREMENTS AND THE DISPLAY OF ODD-LOT INFORMATION TO ENHANCE THE TRANSPARENCY OF BETTER PRICED ORDERS. - IN OCTOBER 2024, TWO NATIONAL SECURITIES EXCHANGES FILED A CHALLENGE TO THE AMENDMENTS TO RULES 610 (ACCESS FEES) AND 612 (TICK SIZES) IN THE D.C. CIRCUIT. IN DECEMBER 2024, THE COMMISSION STAYED THE EFFECTIVENESS OF THE TICK SIZE AND ACCESS FEE AMENDMENTS PENDING THE OUTCOME OF THE EXCHANGES' LITIGATION. THE REMAINING AMENDMENTS TO REGULATION NMS ARE NOT AFFECTED BY THE STAY. TAX POLICY: WWW.SIFMA.ORG/EXPLORE-ISSUES/TAX-POLICY/ TAXES IMPACT THE SAVINGS AND INVESTMENT DECISIONS OF INDIVIDUALS AND CORPORATIONS AND ARE A NECESSARY MEANS FOR FUNDING THE GOVERNMENT. TAX REFORM IS EXPECTED TO BE A MASSIVE UNDERTAKING IN 2025 AS MANY OF THE PROVISIONS IN THE 2017 TAX CUTS AND JOBS ACT (TCJA) EXPIRE. WE EXPECT SIGNIFICANT LEGISLATION AROUND TAX POLICY TO COME UP FOR DEBATE AS REPUBLICAN LAWMAKERS SEEK TO EXTEND THE EXPIRING PROVISIONS, AND MAKING SURE THAT THE FINANCIAL SERVICES INDUSTRY IS AT THE TABLE IS CRITICAL.