NEW YORK, Oct 4 (Reuters) - A comprehensive review of the U.S. stock market is in order because an enormous increase in new rules has exacerbated the risk of an outdated regulatory framework, a commissioner with the Securities and Exchange Commission said on Thursday.
Today's stock market bears little resemblance to almost two decades ago, when the SEC last understook a thorough evaluation that resulted in the Market 2000 report, said SEC Commissioner Daniel Gallagher.
In particular, the self-regulatory aspect of stock exchanges, many of which are now public companies, needs to be reviewed, Gallagher told a conference of the Securities Industry and Financial Markets Association in New York.
"We are at a crossroads with respect to the status of self-regulation," he said. "For decades now, we've been building upon a self-regulatory framework premised on circumstances that no longer exist, a framework that permeates every aspect of market structure."
It is worth asking whether exchanges should be self-regulatory, especially since they have outsourced many of their regulatory responsibilities to the Financial Industry Regulatory Authority, he said.
The role of FINRA also needs examining, he said, adding, "Is FINRA itself becoming a 'deputy SEC'?"
Gallagher acknowledged the onus of a large-scale review. "Cost-benefit analysis isn't easy, it isn't quick, and it isn't cheap," he said. "If self-regulation is to remain viable, however, it is necessary."