- The Washington Times - Wednesday, October 15, 2003

ASSOCIATED PRESS

Federal regulators want to ensure that the way the New York Stock Exchange operates doesn’t put small investors at a disadvantage, and the structure of the rival Nasdaq Stock Market isn’t the only possible model for change, the Securities and Exchange Commission chairman said yesterday.

The issue raised by SEC Chairman William H. Donaldson is part of a broad agency review of all U.S. stock markets that raises the question of what matters more to investors: getting the best price or the speediest trade?

The federal agency, with oversight responsibility for the NYSE, has closely monitored developments at the world’s biggest stock exchange since a crisis erupted in late August over its now-ousted chairman’s pay package. The SEC will vet the exchange’s eventual proposal for overhauling how it governs itself.

“We are very much concerned with the governance structure of the New York Stock Exchange,” Mr. Donaldson said at a hearing of a Senate Banking, Housing and Urban Affairs subcommittee.

The concern extends to every facet of “how the place is run,” he said, including how its directors are elected, how independent they are, and how the exchange’s potentially conflicting roles of regulator and competitive business could be separated. The goal is to make sure the NYSE doesn’t operate “to the detriment of public investors,” Mr. Donaldson said.

While not advocating specific changes, Mr. Donaldson — a former NYSE chairman — reaffirmed his distaste for an approach that would totally strip the self-policing function from the exchange.

“I think the bureaucratic aspects of that and the expense of that would not be in the best interest of keeping up with fast-paced markets,” he testified.

In its wider review, the SEC is considering applying to the nation’s stock markets the sort of separation of the two functions it imposed on the Nasdaq market in the mid-1990s after its investigation of purported collusion said to hurt individual investors.

Still, Mr. Donaldson said at the hearing, the Nasdaq model is “fine for Nasdaq, but it’s not the only model.”

Nasdaq President and CEO Robert Greifeld lobbied for the model yesterday. He distributed a position paper to news reporters that said a “commercial market center should not directly perform the regulatory functions associated with the trading activity within its market.”


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