Changing leadership at NYSE
Interview: Stephen Fell---Fordham University
>> welcome back. critics are lining up to say john reed’s proposal for reforming the nyse doesn’t go far enough in separating the exchange’s regulatory responsibilities from its commercial interests. and today reed propose add new board made up of eight outside directors, broker-dealers who are now recommended on the board, will be relegated to an advisory committee with no direct authority over regulatory policy.
>> it is a feel-good kind of a thing that john reed had to put out because he’s got all these members, most of whom are not active on the floor and aren’t involved in the day’s business. but he has to get their vote to make a change. and so he went for what he could.
>> the securities and exchange commission declined to endorse the plan, saying it is considering reforms beyond what was―what were proposed. north carolina state treasurer richard moore went on the records today, however. he’s saying that he is disappointed with the plan and former s.e.c chairman arthur he visit also says it fails to solve a key problem.
>> something has to be done in terms of setting up a better regulatory mechanism. you can’t have the regulator sitting in the same room, associating with the same people, and have the perception of independence that you have in the nasdaq marketplace, where mary shapiro has led a group that’s independent of the nasdaq market and has done a superb job in terms of regulation.
>> just for the record, leavitt is on the board of bloomberg l. perform, the parent company of bloomberg news. joining us now from our princeton bureau to take a closer look at the changing leadership at the nyse, is stephen fell of fordham university. welcome. appreciate it.
>> thank you for having me.
>> we just heard in that previous piece one guest as saying that, you know, john reed put forth what he though he could get past. you agree or disagree with that?
>> well, i think it is the first effort from him to get something through that will please the members. but i think he is going to find the public, and especially the s.e.c, are going to demand much more.
>> what would be the point of putting something so aggressive to please, you know, the regulatory agencies and the public if the members, who ultimately have the vote and say, say no thanks, try again?
>> well, members only have part of the vote and say. the exchange is going to have to do what the s.e.c wants. the exchange coming off of the grasso excessive compensation is now dealing with the problem of specialists taking too much money. the exchange is under a lot of pressure. the same time, the s.e.c has fumbled on investment companies, on corporate disclosure and the s.e.c is going to be insisting on aggressive action. it is almost certain what is going to happen is the exchange is either going to have to come up with more agretzive reforms or the s.e.c will insist upon them.
>> what specifically was missing today from your point of view?
>> well, i think from my point of view, and for most people s a separation of regulation from the exchange. we need to be certain that the regulators are going to operate aggressively to protect the public, regards less of the interest of the exchange constituency among the specialists. the rules are already on the books and the exchange hasn’t been doing a good job. the directors apparently were irresponsible with grasso’s compensation. the allegations about specialists interpositioning are very serious and they have to separate apart regular lation and they’re going to have to take steps to make sure that the exchange has an attitude of enforcing its own rules to protect the investing public. so, personnel changes and structural changes.
>> ok. let’s talk about losing the faith of the public. i was looking at that time average volume. we just said about 1.3 billion shares today on the nyse. that number is consistent. we’ve seen no decline or no weakening in demand in shares. so, it could be argued that the public, the investing public, institutional, individual and otherwise still have faith in the new york stock exchange, still buying stocks .
>> well, the new york stock exchange is a good place to buy a lot of stocks . but a lot of the public, institutional holders, both the public holders, like the state retirement plans, but also some big players, private players like fidelity, are insisting that change has to happen. the problem isn’t that volume is down, the question is what would volume be if there were greater confidences. and another stitch si, the s.e.c, which is going to insist on change, if for no other reason, to protect their own reputation for being aggressive. the s.e.c looks pretty poor on the mutual fund story. it did a poor job on the research story and so the s.e.c is going to press for change even i suppose if it’s not necessary.
>> and quickly, we’re under a minute here, what did you thids about the names? obviously we have two carryovers from the old bore, but six new names of sorts, all well-known names. what are your thoughts on those preefly?
>> i think they are the sort of directors you expect for the new york stock exchange. i think anyone who accepts a job the new york stock exchange board now is planning to go into it eyes open and be a hands-on director and i expect that’s what we’ll get. the problem is not who these directors are, it is the structure underneath them.
>> lrts. we’re running tight on time. thank you very much for your expertise and insight and we’ll continue to follow this together checkively.
>> thank you.
>> our thanks to stephen thel professor of laugh at fordham university. the world’s third largest auts maker is outside with earnings of its own. u.s. drivers may help toyota’s stock thursday. we’ll have details of how it performed last quarter. that’s coming up next.
