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Is the SEC Wrecking Our Stock Markets?
| Article
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10426 |
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Section : |
CURRENT ISSUES
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| Issue
Date : |
2 / 1993 |
2,213 Words |
| Author
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William Freund
William Freund is chief economist emeritus of the New York
Stock Exchange and occupies the New York Stock Exchange Chair
in economics at the Graduate School of Business of Pace
University in New York City. |
The Securities and Exchange Commission (SEC) has much to be proud of. Founded during the Great Depression of the 1930s, it helped restore a measure of public confidence in our financial markets following the crash of 1929. It did so by encouraging the dissemination of information about traded companies, and by shining the limelight of disclosure on our securities markets. Sunlight has an antiseptic quality, though insider trading and rigged markets are not yet a thing of the past.
But there is another side to the coin. As long as markets were largely domestic, as long as capital did not respond to the pull and push of international events, as long as countries exercised controls over the exchange of their currencies, the SEC could design its rules and regulations on the basis of what it perceived was best for our domestic markets. That world of Independence is gone. When it comes to the world's financial markets, they have become fully internationalized, like no other activity of mankind. Unfortunately, SEC regulations have not kept pace with these new global realities.
The SEC believes passionately that its regulations are the best in the world that they serve the best interests of all equity investors. Through the international Organizations of Securities Commissions, the SEC has tried to achieve an international consensus on the benefits of U.S. type disclosure requirements.
It is time for our Washington regulators to acknowledge that they cannot force foreign markets to march to the beat of their drums. If they continue to close their eyes to the new realities of world trading, the effect, ultimately, will be to strangle U.S. securities markets. In time, the SEC will do immeasurable and irreversible harm, particularly to the New York Stock Exchange (NYSE) in its efforts to remain the leading stock market in the world.
NEW COMPETITION
The major competitive threat to the NYSE is the London stock market, which dominate the trading of global companies in Europe. The London market has abandoned its traditional floor and has gone completely electronic. It recognizes that it is in a tough competitive race for trade from all over Europe, particularly since sleepy old exchanges in Frankfurt, Zurich, Paris, Brussels, Amsterdam, and Madrid have awakened to the new opportunities like a Rip van Winkle. These exchanges are racing to install efficient, globally linked computerized trading facilities. By year-end 1992, for example, the Frankfurt
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