Oxley calls for review of NYSE specialists
By Andrei Postelnicu in New York
FT.com site; Oct 31, 2003
Top lawmaker Michael Oxley called on Thursday for a review of the role of the specialist firms that control trading at the New York Stock Exchange, casting further doubt on their ability to survive a looming shake-up at the world's biggest stock market.
Mr Oxley, chairman of the financial services committee of the House of Representatives, said it was "time to review the specialist system" which is central to the NYSE's auction market model and trading floor.
His comments came as a probe into allegedly improper trading practices gathered pace. It has embroiled five of the seven specialist firms. John Reed, interim chairman of the NYSE, has indicated that he wants a speedy conclusion. The exchange has already told them they face a collective fine of up to $150m.
Mr Oxley - who co-wrote the Sarbanes-Oxley act overhauling US corporate governance after scandals such as Enron - is the most influential political figure to have spoken on the future of the specialists. His comments were made at a congressional hearing on the future structure of US securities markets.
They suggest there would be political support for a potentially painful overhaul of the NYSE's trading structure, which the specialists would be expected to oppose. "The recent controversies at the NYSE present a real opportunity to enact significant and long overdue reforms to the market structure of the US," he said.
Michael LaBranche, who heads the leading specialist firm on the NYSE floor, described the hearings as "very constructive".
Mr Oxley also argued for the overhaul of the trade-through rule which mandates that shares be traded at the best available price regardless of where the order is placed. To critics of the NYSE the rule guarantees its dominant status and the earnings of specialists by preventing investors from taking their orders elsewhere. They compare it to forcing customers to a cheaper but remote supermarket instead of the pricier but more convenient shop next door.
Supporters of the NYSE say the rule, adopted in 1975, guarantees investors the best price all over the US even if that means slower execution on the NYSE floor through the specialists.
Mr Reed, a former Citigroup chief, has said that he will focus only on corporate governance reforms and on finding a permanent chairman for the NYSE. |
