02 October 2003
NYSE and Corporate Governance
The real failure of regulation at the New York Stock Exchange was the lack of enforcement of standards to protect the interests of investors whose securities are traded there. The exchange is run by the houses that use it to buy and sell to each other. They set standards for corporations whose stocks and bonds they trade. It is to insure their own reliance on those issuers for the value of their securities that they set standards. They create belief in the credibility of those standards so that their customers, the public and the funds who manage its money, bring them their business.
The NYSE is, in fact, in competition with other exchanges for that business. However, it no more respects the interests of investors than GM respects the interests of the driving public. In the long run, of course, both are foolish to ignore the safety of their customers; but in the short run, pecuniary gain often trumps their good sense.
The real failure of regulation at the New York Stock Exchange was the lack of enforcement of standards to protect the interests of investors whose securities are traded there. The exchange is run by the houses that use it to buy and sell to each other. They set standards for corporations whose stocks and bonds they trade. It is to insure their own reliance on those issuers for the value of their securities that they set standards. They create belief in the credibility of those standards so that their customers, the public and the funds who manage its money, bring them their business.
The NYSE is, in fact, in competition with other exchanges for that business. However, it no more respects the interests of investors than GM respects the interests of the driving public. In the long run, of course, both are foolish to ignore the safety of their customers; but in the short run, pecuniary gain often trumps their good sense.
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