Grasso urges continued `partnership' with regulators

NYSE chairman talks of integrity of markets

Securities industry


FORT LAUDERDALE, Fla. -- The highest-ranking officer at the New York Stock Exchange told a gathering of securities regulators yesterday that the world's capital markets and government regulators must continue their "partnership" to protect investors and safeguard the integrity of stock exchanges.

NYSE Chairman and Chief Executive Officer Richard Grasso noted that the global embrace of market principles, plus rapid technological advances, has democratized the financial world. The result, he said, is an unprecedented surge in domestic and international investment opportunities for Americans "from Wall Street to Main Street."

But Grasso was quick to warn that complacency in regulatory oversight could undermine investor confidence.

"There is a fundamental difference between free markets and free-for-all markets," he said. "This is a business where public confidence is a decisive factor. There must be zero tolerance for antics that hurt [investors]. If we're not doing the right thing for the public, then we are going to lose."

Grasso received warm applause from the audience packed with regulators from around the nation and Puerto Rico. Regulators murmured and nodded approvingly when Grasso referred to some Internet chat rooms, where sales pitches are made for securities, as the 1990s equivalent of "1920s boiler rooms."

Florida Comptroller Robert Milligan praised Grasso for his remarks. "I think it's tremendous that someone in his position is making it clear that regulatory supervision is so important to the confidence that people must have in the marketplace," Milligan said.

Grasso, who has been at the helm of the 207-year-old exchange since 1995, devoted much of the morning highlighting the dizzying pace at which globalization and technology have revolutionized the world's largest stock market.

He pointed out that 13 years ago the NYSE's market capitalization of $2 trillion was just two-thirds the size of the Tokyo stock exchange. At the time, the Dow Jones industrial average, the most-watched stock barometer, stood at 1,800.

Today, the Dow is near 11,000 and the NYSE's market capitalization stands at $15.25 trillion, more than the combined capitalization of the next five biggest global stock exchanges. Part of the reason for the growth, Grasso said, is that the NYSE is now open to the public in an unprecedented way, with as many as 200 million Americans investing in equities through a variety of channels.

But the growth over the last decade may be dwarfed by the immense opportunities for expansion. So, he said, now is the time for exchanges and regulators to seek ways for supervision to keep pace with technology and globalization.

For example, Grasso said, the NYSE expects that many foreign companies in China and Brazil will soon want to trade on the Big Board. But these firms, he said, must get used to complying with the same transparency and disclosure rules that U.S. firms do.

He added that the NYSE wants to work with regulators and investment firms to ensure that investors understand the risks involved in trading securities and that they are being sold suitable investment products.

"Is the investor getting the right price? Is the investor getting the right protection?" Grasso said. "If we're not adding value [through safeguards], we become southern Manhattan's most prominent museum."

Pub Date: 6/17/99

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