In a clash of tradition vs. technology and price vs. speed, the Securities and Exchange Commission is poised to take advantage of the current leadership vacuum at the New York Stock Exchange to reform the nation’s stock markets.
In a lengthy interview with the Wall Street Journal, SEC Chairman William Donaldson said the time has come to look at the many new electronic stock markets that came to fruition during the 1990s and how they impact investor confidence and satisfaction.
"Difficult choices will have to be made," he said in an interview with the Journal, because the nation’s stock markets suffer from "operating stresses and strains."
He is grappling with the NYSE’s tradition of trading done through people, and the new, speedier electronic trading method, which is used by Nasdaq. Unlike the NYSE, where images of screaming traders on the floor are common in the media, Nasdaq has no central trading location, but is instead a group of traders linked by computers.
"People say they have to wait an intolerable 30 seconds on NYSE" to execute a trade, he told the Journal. "I personally don't think 30 seconds is that long if substantial price improvement can be effected as a result."
With the departure last week of NYSE’s Richard Grasso, Donaldson, who led they NYSE before Grasso, will no doubt make use of the opportunity to promulgate reform. The Journal reported that Donaldson has in the past talked about his vision for a “central” market place and more emphasis on common standards for all markets.
Another issue the SEC is sure to cover is the commission’s "trade-through rule," which the Journal defined as "when a market receives an order, it must execute it on whichever market currently displays the best bid or best offer."