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Reaction to John Reed proposals to Reform NYSE

According to the lead paragraph on the NYSE webpage: "...Reed today proposed far-reaching changes..."      11/5/03

Huh? Is the exchange to remain an SRO? Seems the answer is yes. But there will be a board of people who have little real knowledge of how the markets work and how the specialist system rakes money from public transactions. The problem Mr. Reed seems not to understand is this: even if the NYSE cleans up its trading violations (and that's a big IF) the system is still unfair. Technically legal activities by specialists (penny jumping, for example) are still unfair. Allowing monopolistic powers to a group who are then permitted to trade in between and around public orders, is unfair and the antithesis of a free market. Period. Did you know, for example, that Floor Governors (those policing the day to day specialist activities) are themselves specialists elected by other specialists on a rotational basis? I wonder if Reed even knows this. This is as much of a conflict of interest as Grasso serving on Boards of companies he supposedly supervised. I mean, a floor governor who routinely participates in similar violations is not likely to do much more than smile and turn his head (see no evil...), especially since the individual he may be supervising is likely to be himself a floor governor in the not too distant future. Is there any doubt why so few specialists were ever brought up on charges? (that's a rhetorical question).

You want far-reaching changes, then one has to end the SRO function of the NYSE. As Spitzer said, anyone who can't see that self-regulation has been an abject failure must have been on the far side of the moon. Reed seems to be contentedly munching on green cheese while watching wayward cows jump overhead. Even an investment in a more powerful telescope won't help him, I think. He doesn't understand the real issues (not necessarily his fault. There aren't many people, even in the securities industry, who realize the intricacies -- cronyism and code of silence -- of the system).

Next, the face to face system of trading stocks needs to go. At the very least, Reed should recognize that this so-called auction system needs to be scrutinized. Ending the specialist system will not end the financial world as those with a vested interest claim it will. I maintain that London is much better off for having gone through Big Bang in 1986 (I've attached some promo materials that will give you a sense of that event).

Reed, it seems to me, has put in provisions that are most concerned about addressing the excessive compensation issues at the NYSE. Fact is, the compensation issue always was the smoke. The fire will continue to rage on the NYSE unless there are truly "far-reaching changes."

The NYSE will endorse this package in a heartbeat, I predict. Why not? Once the furor dies down -- as it surely will if we buy into this plan -- they'll be free to go back to raking in unjustified liens on investor transactions. In other words, once the light goes out, the roaches will return.

That's my take.