пятница, 2 марта 2012 г.

GLAUBER'S CHALLENGE

A SWEDISH COMPANY'S BID to buy the London Stock Exchange out fromunder its prospective German merger partner illustrates just howcompetitive world bourses have become.

OM Group, a high-tech start-up that operates a stock exchange inSweden, is seeking to derail Frankfurt's Deutsche Boerse's mergerplans with a $1.2 billion bid for the LSE. No fewer than sevenEuropean securities markets are now investor-owned. But hostile raidsare something new.

Meanwhile, a dozen new-fangled "electronic communicationsnetworks" continue to move in the world's two largest stockexchanges, the New York Stock Exchange and Nasdaq. Something like athird of Nasdaq's total volume now takes place on these alternativetrading systems. Recently they've begun to move in on Big Boardlistings, too.

Among the largest of these ECNs are Bloomberg's Tradebook,Reuter's Instinet, Datek's Island, and the Archipelago system. Theindustry is preparing to go public with its opposition to Nasdaq'sproposed Supermontage trading system - a price display technologythat the ECNs fear would put them out of business. The NYSE in turn(with one eye on the Justice Department) has considered buying an ECNor two.

And Nasdaq, which has repeatedly said it expects to build apresence in Europe, has been mentioned as a possible bidder for theLSE, if the English merger with the Frankfurt bourse breaks down.

The German-English market (in which Nasdaq is to have a minorshare) is slated to be called iX; the Paris, Amsterdam, and Brusselsexchanges have teamed up to form Euronext NV. Who will finallysucceed in putting together a pan-European market? It is anybody'sguess.

The leading player in all this is, of course, the Internet.Computer technology for years has been transforming stock exchangesfrom storied citadels of privilege to commercially motivatedinformation networks. European integration accelerated the process.

In the calm eye of the storm sits Robert R. Glauber, 61, adjunctlecturer at Harvard University's Kennedy School of Government and all-around financial trouble-shooter. He is slated to become topregulator of the National Association of Securities Dealers and itsfeisty stock exchange in November, taking his place beside RichardGrasso of the NYSE.

Glauber has been a familiar feature of the regulatory landscapesince 1987, when Nicholas Brady chose him to serve as executivedirector of the commission appointed by President Reagan to study theOctober stock market crash. Previously Glauber has been professor offinance at Harvard Business School and chairman of its AdvancedManagement Program.

After Brady became Treasury secretary in the Bush administration,Glauber served as undersecretary for finance. He oversaw theoverhaul and recapitalization of the savings and loan industry, andlaid the groundwork for the commercial banking reform act thatfinally passed last year.

It was Securities and Exchange Commission chairman Arthur LevittJr. who in 1995 caused Glauber to be appointed to the NASD board,after a series of scandals shook public confidence in the ability ofthe second-largest stock exchange to ride herd on its dealers.

Now Levitt is forcing the NASD to privatize Nasdaq, ultimatelyretaining only a 20 percent stake in the exchange it founded in 1971.The first part of the sale took place this year. For now, NASD willretain full ownership of the American Stock Exchange as well, but itsmain purpose is to perform a full schedule of regulatory functions.

Glauber was a natural choice to replace retiring Wall Streetveteran Frank Zarb.

"We would like NASD to become the source of regulatory oversightfor new exchanges," Glauber said last week. "We would like to offerour services to exchanges in other countries. We see ourselves as apotentially global regulator."

Self-regulatory organizations like Glauber's are yet anothersource of American competitive advantage in global markets. They'renot substitutes for the SEC, but extensions of it. The FinancialAccounting Standards Board is another good example of the sort.Glauber's challenge at NASD is to extend the concept of thesemiprivate industry watchdog to other continents in an increasinglycomplicated world.

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