NYSE Euronext COO: Markets Operate Best with Integrity & Transparency
NYSE Euronext COO: Larry Leibowitz
In the wake of the continuing economic challenges, a silver lining has emerged. Transparency and integrity, the fundamentals of an old business model founded on trust, is making a comeback. Its presence can be seen re-emerging in a big way through best practices and CSR initiatives throughout corporate America and the large financial institutions.
One such organization, the NYSE Euronext has put values-based leadership at the forefront of its operating strategy. At a recent conference in New York, hosted by SABEW (Society of American Business Editors and Writers), NYSE Chief Operating Officer Larry Leibowitz spoke of the New York Stock Exchange’s mandate: “We have an obligation to restore confidence in the system by showing transparency and integrity.”
NYSE Euronext COO, Larry Leibowitz in his own words:
On Economic Growth & High-Frequency Trading: This is the natural evolution of the market where people are using technology more and more. In the old days, market makers traded by answering the phones, that’s what used to happen in exchanges like Nasdaq or trading by walking up to the guy on the trading floor in the case of the New York Stock Exchange. That has given way to mostly computer to computer trading. Part of the problem is a lack of transparency around that…What it illustrates is that we don’t have good transparency and labeling around what people are doing, we don’t have the confidence that it is being surveilled properly…There is a lot disinformation and non-information around that. The industry needs to do a better job, in conjunction with regulators for providing that.
On Market Integrity and Leadership: The SEC proposal to create a centralized audit trail for the U.S. is absolutely critical so that we can confidently say someone is surveilling across all markets. There is a big debate about how that should be done. We say as cheaply and quickly as possible. In our minds the longer this big question mark about high frequency is out there, the more people question the integrity of the market. What is really critical that people feel that this is not a casino; this is not a rigged game; this is not a situation where the little guy is not getting a bad deal…The sooner we can get to a point where people can feel more confident in what’s going on.
There is a natural tendency to mistrust technology… It’s our job as an industry, the exchanges in particular, to stand up for integrity and transparency. So that people feel like they are getting a good deal…whether they are issuers, small investors, big investors, professional firms. It’s balancing all of those for the public good. That’s our job as an industry to show leadership. “
On the Deutsche Boerse merger: The changes in the macroeconomic environment over the last few months… “Make this deal more important than ever and more strategic for us (US) and for Europe. That we build a strong derivatives, clearing, risk management franchise for Europe to help cope with all the things coming, all the regulation changes, all the capital issues. This is freeing up capital for banks. There are a lot of things that this deal actually helps solve if it goes through. So if anything the strategic rationale for the deal is very much intact.”
On the NYSE Trading Floor: “When I got there, people thought we were going to close the Floor. Since I have gotten there, we are more reliant on the Floor than ever…It’s a matter of rebalancing the balance between human judgment and technology. We created high-tech broker-trader booths: sales, trading, everything, a full service business…Where else can you go to find the impulse of the market when things get crazy?”
On Derivatives Transparency: “Financial institutions need to be part of clearing solutions in the future. Consortiums tend to work best in those, both to get better financial backing and to get better risk management…Our platform stands as it is. We think it’s a great platform….We are out there exchanging ideas and trying to figure it out along with everyone else. It’s certain that more OTC derivatives need to get into clearing houses. More so that the regulators can understand systemic risk and evaluate it. Whether that is competitive or not, let them figure that out. But that’s good for the system; that’s good for everyone..”
On OTC Derivatives Exchange: ”It’s more of a B2B platform. Not a public market. Mom and Pop in Iowa are not going to trading those. It’s more of a professional network…It’s really an issue of being more transparent around price discovery. A better way to manage the risk across the platform.”
On Economic Responsibility & Solutions: “People are frustrated. Whether they are frustrated on the right or frustrated on the left…We have been through a very long and difficult economic period. Again whether you feel someone is responsible, it has been difficult. They feel they lost their voice. They feel like, whether its politicians or the financial industry, is not responsive. Again on the right and the left and they are trying to make their voice heard. That’s part of democracy. As long as they follow the rules, not being violent or doing bad things. That’s how democracy works. We saw these things happen during the Depression…I think it’s a sign we have not done a good job of articulating a good plan. Making them feel heard; that there is a solution that will help them. It is clear that government is not doing its job, or certainly communicating it very well. Everybody needs to do a better job in providing that solution. “
To restore trust in the system, financial institutions are obligated to show new leadership strategies. Incorporating a basic strategy of transparency and integrity into for-profit models rebuilds confidence in customers, clients and the public. NYSE Euronext plays a vital role in that shift. Not only is NYSE’s highly visible position capable of leading the industry, their success in publicly supporting an integrity model inspires other market makers to recognize that profits with purpose is the premier operating strategy for 21st century good business.
Reported by Monika Mitchell
Category: shared values
Pingback: America the Beautiful: What’s in it for me? | Good Business International