NYSE Euronext Chief Executive Officer Duncan Niederauer said President Barack Obama’s push to overhaul U.S. financial regulation has gained momentum and may be poised for a breakthrough.
Obama, in a speech in New York today, is likely to continue his recent “constructive” approach to financial legislation, Niederauer said in an interview in Washington. He said this is a welcome change from the populist anger at Wall Street that dominated discussions at the start of 2010.
“We’ve got a nice tailwind to get to what looks like a pretty good place on financial regulatory reform,” Niederauer said yesterday.
He said he is pleased with the direction taken recently by the debate in Congress.
“Americans are right to be upset, they’re right to demand answers,” he said. “Let’s take the steps that are going to get us to an outcome that we’re all going to be happy we collaboratively engineered.”
Obama has spent the week making a public appeal for revamping market regulations that will culminate in the speech he is scheduled to deliver today at Cooper Union in New York, where, as a presidential candidate, he outlined a regulatory- overhaul plan in 2008. Administration officials have sought to lure Republican votes in the Senate by seeking compromise on issues such as regulating derivatives and whether to require banks to pay into a $50 billion fund that would be used to unwind failed institutions.
Republican Senator Richard Shelby said yesterday he and Senate Banking Committee Chairman Christopher Dodd are “making progress” in negotiations on an overhaul of the rules governing Wall Street. The measure would set up a consumer-protection bureau at the Federal Reserve, create a council of financial regulators to monitor systemic risk and strengthen oversight of the $605 trillion over-the-counter derivatives market and hedge funds.
The bill, which Dodd drafted, is based on a proposal offered last year by Obama and is a top legislative priority for the president.
In the New York speech, Obama “will remind the American people and the Senate what we all have at stake as we move forward, and hopefully get something passed out of the Senate and quickly to his desk,” White House press secretary Robert Gibbs said yesterday.
Niederauer endorsed proposals that would require derivatives negotiated by brokers to be processed through clearinghouses and reported. Clearing the products would address concerns about unseen risk in the market, while reporting the trades would provide transparency, he said. The Senate Agriculture Committee yesterday approved derivatives legislation that may be merged with Dodd’s regulatory-overhaul bill.
“One thing that’s headed in absolutely the right direction is the majority of the discussion around derivatives,” he said. “Our push is to clear it, report it.”
Concern by some opponents of derivatives regulation that forcing trades onto exchanges would shrink liquidity isn’t borne out by evidence, Niederauer said. He said exchanges operated efficiently during the financial crisis, avoiding technology glitches and “liquidity strikes” by market makers who didn’t want to trade.
“Almost any change you get here is good for the exchange industry in general,” he said about an overhaul of derivatives regulation.
The administration also succeeded in fending off calls for a tax on financial transactions that would have been “pretty terrible and pretty inappropriate,” Niederauer said. He said the tax proposal would have hurt investors and companies instead of the banks that were its target because of the way costs would be passed on by financial firms.
NYSE, a 217-year-old exchange in Manhattan, once dominated American stock trading. Niederauer said the company is now focused on technology and processing as a global exchange operator. Competitors such as Bats Global Markets, Direct Edge Holdings LLC and Nasdaq OMX Group Inc. have cost NYSE its majority share of the stock-trading business, fueling a shift into options, futures and overseas equities. Its derivatives business is run by NYSE’s Liffe market, which the company purchased as part of its 2007 acquisition of Euronext NV in Paris.
Niederauer said Congress should consider lifting the $75 million auditing threshold for publicly traded companies. That requirement, enacted as part of the 2002 Sarbanes-Oxley law, isn’t affected by current drafts of the financial-regulation legislation.
Niederauer said he hoped lawmakers would “circle back” to that issue and lift the cap to at least $500 million, which he said would give about 1,000 companies reason to consider whether to become publicly traded.
“I was hoping we’d get a window in this bill where some policy makers would sponsor an amendment, because I think that would be great for small businesses,” he said. “I think it would be great for job creation.” .