Dr. Levitt's Rx For A New Market

Securities & Exchange Commission Chairman Arthur Levitt Jr. has a vision for unifying America's fast-changing securities markets, boosting competition, and improving prices for the nation's investors. With the New York Stock Exchange and the Nasdaq set to convert to profit-driven, shareholder-owned businesses and electronic communications networks (ECNs) playing ever-larger roles, Levitt is trying to nudge the industry into a rational, high-tech future. The industry should transcend its many parochial interests and find common ground with the SEC chairman.

Levitt wants open borders and transparent prices among the growing number of markets. He'd like to see a single electronic trading system linking buyers and sellers in all of the traditional and new electronic markets so investors can see the best prices everywhere. Then the NYSE could make a market in Microsoft, now traded only on Nasdaq, while Nasdaq could trade General Electric, now traded only on the NYSE. Markets would move on to compete by offering high-value-added services, such as faster trades, lower fees, or tax strategy trades.

Levitt is also worried that for-profit stock exchanges will find it hard to regulate themselves when they feel pressure to deliver quarterly profits to shareholders. It's a reasonable concern, and a new regulatory structure might be needed. To most investors, the SEC's suggestions seem eminently reasonable.

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