Reed says NYSE must restore image

John Reed, interim chairman of the New York Stock Exchange, has warned that the world's largest stock market is being damaged by "seemingly unending" criticism of its corporate governance and by an ongoing investigation into trading irregularities.

In his most pointed public comments on the controversies that have swirled around the NYSE for the past few months, Mr Reed said the exchange was being "hurt" and needed to be better able to get its message across to investors and the public.

In a letter to NYSE members earlier this week and made available by the exchange, Mr Reed said: "I continue to be concerned about the seemingly unending comment about the NYSE and feel that we must try to regain our voice, but are hurt by the discussion of governance and the specialist investigation."
This is a reference to a probe into possible breaches of stock trading rules by the seven specialist firms that manage stock trading on the NYSE floor.

The firms have been told by the NYSE that they face a collective fine of up to $150m, which is the amount the Securities and Exchange Commission believes investors lost because of the irregularities.

Addressing a growing view that the trading floor and the specialist system have become outmoded, Mr Reed told members: "I remain convinced that we are different than described and that our auction market continues to be the gold standard. We will have our opportunity to make the point.

The NYSE has been the focus of much public debate in recent months, culminating in the resignation in September of former chairman Richard Grasso in a row over his $187.5m compensation package.

The 27-member board that awarded him the pay has been replaced by an eight-member non-executive board that met for the first time on Monday.

Mr Reed's comments were made to members following that meeting. They were in part designed to rebut criticism from state treasurers and managers of public pension funds, who have complained that corporate governance reforms Mr Reed put in place do not go far enough.

Apart from the corporate governance reforms, which members t approved by a 98 per cent major ity earlier this month, the new board made additional changes to , the NYSE's constitution on Monday that may lead to the separation of the chairman's and chief executive's roles.

Mr Reed, who is due to step down in a month, said he was "starting to look for my successor". The wording of some amendments to the NYSE constitution suggest two people may be sought to become chairman and chief executive, a step that would go a long way to meeting criticism that management of the NYSE needs to be more transparent.

US financial markets were closed yesterday for the Thanksgiving holiday. NYSE spokesmen could not immediately be reached for comment.