Corporate Governance

The Role of Stock Exchanges in Corporate Governance: Shielding the Regulatory Function from Profit Maximization (Part 6)

By J. Robert Brown

We are discussing The Role of Stock Exchanges in Corporate Governance, a report issued by the OECD.  What about listing standards, particularly in a "for-profit" environment?

For those that do retain a regulatory role, the model varies. The NYSE relies on a separate non-profit subsidiary, NYSE Regulation, for surveillance and enforcement.  While we have questioned the efficacy of the arrangement, it appears to be much stronger than most other exchanges.  As the report described:

• The OMX Nordic Exchanges have also established a separate structure (though not an independent legal entity) responsible for monitoring issues related to self-listing and market surveillance. Reporting relationships have evolved to reflect these new structures. At the beginning of 2009, the Six Group - of which the Six Swiss Exchange is a part - has separated the firm's regulatory functions from operational activities. Going forward, rule-making will be the task of the Regulatory Board, whereas enforcement of rules will be conducted by the SIX Swiss Exchange Regulation Unit (a new structure to address issuer regulations and supervise securities trading).

In other words, some exchanges separate the regulatory function from others but do not go to the same lengths as the NYSE to ensure independence.  Of course, the most independent structure of all is to have no regulatory function which is true of a number of the exchanges.

Full post as published by The Race to the Bottom on September 17, 2009 (boomark / email).