Good morning, and thank you for joining us here this morning. We have an important announcement to make — and because I so strongly support the merger of the oversight functions of the nation's two largest securities regulators, the New York Stock Exchange and the National Association of Securities Dealers, it's appropriate that the Commission's Washington D.C. headquarters are providing the setting.
I want to welcome Mary Schapiro, Chairman and CEO of the NASD; Rick Ketchum, CEO of NYSE Regulation; Richard Brueckner, the Lead Director of NASD Regulation; and Shirley Jackson, the Chair of NYSE Regulation. These four leaders have shown a strong commitment to getting this important work done in behalf of America's investors. And I particularly want to recognize the leadership of my fellow Commissioner, Annette Nazareth, who for many years led the SEC's Division of Market Regulation. Annette has been a key resource and a facilitator of the NYSE-NASD talks over many months. And it is in no small part due to her work that we are able today to announce this accomplishment.
There are still many decisions that remain as we determine how to move forward. But I'm confident that all of the parties know that the integrity of our markets is the goal. That's the most important thing for America's investors, and for our nation's capital markets.
For 72 years, the SEC has been committed to protecting investors, large and small, as our markets have evolved from modest beginnings as regional exchanges, to a national market system, and increasingly over the last two decades, into truly global securities markets. Today, more than ever before, American exchanges operate in a global marketplace.
While this is almost entirely good news — since it reflects political and economical liberalization in many countries, advances in technology, and increased competition that benefits investors and consumers through lower prices and greater opportunities for diversification — all of this progress comes with a price.
The greater integration among world markets means that today, just as investors don't trade in a single market, neither do fraudsters. And so there are new opportunities for fraud — particularly when the regulators are limited to their turf in only one market.
For investors to be protected in this global competition among markets, regulatory oversight has got to be expanded across the different financial markets in which investors trade. Whereas today we have two separate and uncoordinated enforcement systems, the NASD and the NYSE are close to creating a single member firm regulator for the nation's securities markets. They haven't yet reached a definitive agreement. Some important details remain to be negotiated, and of course any such transaction will require public comment, and Commission approval. But as you will hear from them directly in a moment, they are today taking the definitive first step toward an historic change that will simplify and strengthen the current self-regulatory structure in the United States.
Self regulation has played a key role in protecting investors for a very long time. Most observers agree that the SRO system has functioned effectively, and has served the government, the securities industry, and investors well. But despite this general agreement, one feature of the system in particular has increasingly drawn the attention of reformers — and that is its reliance on multiple, redundant regulators.
For some time, a number of commentators have urged the Commission to simplify the system. As Chairman of the SEC, I've strongly supported the effort to fold the member regulation functions of both the NASD and the NYSE into one regulatory body. I'm firmly convinced that done properly, this could make our self-regulatory system more efficient and more robust from an investor protection standpoint. Instead of multiple and often redundant players, we may soon have a single self regulator for all firms in the securities industry. Instead of two rulebooks, two separate regulatory staffs, and two completely different enforcement systems, we'll have a coordinated, integrated effort to keep our markets free of fraud and unfair dealing. Instead of a menagerie of potentially conflicting schemes that can actually undermine the effectiveness of regulation — not to mention the efficiency of the securities markets — we might soon be able to increase the effectiveness of regulation for the benefit of investors by eliminating the needless and often harmful duplication that interferes with our investor protection mission.
Under this approach, market operations and market regulation would remain separate. The strength of this structure is that it would minimize the inherent conflicts between the regulatory function, on the one hand, and market operations, on the other.
This single regulator approach would also completely eliminate today's duplicate member rulebooks, and the possibility of conflicting interpretations of those rules. At the same time, it would retain one of the fundamental precepts that has characterized the SRO model since its inception in 1930s: the notion that regulation of the markets works best when the front-line regulator is close to the markets. The SEC and other government regulators would continue to benefit by being able to leverage their resources through an oversight role, and the securities markets would continue to be supervised by organizations familiar with the nuances of their operations.
As regulators, our mission is to serve and protect investors with the most efficient, fair, and forward-thinking system of regulation possible. The time has come to put an end to the duplication, conflicts, regulatory costs and competing rules that we all live with today. I'm very excited about these opportunities to increase consistency and efficiency in our SRO system — because in ushering in these changes, we'll be improving America's capital markets, and making our nation more competitive.
It's now my pleasure to introduce Commissioner Annette Nazareth, who will in turn introduce the leaders who've worked so hard on this merger, and who the SEC is pleased to welcome here this morning: Mary Schapiro, Rick Ketchum, Rich Brueckner, and Shirley Jackson. We will then take your questions.
