SEC Chairman William Donaldson said today he does not think competition would be hindered by recent equity market merger agreements — the New York Stock Exchange acquiring all-electronic Archipelago Holdings Inc. to create a for-profit NYSE Group Inc., and the Nasdaq Stock Market Inc.'s planned acquisition of Instinet Group Inc.'s electronic trading platform INET.
"However, I caution that any final conclusions will have to await review of the full details of the proposed transactions," he said in written testimony before the Senate Banking Committee.
Mr. Donaldson added that the two merger agreements increased pressure on the SEC to act on its proposed self-regulatory organization rules. Those rules address potential conflicts of interest between an SRO's regulatory obligations and its members, listed companies and shareholders, surveillance across markets by multiple SROs, the way SROs generate revenue and fund operations and the potential costs and inefficiencies of multiple SROs.
"The transactions would give rise to important issues of governance and self-regulation, and it is vital that the commission reach a decision on the standards that will govern its review of the consolidations," he said. "Indeed, I believe that many of the proposed rules on SRO governance and transparency would help address issues raised by the proposed transactions, particularly the critical issue of addressing conflicts of interest between SRO business and regulatory functions."
He added that the commission is working with Nasdaq on resolving regulatory issues raised by the company's application to become a national securities exchange and said he expects Nasdaq to file an amended exchange application "early this summer."