Nasdaq OMX CEO Calls for Re-Regulation, New Regulator

As efforts to overhaul the U.S. financial regulatory system ramp up, a top stock exchange leader became the latest official to publicly back calls for a merger between the Securities and Exchange Commission and the Commodity Futures Trading Commission.

“Two different agencies with very different approaches essentially monitor the same securities,” Nasdaq OMX chief executive Robert Greifeld said in Jan. 8 remarks before the National Press Club. “I don’t to see how we can address systemic risk without a regulator with an overall viewpoint and mandate.”

Greifeld called it “incomprehensible” that there are two separate regulators “at a time when financial products have evolved into instruments virtually indistinguishable from one another.”

“We have a wonderful opportunity in front of us to fundamentally rethink regulation," he said. The objective shouldn’t be more or less regulation, but “re-regulation—smarter and more efficient.”

While opposition to the idea certainly exists, public support for a merger between the two agencies has increased in recent months amid the financial crisis as regulators and lawmakers work to craft a new regulatory regime. Other top officials, including Treasury Secretary Henry Paulson and SEC chairman Christopher Cox have said they support such a merger.

The Nasdaq OMX CEO also called for new rules on the books, “reflective of the world that exists today,” not of the world that existed in the 1930s, and said government agencies should utilize self-regulation where it is “well proven and where government resources can be freed up for higher priorities.”

He also echoed calls for a single regulatory agency to oversee systemic risk, “driven by specific objectives governed by principles, not rules.” That idea has gained traction among regulators including Treasury officials and many lawmakers.

“The financial markets will always stay ahead of regulators, and particularly regulators who wield static rules,” he said.

As for the SEC, Greifeld said there is a “clear prioritization problem.” During a Congressional hearing last week to assess the scandal surrounding Wall Street money manager Bernard Madoff, some lawmakers had questioned whether the SEC needed more authority or more resources to uncover such schemes. “That can be debated,” said Greifeld, “but where the SEC failed was in focusing on the wrong issues—it was not about authority or resources.”

He said Commission priorities didn’t match the priorities driving the financial market. “The SEC was policing obscure business issues while investors fell prey to schemes such as those of Madoff,” he said.

He advised the location of senior regulators in the New York City office, saying regulators need to be “at the heart of the action virtually and physically.”