The Corner

More: Whose Business

I was going to mention this angle, but frankly I don’t know enough on the subject. This emailer clarifies:

In repsonse to Peter Robinson’s question 2 – since NYSE is private, whose business is it what Grasso gets paid, a half-hearted answer:

NYSE is not exactly and totally private. It is a corporation that is not publicly traded, but it has been granted extreme protections by the US government, to govern itself, and to attract and keep stocks listed (including the well-known “roach motel” listing clauses that almost completely prevent voluntary DE-listing by a company on the big board). It exists, and is protected by the SEC, to make markets in stocks, to the benefit of companies and stockholders. We may argue about the efficacy of the SEC, and whether we could have efficient markets without government intervening to “make” them, but at least in the moment, Grasso is a quasi-public official, and the way our markets are structured, he’s not just a purely private actor, like the CEO of a privately-held company. His large salary for doing arguably nothing (ARGUABLY – Peter does have a point re: saving the Big Board) is evidence of rent-taking by NYSE’s near-monopoly status granted by the Feds. We ought to be concerned, for two reasons – one, maybe it’s a sign we should end the monopoly – if they are capable of extracting such large rents, maybe it’s not efficient. Two, maybe we can’t come up with a better way to “make” the markets we want to have, so we ned to squawk about stuff like this to ensure that the folks we’ve entrusted with making markets know they are being watched and thus can’t extract monopoly rents. NYSE’s extraction of ANY rent is in some sense a deadweight loss – a theoretically perfect market would have no transaction costs. Of course, we can’t get to “theoretically perfect” but Grasso’s salary indicates that we could get more efficient than NYSE – or they wouldn’t have the cash to drown him in. And stockholders should care. I own companies traded on the Big Board, and my trades are going to line his pockets, instead of my own.

Naturally, my views are not necessarily the views of my employer.

[Name withheld]


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