Grasso Rejects SEC Request to Change Rule

New York Stock Exchange Chairman Richard Grasso on Tuesday rejected Securities and Exchange Commission Chairman Arthur Levitt’s request to change an NYSE rule that prevents many of the Big Board’s largest stocks from being traded in other markets.

“I have no intention of removing it right now,” Grasso said, answering reporters’ questions after testifying before the Senate Banking Committee.

NYSE Rule 390 prohibits member firms from making off-exchange trades of stocks that were listed on the Big Board before April 1979. Levitt indicated last week that the SEC may change Rule 390 if the Big Board doesn’t do so itself.

In another challenge to the SEC chairman, Grasso said the NYSE’s broker-policing unit should remain part of the exchange after the Big Board becomes a for-profit, publicly traded company. The NYSE and Nasdaq Stock Market are preparing to sell stock in themselves as early as next year.

“A compelling case can be made,” Grasso said, “that it’s more effective, more consumer-friendly and ultimately less costly to regulate as an integrated market with a firewall separating the business side from the self-regulatory side.”

The NYSE’s IPO idea has prompted concern from Levitt, who said last month that he has “serious reservations about the conflicts that spring from [the NYSE] plan.”