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U.S. Securities and Exchange Commission

Statement by SEC Chairman:
Letter to Exchange Officers Regarding SRO Corporate Governance


Chairman William H. Donaldson

U.S. Securities and Exchange Commission

Washington, D.C.
March 26, 2003

The text below was sent to the top officers of U.S. exchanges:
Mr. Richard Grasso
Chairman & Chief Executive Officer
New York Stock Exchange

Mr. Robert Glauber
Chairman & Chief Executive Officer

Mr. Richard G. Ketchum
President and Deputy Chairman
NASDAQ Stock Exchange

Mr. David Colker
President & Chief Executive Officer
Cincinnati Stock Exchange

Mr. Kenneth R. Leibler
Chairman & Chief Executive Officer
Boston Stock Exchange

Mr. David A. Herron
Chief Executive Officer
Chicago Stock Exchange
          Mr. William J. Brodsky
Chairman & Chief Executive Officer
Chicago Board Options Exchange

Mr. Philip D. DeFeo
Chairman & Chief Executive Officer
Pacific Exchange

Mr. Meyer S. Frucher
Chairman & Chief Executive Officer
Philadelphia Stock Exchange

Mr. David Krell
President & Chief Executive Officer
International Securities Exchange

Mr. Salvatore F. Sodano
Chairman & Chief Executive Officer
American Stock Exchange

The recent corporate failures suffered by our nation have vividly shown the importance of accountability and sound governance within shareholder-owned organizations. In response, there has been a broad examination of corporate governance practices throughout corporate America. Many organizations and individuals, including the U.S. Congress, the SEC, and myself have called for the establishment of corporate governance standards that reflect the highest commitment to ethics and transparency. Doing so is essential to restoring a strong sense of investor confidence.

Self-regulatory organizations play a critical role as standard setters for issuing companies, operators of trading markets, and front-line regulators of securities firms. At the urging of the SEC, two of the self-regulatory organizations, the New York Stock Exchange and NASDAQ have both proposed new corporate governance listing standards for publicly traded companies, and the SEC continues to help them harmonize their proposals to the extent possible. Just as the NYSE and NASDAQ will be asking publicly traded companies to meet high standards in order to list on their exchanges, the self-regulatory organizations must demand the same standards of themselves.

The Commission has for some time expressed concern about the adequacy of the governance process of self-regulatory organizations. In recent years, a number of self-regulatory organizations have reviewed and revamped their governance structures, and some of you have initiated further reviews very recently.

It is now more important than ever that self-regulatory organizations be examples of good governance. There, I ask you to engage in a review of your own corporate governance practices, including board structure and representation, and oversight of management policies and practices to ensure that they serve the public well. Bottom line, how do your governance practices reflect those expected of corporations traded on your market?

When you have completed a review of your governance structure, we would appreciate receiving a report of your principal findings and any proposed changes to your governance arising from the review. Please provide this report by May 15, 2003.

The Commission stands willing to provide any assistance in our power to further your review, such as facilitating a discussion among self-regulatory organizations regarding their practices and the issues they encounter. Annette Nazareth, Director, Division of Market Regulation, will be in touch with you shortly to provide you with additional guidance. Please feel free to contact me at 202-942-0100, or Annette L. Nazareth at 202-942-0094 if you have any questions or concerns.


Sincerely yours,


William H. Donaldson



Modified: 09/09/2003