Statement of Chairman Arthur Levitt 
     United States Securities and Exchange Commission
                       Open Meeting
                       May 23, 1997

  We are here to consider a concept release that solicits 
comment on how best to ensure the continued pre-eminence of our 
securities markets.  

  It's no secret that advances in technology have changed our 
securities markets.  Where once stocks were bought and sold 
exclusively on the exchange floor, today at least as much volume 
trades at lightning speed on screen-based markets.  Services that 
were once the exclusive province of exchanges are provided by a 
growing number of private trading systems.

  Technology has also made it easier to cross national 
boundaries.  Through electronic linkages, investors in the United 
States now have the ability to trade directly on foreign markets.

  As regulators, we face an important choice.  We can take a 
piecemeal approach and hope that we can accommodate technology 
simply by tinkering with the current regulatory scheme.

  Or we can look for ways to create a new framework -- one 
that will serve our markets well into the 21st century.  

  The concept release we are considering today adopts the 
second approach.  I believe it is the right one.

  The release takes a close look at the challenges the 
information age poses for securities markets, their participants, 
and their regulators -- and it invites all of us to suggest ways 
to deal with those challenges.  

Domestic Markets

  Consider this fact: the volume of shares traded on alternative 
markets today is greater than the combined volume on  the
American Stock Exchange and all the regional exchanges.  The 
implications of this dramatic shift are enormous.

  U.S. securities markets have greatly benefitted from these 
innovative electronic systems.  The competition and efficiencies 
these new trading forums have brought has reduced costs and made 
markets more responsive to investors.  

  In response to these developments, the Commission is re-
evaluating the way it regulates the markets.  We seek a forward-
looking and enduring approach that will permit diverse markets to 
evolve and compete, while preserving market-wide transparency, 
oversight, and fairness.

  The questions raised by these alternative markets have grown 
as companies have developed new and efficient trading mechanisms 
that would have been unimaginable only a few years ago.  In large 
part, these questions arise from the fact that these alternative 
markets are not regulated as markets.  

  This raises competitive implications: for example, the NASD 
regulates Instinet, Bloomberg, Island, and Terranova, which 
compete with the Nasdaq market.  They can participate in our 
national market system, but only under terms set by Nasdaq and 
the registered exchanges.   

  These trading systems have become so integral to our 
national marketplace that the public interest requires the 
Commission to concern itself with their security and reliability. 

  While technology has changed, the principal goals of 
regulation remain the same -- to protect investors and to ensure 
our markets are fair and orderly.  This release asks market 
participants to consider ways to better integrate these 
alternative markets in order to ensure transparency, fair 
treatment, and protection against fraud and manipulation.

  Let me add that alternative markets have no monopoly on 
innovation.  In the information age, there is room for all types 
of markets.  Traditional exchanges should also be able to respond 
to this increasingly competitive environment.  With that in mind, 
this release also solicits comment on ways to reduce unnecessary 
regulatory restraints.

The Global Marketplace

  Technology has also given U.S. investors efficient new ways 
of trading stocks on foreign markets.  Many U.S. investors are 
now able to view real-time quotes from foreign markets, and route 
orders to those markets, electronically.  This seamless access to 
foreign markets has strained our existing regulatory apparatus.  

  At the same time, we continue to believe strongly that 
investors are entitled to certain critical protections when 
trading from the United States.  In crafting any regulatory 
scheme applicable to trading in foreign securities, for example, 
we must be mindful that investors deserve high-quality disclosure 
about the companies in which they are investing -- whether those 
companies happen to be based in Brooklyn or Bangkok.  This 
release invites the public's views on how to balance investors' 
ability to access foreign markets against such keystone investor 
protections as accurate and complete disclosure.

Conclusion

  U.S. securities markets are the most successful in the 
world.  Investor confidence in the integrity of the markets has 
been essential to their success.  We will never compromise that 
confidence and that integrity.

  At the same time, regulation must be responsive to trading 
practices in ways that encourage innovation.  This release is a 
significant step toward creating a forward-looking, flexible 
regulatory framework.  With it, we initiate a dialogue with the 
markets, their participants, and the investing public about how 
best to achieve this goal.  It is in the interest of all of us 
that this undertaking succeed.

  Let me now ask Richard Lindsey, the Director of the Division 
of Market Regulation, to discuss the concept release in greater 
detail.  

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