Passage One
①The California Public Employees’ Retirement System(CalPERS) has positioned itself as the premier champion of investor rights, regularly singling out bad managers at some of the nation’s largest companies in its annual corporate-guvemance focus lists. And with $153 billion under management, Wall Street tends to listen when CalPERS speaks out. But the country’s largest pension fund has never taken on as big a fish as it did Dec. 16, when it filed a class action against the New York Stock Exchange and seven of its member firms. CalPERS’ suit charges the NYSE and specialist firms with fraud, alleging that the exchange skirted its regulatory duties and allowed its members to trade stocks at the expense of investors.
The move is a major slap in the face for the NYSE’s recently appointed interim Chairman John Reed. The former Citibank chairman and CEO came on board in September after the exchange’s longtime head, Richard Grasso, resigned under pressure over public outrage about his excessive compensation.
②Reed has been widely criticized by CalPERS and other institutional investors for not including representatives of investors on the exchange’s newly constituted board and not clearly separating the exchange’s regulatory function from its day-to-day operations. The CalPERS lawsuit is evidence that the investment communities’ dissatisfaction hasn’t ebbed(衰退). "Our hopes were dashed when Mr. Reed didn’t perform," says Harrigan.
The suit alleges that seven specialist firms profited by abusing and overusing a series of trading tactics. ③The tactics, which are not currently illegal, include "penny jumping", where a firm positions itself between two orders to capture a piece of the price differential, "front running", which involves trading in advance of customers based on confidential information obtained by their orders, and "freezing" the finn’s order book so that the firm can make trades on its own account first.
The suit highlights the growing frustration that institutional investors have expressed with what they perceive as a system that needs to be revamped(修补)-if not eliminated. According to California State Comptroller Steve Westley, a CalPERS board member who participated in the Dec. 16 press conference, has repeatedly called on the NYSE to end its use of specialist firms to facilitate trades and move to a system of openly matching of buyers and sellers. BLIND EYE "There’s no reason not to move to a fully automated exchange," Westley says. "Every exchange in the world is using such a system. The time is now for the NYSE to move into the 21st century and remove the cloud that there’s self-dealing working against investors.\
Passage OneAccording to Westley, NYSE’s problem results from ______