Absence of transparency threatens markets: NYSE official

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The deputy head of the NYSE Euronext stock exchange warned on Tuesday that an absence of transparency on financial markets now threatened the health of the financial system.

"Nothing justifies such murkiness, which is only legitimate in certain specific instances," Dominique Cerutti told the newspaper Les Echos in an interview appearing Tuesday.

The lack of transparency and the proliferation of alternative negotiating platforms "very significantly increases systemic risk, since practically no transaction carried out by mutual agreement on informal markets is compensated," meaning was not backed up by normal counterparty procedures.

He said investor protection is weakened by transactions "that take place outside the control of regulators."

Cerutti warned in late March that the markets were suffering from a decline in the importance of historic operators and the emergence of alternative negotiating platforms.

The solution, he said, would be to restrict the number of exchanges taking place outside transparent mechanisms.

© 2010 AFP

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