Mid-Sized Firms Cheated in NYSE/NASD Merger?

By Cory Levine, Wall Street & Technology

In a widely anticipated move, the NASD and NYSE Group this week announced their plans to merge regulatory arms into a single self-regulatory organization. The merger appears to be an effective play toward regulators' aim to increase the efficiency and consistency of industry oversight, while reducing regulatory costs. However, there's at least one constituency that can't be thrilled about details of the announcement.It would appear that mid-sized securities firms have been given the short end of the stick in the governance of the new SRO. In structuring the board of governors, the NASD and NYSE will give large firms with 500 or more registered members, as well as small firms with 150 registered persons or fewer, three seats on the new SRO board. Mid-size firms will only be guaranteed one seat at the table.

SEC chairman Christopher Cox believes that this distribution "strikes the right balance" for board representation. Do mid-size firms deserve an equal share of seats on the new SRO's board of governors?

Interestingly, some small firms have begun making noise about the merger, saying that the new structure is a win only for large firms that are members of both exchanges and that the move is being rushed, with the new SRO expected to open its doors in the second quarter of 2007.