Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


00:00 AM
Cristina McEachern
Cristina McEachern
Connect Directly

NASD Initiates Restructuring with Member Vote and Private Placement Plan

NASD members will vote on the proposed restructuring at a special meeting on April 14.

In a teleconference this week, NASD chairman and chief executive officer Frank Zarb announced the launch of a member vote on its proposed restructuring. Proxy materials detailing the restructuring plan were sent to about 5,500 NASD members for review.
Simultaneously, a private placement memorandum went out to members and potential investors, opening the first phase of Nasdaq private placement. NASD members will vote on the proposed restructuring at a special meeting on April 14, when a simple majority of member votes, or one for each firm, will be needed to approve the plan and begin the first phase.

"The new economy needs a new marketplace and that's been fairly clear for a long time," said Zarb, urging members to vote in favor of the restructuring. "This restructuring helps and benefits all parts of the marketplace and those who read the material will see that each element is addressed as to how it affects the members. It makes clear the new model is good for investors and very good for issuers, market makers and liquidity providers."

Chairman Zarb also emphasized that the plan will potentially lowers costs for member firms. The NASD has committed to reducing fees and assessments of members by $114 million over the next few years. Part of the reduction will come in the form of a $600 cash rebate to all members this year as well as a lowering of the minimum level of assessments paid by smaller broker/dealers, which make up a majority of the NASD membership. "The NASD will be able to focus full time and attention to the welfare of its members and to the self-regulatory model which is important to all of us," he added.

The first phase of restructuring involves the selling of 47-49% of Nasdaq newly issued shares to a limited number of market participants, issuers and all NASD members. Ownership will be broken down to offer about 130 Nasdaq market participants a total of 30-32% equity interest, 130 issuers a total of 16% equity interest and all NASD members will be offered a total of 25% equity interest. During the initial phase of restructuring, which will begin following the vote in April, Nasdaq also plans to register as an exchange.

In the future, the NASD could also undertake an initial public offering, selling another 8% equity participation in Nasdaq to the membership at large, which would be subject to regulatory approval. Following the private placement, the NASD would still retain a minority stake in Nasdaq. "This is not only a question of improving the situation," explained Zarb. "But by not taking an aggressive initial step that's consistent with what the rest of the marketplace is asking for, the board would be negligent in exercising its fiduciary responsibilities. With the approval of our members, we can only end up as a stronger institution."

Register for Wall Street & Technology Newsletters
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.