NASD News Release:
NASD's Frank Zarb Asks Securities
Industry to Embrace Change; Presents
'The Coming Global Digital Stock Market'
at the National Press Club
PR Newswire - June 23, 1999 12:42
WASHINGTON, June 23 /PRNewswire/ -- Frank G. Zarb, chairman
and chief executive officer of the National Association of Securities
Dealers, Inc. (NASD(R)) and The Nasdaq-Amex Market Group(SM),
presented his vision for the future of stock markets at the National Press
Club today, stating that "A next-generation stock market is needed to
meet needs of investors and listed companies in the Internet age for an
improved system of exchanging stock."
"A next generation of stock markets is needed to fulfill global capital
formation and liquidity requirements and to provide worldwide, instant
price discovery and trade execution in a fair, orderly, low-cost and
well-regulated environment, without time-zone limitations," Zarb told
some 200 members of the news media and invited guests at the Club's
Newsmaker Luncheon.
In describing his vision for the future digital stock market, Zarb said the
major factors driving change in the financial markets are technology,
demographics and a more global world economy. "Our strategy at the
NASD and at Nasdaq-Amex is not only to embrace the changing
technological and investing environment, but also to help move the
electronic network forward. We have made great strides, but much is left
to do," he explained.
Zarb defined the major attributes of securities industry survivors as those
who:
* Embrace technology to deliver the best service;
* Operate on global basis for the benefit of both issuers and investors;
* Are well regulated;
* Provide the best environment for listed companies.
To prepare for and embrace such rapid change, Zarb said the NASD is
mounting several strategic initiatives, including increased alliances around
the world, extended trading hours, new products, and a potential
restructuring of the NASD.
NASD Restructuring
NASD is considering restructuring initiatives to save costs and to enable
more technology investment and more efficient regulation such as:
* Spinning off NASD Regulation(R) into a well-funded, stronger
independent entity to be merged into the New York Stock Exchange's
for efficiency, savings and higher quality. Zarb explained, "A high-tech,
independent single regulator, jointly owned by the markets, with
advanced electronic surveillance could be better for investors, markets
and the securities industry. This could lessen costs and increase depth of
regulation, as well as eliminate potential conflicts of interest between
regulators and the stock markets. Oversight and investor protection is the
cornerstone of a successful market. If a joint, separate company would
do a better job, we should be willing to make it happen."
* An initial public offering (IPO) of Nasdaq, itself, in two stages: First, a
private placement for key Nasdaq-listed companies and key member
firms. Then, an initial public offering. Such actions, Zarb said, could occur
as early as next year. "Our thinking is to open up our stock markets to
investment from market participants and eventually the public, so they can
participate in our growth and financial success, and so the NASD can
raise funds to grow and continue to modernize and anticipate the future."
Extended Hours Trading
Zarb spoke about investor demand for extended hours trading, "Investors
want it, so extended hours will be a reality. The implementation date
seems to be the big question. People want to be able to trade their
personal stock portfolios at a time convenient to them."
Following the NASD's May 27 announcement of its plans to prepare for
extended hours trading, NASD leadership is working with the securities
industry to ensure the efficient implementation of an extended trading day,
including the following efforts:
* Participating in the Securities and Exchange Commission's June 30
summit on extended hours trading;
* Working with small broker/dealers to ease the impact on their business;
* Calling for the industry -- especially electronic communications
networks (ECNs) -- to participate in coordinated efforts.
International Expansion
Zarb discussed NASD's global strategy, "Our goal is to expose listed
companies to global pools of capital and our American investors to
non-U.S. listed companies. We would use various models to get from
here to there. We think linkage will provide better value for the investor,
more liquidity and lower cost trading. As a stock market, we are worth
more when we share and are shared with, as opposed to monopolizing
listings and trade flow." Recent international efforts include:
* Forming Nasdaq-Japan, an all-new electronic, Internet-based stock
market;
* Continuing to explore alliances with international markets in China and
European countries;
* Exploring further benefits of current alliances with the Stock Exchange
of Hong Kong and the Australian Stock Exchange.
Amex
Zarb outlined strategic initiatives to enhance the American Stock
Exchange(R) including:
* Automating Amex(R) trading and product improvement for faster trade
execution and reduced transaction costs;
* Extending Amex's successful index-based products internationally;
* Promoting Amex as the place for companies that need the sponsorship
of a single Market Maker (Specialist).
Zarb noted, "Some high-volume stocks like Microsoft, General Electric,
Starbucks and others trade much better in a multi-Market Maker
environment (Nasdaq). Other companies with a different profile will do
better at Amex."
Futures
Zarb announced the NASD's interest in developing an electronic futures
contract business in the U.S.:
"We think there is a need for such a venture since it would be high-tech,
screen-based, totally electronic and low-cost," said Zarb. "Futures
contracts are a step in expanding our product listings to encompass a
broad range of securities."
* We are investigating the possibility electronic futures trading -- a new,
state-of-the-art, electronic futures trading and clearing system that initially
would start with Treasury debt instruments and expand to other products.
* We have begun preliminary talks with investment firms.
* Once established, we will consider international futures trading.
Competition
Zarb concluded his remarks, focusing on the competitive environment.
"Major stock markets must play an important role in this new trading
world. Competition must be open and fair. Open competition and a level
playing field brings fairness, investor confidence and a healthy
marketplace. Where we still have outmoded anti-competitive rules and
practices related to the ability of a listed company to leave one exchange
for another, they need to be eliminated. Investors and listed companies
want rules that give them choices and efficiency. Obviously, I am referring
to the on-going debate over the NYSE's Rule 500, which makes it
impossible for companies to seek the best market for their shares and
move from the NYSE once they are listed. Large companies like GE and
IBM may do better trading on Nasdaq than on the NYSE. Our larger
capitalized companies like Microsoft and Intel find maximum liquidity and
effective price spreads on Nasdaq. Investors and companies would be
better served if Rule 500 and other similar barriers on exchanges were
100 percent eliminated. The NYSE must act on its own or government
agencies, the courts, or Congress will act to protect investors and
consumers by forcing real reform on these outmoded rules."
Information on NASD
The NASD is the largest securities-industry, self-regulatory organization
in the United States and parent organization of NASD Regulation, Inc.,
and The Nasdaq-Amex Market Group, Inc. Through its regulatory
subsidiary, the NASD develops rules and regulations, provides a dispute
resolution forum, and conducts regulatory reviews of member activities
for the protection and benefit of investors. Through the Nasdaq-Amex
Market Group, the NASD operates The Nasdaq Stock Market and the
American Stock Exchange (Amex). The NASD also oversees the
nation's 5,600 brokerage firms and more than half-a-million registered
brokers. For more information about the NASD and its subsidiaries,
please visit the following Web sites: nasd.com;
nasdaq-amex.com; nasdr.com; or the
Nasdaq-Amex Newsroom(SM) at nasdaq-amexnews.com.
A copy of Zarb's prepared remarks is available at
www.nasdaq-amexnews.com.
SOURCE National Association of Securities Dealers, Inc.
/CONTACT: Andy MacMillan, 202-728-8340, or Scott Peterson,
202-728-8955,
both of NASD/
/Web site: nasdaq-amexnews.com
/Web site: nasdr.com
/Web site: nasdaq-amex.com
/Web site: nasd.com |
