NASD and NYSE Group Inc. Move Toward SRO Merger

The NASD (National Association of Securities Dealers) and the New York Stock Exchange (NYSE) Group Inc. took a major step forward toward developing a consolidated, single, not-for-profit self-regulatory organization (SRO). They recently signed a historic letter of intent for the merger. Before the SRO can be created however, both parties’ memberships and the SEC have to approve the bylaw amendments. The SRO is expected to be up and running after the first quarter of 2007.

With a newly consolidated group working toward more efficient regulation, costs would be cut for broker-dealers because there no longer would be any duplicate oversight. There would also be one enforcement staff, one set of rules, and one set of examiners. Mary L. Shapiro, NASD chairman and chief executive officer, will be CEO of the organization. CEO of NYSE Regulation Richard G. Ketchum would remain in his position while also becoming the new SRO’s chairman of the board of governors.

An SRO is a nongovernmental organization that has been entrusted to regulate its own members. The purpose of the New SRO is to enhance regulatory efficiency and consistency, and millions of dollars are expected to be saved once the new operation is fully running.

Regarding the new SRO, SEC Chairman Christopher Cox has said, “This is a significant step forward for America’s investors and for our nation’s capital markets. Protecting investors from fraud in today’s complex, integrated markets requires that regulators look across markets to prevent wrongdoers from exploiting the seams in regulatory jurisdiction… Eliminating overlapping regulation, establishing a uniform set of rules placing oversight responsibility in a single organization will therefore enhance investor protection while increasing competitiveness in our markets.”

470 NYSE regulation members and 2400 NASD staffers are expected to stay on and work for the proposed organization. A 23-member transitional board of governors is expected to stay on for three years. The new board would include three seats for small firms and three seats for larger firms to make sure the interests of both types of firms are represented. Medium size firms (151-499 members), independent dealer/insurance affiliated firms, investment companies, and NYSE floor members will each have one seat on the board. The SRO will have operations in New York, Washington D.C., and at a number of district and dispute resolution offices across the United States.

NYSE Group, Inc. (NYSE:NYX) is a leading provider of trading, securities listings, and market data products and services. It operates the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange).

The NASD oversees the activities of more than 5,050 brokerage firms, approximately 172,050 branch offices and more than 663,050 registered securities representatives while also providing outsourced regulatory products and services to a number of stock markets and exchanges. The NASD is the main private sector regulator of the U.S. securities industry.

All 5100 NASD member firms are expected to benefit from this more streamlined form of regulation. Each firm is also expected to receive a one-time $35,000 payment because of the cost savings that are anticipated under the new member plan. There will also be a decrease in certain member fees for five years.

The stockbroker arbitration law firm of Shepherd Smith Edwards & Kantas LTD LLP helps U.S. investors recover losses due to any acts of broker misconduct or securities fraud. If you would like to speak to one of our attorneys, contact Shepherd Smith Edwards & Kantas LTD LLP online or call us at 1-800- 259-9010 today to schedule an appointment for your free consultation.

NASD, NYSE Agree to Merge, Will Form Single SRO,, November 29, 2006
NYSE Group


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