In the stock market crash of 1987, few institutions suffered
more damage, both real and perceived, than the National Association
of Securities Dealers' over-the-counter market.
Through the long winter that followed, the NASD and its
president, Joseph Hardiman, have labored to repair the market's
image and recover the momentum it had been building since the early
By all accounts, that effort has produced some notable successes
``I feel that the NASD has done a real good job,'' said Binkley
Shorts, portfolio manager of the Over-The-Counter Securities Fund, a
mutual fund that concentrates in the market for unlisted stocks that
are traded through a network of dealers overseen by the NASD.
``It feels pretty comfortable right now'' investing in
over-the-counter stocks, Shorts added.
But few observers argue that the mission of restoring investors'
confidence in the over-the-counter market, or in stocks in general,
is anywhere near complete.
``We've taken some first steps, some important steps,'' Hardiman
said in an interview at his office here. ``There's more to be
The crash hit at a time when the NASD, after a decade of
dramatic expansion and innovation, was bidding to challenge the New
York Stock Exchange for pre-eminence in the U.S. stock market.
It claimed that its multiple-dealer system was superior to that
of the Big Board and other exchanges, where a single broker known as
a specialist operating on the trade floor acts as a meeting point
for buy and sell orders in a given stock.
But in the worst days of the crunch, some beleaguered
over-the-counter dealers backed away from the NASD's automated
small-order execution system, known as SOES.
Investors and brokers ran into busy signal after busy signal as
they tried to reach dealers who were either unable or unwilling to
handle the volume of telephone calls and orders.
``The market was put to a severe test, and it suffered a
hangover that lasted for at least a couple of weeks,'' recalled
Within a month, the NASD came up with plans to strengthen the
small-order execution system and increase the responsibilities of
dealers. Those measures have been approved and are scheduled to be
put into effect by late May or early June, Hardiman said.
For one thing, participation in the system, formerly optional
for dealers, will now be mandatory. …