Newspaper article THE JOURNAL RECORD

Marketplace: Challenges to NASDAQ Loom Large

Newspaper article THE JOURNAL RECORD

Marketplace: Challenges to NASDAQ Loom Large

Article excerpt

NEW YORK -- During the past year, Frank G. Zarb, chairman of the National Association of Securities Dealers, has struck deals to buy the American Stock Exchange, forged alliances with three overseas bourses and promised investors 24-hour access to the Nasdaq stock market. And at an NASD board meeting Thursday, Zarb will present his plan for making the Nasdaq market a for-profit, publicly held company separate from its regulatory unit.

Clearly, Zarb has been busy. But has he been effective?

This question is being raised by people both inside and outside the NASD following the flurry of activity. As the Nasdaq stock market faces increased competition from well-capitalized private companies running electronic communications networks, or ECNs, the effectiveness of the NASD chairman is more crucial than ever.

"I know what Zarb is trying to do," said Patrick J. Healy, president of the Issuer Network, a company in Chevy Chase, Md., that advises public companies on where they should list their shares.

"But I think their ability to get these things running smoothly is less than stellar," he said.

The challenges to the NASD certainly loom large. The business of who facilitates investors' securities trading and ensures that the participants abide by the rules is up for grabs.

As for Zarb, he argues that the NASD is setting the pace. "I think we're leading the parade," he said. "Not everybody always agrees with me. I think we've responded to events and maybe even gotten a little ahead of the ball."

But he will have to run faster and faster just to keep up. New competitors are entering the business almost weekly.

Any moves the NASD may want to make are hindered by its considerable infrastructure. By definition, an entity that is both a market and a regulator to thousands of brokerage firms across the nation cannot be as nimble as startups with no regulatory obligations. "It's like dealing with the old AT&T," said Alan Davidson, president of the Independent Broker-Dealer Association. …

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