News Release

NASD Restructuring Wins in Landslide Vote of the Members


  • 84 percent of those voting, vote "for"
  • Highest member turnout ever
  • "Green light" for spinning off The Nasdaq Stock Market

Washington, DC – The National Association of Securities Dealers, Inc. (NASD®), membership voted overwhelmingly in favor of the NASD restructuring at a special meeting today in Washington, D.C., concluding a five-week, voting process. In the NASD’s highest member voting turnout ever, more than 80 percent of those voting were in favor of the restructuring.

NASD Chairman and Chief Executive Officer, Frank Zarb, in commenting on the vote, said: "The members have spoken. By an overwhelming majority, they are saying that the plan we put forward makes sense. They have given the ‘green light’ to spinning off Nasdaq— positioning it to be the most successful market in the world. They have also validated the return of NASD to its original mission as a member-based organization."

In mid-March, proxy materials were mailed to each of the more than 5,000 NASD members in good standing as of February 18, 2000. Each member firm was entitled to vote on the restructuring, on the basis of one firm, one vote. Members had until today to vote, either in person at the meeting or by proxy.

The results of the vote were as follows:

Voting Results Number % of Members Voting*
Members voting in favor 3423 84%
Members voting against 652 16%

*%’s of those voting vote or against, there were also 110 members abstaining

With the membership approval of the plan, the next step will be the sale of approximately 47 to 49 percent (on a fully diluted basis) by private placement. This sale is expected to occur by May. A recap of the restructuring plans is provided in the attached fact sheet.

Based on initial tallies, a large number of NASD members have also decided to invest in the new Nasdaq Stock Market. In response to a number of member requests, the NASD is extending the subscription period until April 24, 2000, at 5:00 p.m., Eastern Time.

The National Association of Securities Dealers, Inc., is the largest securities- industry, self-regulatory organization in the United States. It is the parent organization of The Nasdaq Stock Market® , The American Stock Exchange® ,and NASD Regulation, Inc. For more information about the NASD and its subsidiaries, please visit the following Web sites:;;; or the Nasdaq NewsroomSM at

Fact Sheet on the Proposed NASD Restructuring*

A recap of the NASD proposed restructuring is provided below as follows:

  • Goals of the Restructuring
  • Summary of the Restructuring
  • Proposed Timetable
  • The Baxter Committee
  • The Fairness Committee
  • NASD Small Member Firm Participation and Benefits of the Restructuring

Goals of the Restructuring

The principal goals of the restructuring are to:

  • realign strategically the ownership of Nasdaq by enlisting a broad class of investor-owners interested in Nasdaq’s long-term success;
  • permit the NASD to focus more intently on its original mission of being solely a membership-focused organization;
  • streamline corporate governance;
  • separate Nasdaq from the NASD and NASD Regulation in an attempt to minimize potential conflicts of interest;
  • create a financially stronger Nasdaq better able to address competitive challenges and invest in new technologies;
  • generate proceeds that will support the operations of the NASD, which will continue to own NASDR, and will remain the principal self-regulatory organization (SRO) responsible for the securities markets; and
  • allow the NASD to devote additional management energies to help further develop the business lines of the American Stock Exchange LLC.

Summary of the Restructuring

In summary, a substantial stake in Nasdaq is intended to be sold at fair value in a two-part private placement to a limited number of market participants, issuers, and all NASD members. Over the course of Phase I and II, Nasdaq will offer newly-issued shares and the NASD will offer warrants to purchase outstanding Nasdaq stock.

  • In Phase 1 of the private placement, approximately 47 to49 percent (on a fully diluted basis) will be sold. Shares and warrants will be sold at fair market value, as determined through valuation analyses conducted by both J.P. Morgan Securities, Inc., financial advisor to the Fairness Committee of the NASD Board of Governors and Salomon Smith Barney, financial advisor to the NASD.

Note: Phases 1 and 2 of the restructuring are to be completed through the private placement of shares of common stock and warrants pursuant to an exemption registration of non-public offerings under the Securities Act of 1933, as amended. The securities will not be registered with or approved or disapproved by the Securities and Exchange Commission or any state Securities Commission. This press release is neither an offer to sell nor a solicitation of an offer to sell any securities. The offer of securities will only be made through a Private Placement Memorandum to be delivered to intended offerees.

Nasdaq will offer newly issued shares and the NASD will sell warrants to purchase outstanding Nasdaq stock, in varying amounts, to the following investors:

  • Approximately 130 strategic Nasdaq market participants will be offered a total of 30 to32 percent equity interest.
  • Approximately 130 issuers will be offered a total of approximately 16 percent equity interest.
  • All NASD members in good standing will initially be offered a total of approximate total of 25 percent equity interest on a prorata basis. Each member will have the opportunity to purchase warrants on 6,000 shares over the two phases of the transaction.
  • Nasdaq will seek to register as an exchange. Prior to registration as an exchange, the NASD will retain majority voting control over Nasdaq. After registration, the NASD is expected to have a minority voting interest in Nasdaq.
  • If Nasdaq decided at a later date to undertake an initial public offering, a further 8 percent equity participation in Nasdaq, based on the outstanding shares at the end of the two phases, would be allocated to the NASD membership at large, subject to regulatory approval, at fair market value.

Proposed Timetable

An approximate timetable for the major remaining restructuring steps is as follows:

Proxy materials forwarded to NASD membership to begin the voting period March 10, 2000
Special member meeting to vote on the restructuring April 14, 2000
Phase 1 private placement May 2000
Nasdaq registered to be an exchange Mid 2000
Phase 2 private placement Fall 2000

New Organizational Structure for NASD

By the end of Phases 1 and 2, the NASD’s ownership of Nasdaq on a fully diluted basis is expected to shift from 100 percent – to a minority stake of approximately 22 percent. The major portion of Nasdaq would then be owned by investors consisting of current NASD members, Nasdaq issuers and strategic market participants, as illustrated in the diagram below:

The Baxter Committee

The strategy behind the restructuring was developed through the efforts of a special committee of the Board chaired by NASD Board member Frank R. Baxter. The Baxter Committee was formed in mid-1998 and charged with the task of studying governance and restructuring options for The Nasdaq Stock Market in the face of the challenging, dynamic and increasingly competitive market. The committee worked with outside investment bankers (Salomon Smith Barney) and was composed of NASD Board members representing a cross-section of interests.

The Fairness Committee

A second committee of the board, the Fairness Committee, was created on July 29, 1999, to provide an independent assessment of the restructuring proposal. The Fairness Committee was composed of a cross section of NASD Board members who had not been part of the Baxter Committee. The Fairness Committee was chaired by Professor Robert R. Glauber of Harvard University and engaged its own independent legal and financial advisors (J.P. Morgan). The Fairness Committee carefully reviewed and considered the objectives and terms and conditions of the restructuring. The restructuring plans were modified in a number of important respects based on input from the Fairness Committee. The Fairness Committee unanimously determined that the terms of the restructuring were fair and in the best interests of the NASD and its members.

NASD Small Member Firms Participation and Benefits of the Restructuring

The proposed restructuring offers significant participation and benefits to all NASD members, including those small member firms, as summarized below:

  1. NASD is committed to reducing the fees and assessments of members by approximately $114 million over the next seven years.
    • Part of the $114 million reduction will include a $600 cash rebate to all members in year 2000.
    • Part of the $114 million reduction will include a lowering of the minimum level of assessments paid by the smaller broker dealers which make up the majority of NASD membership.
  2. $500 million in proceeds of the transaction will be earmarked to reduce regulatory burdens and make NASD Regulation technologically more efficient. 
  3. All members will be given an opportunity to purchase an equity interest in the new Nasdaq at fair market prices. Following the completion of the entire private placement, it is expected that NASD members will collectively represent the largest direct and indirect ownership constituency in Nasdaq. 
  4. The recapitalized Nasdaq will be a financially stronger, technologically more advanced market that will benefit all market participants. 
  5. The proposed restructuring will create a financially stronger NASD for the membership. 
  6. The transaction will preserve the tax-exempt status of the NASD, which benefits all members. Moreover, this proposal will avoid alternatives that would have resulted in punitive tax burdens on members.