|Wednesday, June 23, 1999
NASD's Frank Zarb Asks Securities Industry to Embrace Change
Washington, D.C. – Frank G. Zarb, chairman and chief executive officer of the National Association of Securities Dealers, Inc. (NASD®) and The Nasdaq-Amex Market GroupSM, 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:
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 is considering restructuring initiatives to save costs and to enable more technology investment and more efficient regulation such as:
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:
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:
Zarb outlined strategic initiatives to enhance the American Stock Exchange® including:
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."
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.
Once established, we will consider international futures trading.
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: www.nasd.com; www.nasdaq-amex.com; or the Nasdaq-Amex NewsroomSM at www.nasdaq-amexnews.com. A copy of Zarb’s prepared remarks is available at www.nasdaq-amexnews.com