28 November 2006

Finextra: NASD and Nyse to merge regulatory arms

The US National Association of Securities Dealers (NASD) and the New York Stock Exchange (Nyse) have signed a letter of intent to merge their respective self-regulatory operations into a single watchdog.

In a statement the two groups say the new self-regulatory organisation 'will be the private sector regulator for all securities brokers and dealers doing business with the public in the United States'. The new structure is 'expected to reduce regulatory costs to the industry by millions per year once the operations are fully integrated'.

The new organisation is expected to begin operations in Q2 2007 and will consist of the current 2400-person NASD organisation and around 470 of Nyse Regulation's member regulation, arbitration and related enforcement team.

When the deal is completed, each NASD member firm will receive a one-time payment of $35,000 in recognition of anticipated cost savings. Some member fees also will be reduced for five years.

NASD chairman and CEO Mary Schapiro will serve as CEO of the combined organisation, while Richard Ketchum, Nyse Regulation's CEO, will become non-executive chairman of the board of governors during a three-year transition period. Ketchum also will remain CEO of Nyse Regulation, which will continue to oversee market surveillance and compliance at the Nyse and Nyse Arca.

Commenting on the merger, Schapiro says: 'This plan establishes a more sensible and less complex regulatory regime that makes private sector regulation more efficient and effective. We will reduce the regulatory costs for all our member firms, while providing protection for the tens of millions of people who invest for their future in the US capital markets.'

Christopher Cox, chairman of the Securities and Exchange Commission called the move 'a significant step forward for America's investors'.

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,' he says.

© finextra