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May 31, 1999

New Session in NASD's Plan for Extended Trading

By William Hoffman

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  • New Session in NASD's Plan for Extended Trading

The NASD board of Govenors has considered a proposal by the association's Quality of Markets Committee to add a supplementary four-hour session to the exchange's trading day.

The session would start at 5 p.m. Eastern time and end at 9 p.m. It would be a pilot program, affecting between 100 and 500 of the approximately 5,000 stocks now traded on the exchange.

Market makers, electronic commerce networks (ECNs) and order-entry firms, including online discount brokers, would be invited to participate on a voluntary basis.

The extra session might be extended if the pilot program is approved by the Securities and Exchange Commission and becomes successful, according to NASD spokesman Scott Peterson.

SEC spokesman John Heine, said that with a 21-day comment period and 14 days for staff review, recommendation and an optional commission vote, the respond to it in due time. Neither the National Association of Securities Dealers, nor the New York Stock Exchange would comment on the consolidation issue.

But Rick Roberts, an attorney at Thelen Reid & Priest in Washington and a former SEC commissioner, said, "I support conceptually what the SIA is talking about."

Regulatory overlap and duplication of effort, especially on matters that draw in state agencies, the SEC and the SROs, could be avoided with a thoughtful and thorough consolidation of the myriad self-regulatory authorities, Roberts said.

"You see a lot of [overlap] in the examination area," Roberts pointed out. Under a consolidated regime, various state, federal and self-regulatory authorities might perform one coordinated examination per year, rather than the current system where one risks "getting examined to death."

Worth a Look

Former NASD regulator John E. Pinto, who is now an executive vice president in Washington for Atlanta-based DOVER International, sounded a more cautious endorsement: "It's always worth looking at the issue."

It's easy to favor the principle of consolidation, Pinto noted, but far more problematic to make the principle work. Concerns about waste, overlap and duplication of effort must be balanced against jurisdictional concerns of the responsible SROs, he added.

Pinto said that, as much as SEC's new alternative trading system rules, what might be driving interest in SRO consolidation is recent talk about consolidation of trading markets.

Poppolardo said SIA's study proposal has prompted spirited debate among members. Some are intrigued by the cost-savings that could be won from efficiencies in consolidation. Others don't want to surrender the advantages a little regulatory competition among numerous SROs can bring. A consensus may be emerging, she said, that oversight activities should probably remain closer to the individual markets. The Securities Industry Association wants the Securities and Exchange Commission to study the feasibility of consolidating the industry's numerous self-regulatory organizations (SROs).

The SIA included the proposed study in a list of legislative proposals sent to the Senate Banking Committee, after committee chairman Sen. Phil Gramm (R-Texas) invited comments from industry representatives earlier this year.

The trade group suggested "this may be an appropriate time for a public discussion about the direction that self-regulation should take." Arguing the case, the SIA cited recent changes in the structure and governance of the NASD, consolidation among some SROs, and increasing competition between broker dealers and SROs in some areas the latter regulate.