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December 1, 2004

Dumping the Bulletin Board?

By Gregory Bresiger

Nasdaq, which just had another difficult quarter, is said to be finally preparing to give up its Bulletin Board operation, sources told Traders Magazine.

"They will turn it over to the NASD and let them run it," says one source, who wouldn't be quoted by name. "This is part of a move by Nasdaq to cut back on various money losing operations and concentrate on core operations that make them money." He adds that the NASD will run the Bulletin Board and charge Nasdaq for doing so.

A Nasdaq official said that, "we will not comment on speculation." The NASD declined comment.

Nasdaq has agonized over what to do with the troublesome Bulletin Board for years. It had previously considered ridding itself of this obscure market for thinly-traded stocks, which are typically too small for listing on Nasdaq. It abandoned plans to turn the Bulletin Board into a formal stock exchange - the BBX, or Bulletin Board Exchange - with stricter listing standards. The Bulletin Board has some 3,300 stocks and about 230 market maker participants, according to Nasdaq. Nasdaq has operated the Bulletin Board since 1990. Unlike the Nasdaq market, it has no business relationship with Bulletin Board issuers.

Another trading source said that he had heard for sometime that Nasdaq would be making the move to finally unload the Bulletin Board. "It will certainly do this because it is another step in Nasdaq getting its exchange application from the Washington regulators. Nasdaq can't become a formal stock exchange if it is structured as a dealer association," says this veteran trading executive.

To be sure, Nasdaq could also reverse itself one more time and scrap plans to rid itself of the Bulletin Board. But the veteran trading executive said freeing itself from the obligation to run the Bulletin Board would help Nasdaq shareholders feel more confident. Nasdaq, which cut its expenses by some $31 million in the third quarter, compared to the previous period, lost $5.5 million in the last quarter.

On the plus side, Nasdaq had a bigger loss, $38 million, in the third quarter of last year. The bad news is that total revenue is down by some 12 percent compared to a year ago, with market services taking an 18 percent hit, but issuer services slightly up. "These results," said Nasdaq CEO Robert Greifeld, "reflect the strength of our diversified business model and our continuing efforts to reduce operating expenses."