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August 23, 2005

NASD Adopts Nasdaq's OTCBB

By Gregory Bresiger

(Traders Magazine, August 2005) -- It's now official. NASD, a regulator that has closed many a boiler room, said it is going to take possession of Nasdaq's OTC Bulletin Board (OTCBB) as reported here last month (See Traders Magazine Washington, July).

"I don't know whether to send them my congratulations or my condolences," one trading industry executive, who declined to be quoted by name, told Traders Magazine.

Nasdaq will continue to provide the technology and the connectivity used to carry out the day-to-day functions of the OTCBB and the OTC trade reporting while the OTCBB business will be owned, managed and continue to be regulated by NASD, Nasdaq officials said. The NASD's new ownership of the OTCBB is a double- edged sword," Cromwell Coulson, chief executive of the Pink Sheets, told Traders Magazine. His firm had wanted the bulletin board."It will allow them (NASD) to move forward with more rulemaking that protects investors and improves best execution," Coulson said. "But they will also have to ensure that their operation of the OTCBB does not create a false sense of legitimacy," he added.The OTCBB was Nasdaq's problem child, making little money and conflicting with its attempts to become an upscale exchange. Jettisoning the bulletin board is also seen as another step in Nasdaq's marathon efforts to become a legal exchange."This development," said a Nasdaq spokeswoman, "is designed to facilitate corporate structure changes related to Nasdaq achieving exchange status." The spokeswoman said the SEC stipulated that, as an exchange, Nasdaq cannot have any "connection with the OTC markets."

One trading executive, who did not wanted to be quoted by name, also said, "having a OTC bulletin board clashed with Nasdaq's main brand. NASD didn't respond to requests for comments.