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NASD sets member vote
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March 13, 2000: 9:15 a.m. ET
Proposed restructuring would convert exchange into for-profit company
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NEW YORK (CNNfn) - The National Association of Securities Dealers Inc., the parent of the Nasdaq electronic stock market, launched the first steps Monday in its attempt to convert the exchange into a for-profit, private company.
The dealers' association, or NASD, began sending proxies to its approximately 5,500 members to vote on the restructuring plans. Member approval would allow the NASD to proceed with a two-part private placement of newly issued Nasdaq stock, which ultimately could lead to an initial public offering of shares.
The NASD has "put in the mail the proxies to all of our members, which starts the clock running -- and the early part of April will be the finale of this process," NASD chairman and CEO Frank G. Zarb said. "This is a complete reinvention of how a stock market is run."
NASD members will vote on the proposal April 14.
In January, the NASD board decided to proceed with privatization plans that would place a majority of the electronic stock market's ownership in the hands of its members and the companies that are listed on the exchange. The exchange is the home of many leading high-tech companies, including Microsoft (MSFT: Research, Estimates) and Intel (INTC: Research, Estimates).
If the NASD members approve the plan, NASD then will privately offer from 47 percent to 49 percent of the newly issued stock to members, market makers and companies that issue stock on the exchange in the first phase of the placement. NASD opened the subscription period for potential investors for the first phase of the private placement Monday.
In a second phase, the NASD would reduce its holding in the Nasdaq to a minority stake of about 22 percent.
The placement is expected to be completed by later this year.
The Nasdaq and the New York Stock Exchange are under pressure to modernize amid the threat of competition from alternative trading systems known as electronic communications networks, or ECNs. Such networks can match trades faster and cheaper than traditional markets, bypassing the use of specialists or the market makers of the Nasdaq exchange.
The NYSE reportedly approached the Nasdaq recently about a possible merger, but was rebuffed. 
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