WASHINGTON -- National Association of Securities Dealers members voted overwhelmingly yesterday to turn the Nasdaq stock market into a for-profit company.
The approval by 84 percent of the NASD's member brokerages clears the way for the association to sell the Nasdaq by September. The plan seeks to raise $1.5 billion by making two private sales of Nasdaq stock and warrants to brokerages, companies and institutional investors. "The members' message is a realization that this is not only good for them but represents survival for Nasdaq," NASD and Nasdaq Chairman Frank Zarb said.
Zarb said turning the Nasdaq from a not-for-profit membership organization into a private company would let it compete more nimbly with electronic trading rivals in the United States and Europe. A shareholder-owned company can make corporate decisions more quickly and raise money more easily to finance the Nasdaq's growing technology needs, he said.
After the Nasdaq is sold, its new board of directors will decide by the end of the year whether to make an initial public offering of Nasdaq stock, Zarb said. The New York Stock Exchange, the largest U.S. stock market, is considering raising money through an IPO next year.
The NASD member vote handed a victory to Zarb and a stinging defeat to dissident NASD board member Alan Davidson, a small-firm activist who campaigned against the plan after endorsing it in January.
Davidson said he was disappointed by the vote but unrepentant in his opposition. "The vote reflects confusion and fear of retaliation by the member firms," said Davidson, who also is president of the 200-member Independent Broker-Dealers Association. Of the 4,185 member firms voting, 3,423 approved the plan, 652 opposed it and 110 abstained, the NASD announced yesterday. About 1,300 firms did not vote. About 60 percent of NASD member firms have fewer than 10 employees.
The NASD's next step will be to sell a minority block of Nasdaq stock and warrants to brokerages, companies and institutional investors by the end of next month. A second sale, expected by the end of September, will complete the Nasdaq's transformation into a private company. The sale will leave NASD with a 22 percent stake in the new Nasdaq firm.
Zarb said the Nasdaq composite index's plunge during the past month, including its 9.67 percent decline yesterday, would not affect the desirability of the Nasdaq stocks and warrants being sold.
"They're being sold to professionals who know that markets go up and markets go down," he said.
More than 1,000 member firms have committed to buying Nasdaq shares for $11 a share during the first private placement, he said.