Opposition Fails to Block Nasdaq Spin-Off

FRAMINGHAM (04/18/2000) - The spin-off of Nasdaq Stock Market Inc. will proceed swiftly, as an opposition group failed in its bid to get a preliminary injunction to block implementation of the plan.

Judge Barry Cozier of the Supreme Court of New York County turned down a request by the Independent Broker-Dealer Association (IBDA), which argued that there were irregularities in Friday's vote among Nasdaq members to approve the spin-off.

Last Thursday, the IBDA made a last-ditch effort to block the vote. However, that move failed, and the National Association of Securities Dealers (NASD) voted overwhelmingly to approve the spin-off of the tech-heavy Nasdaq stock exchange.

"Obviously, we're disappointed, and we're going to have to assess what we are going to do," said Saul Roffe, an attorney for the IBDA. Meanwhile, the group plans to continue with a lawsuit against the NASD.

IBDA head Alan Davidson said that he doesn't oppose the spin-off as such - in fact, as a member of the NASD board of directors, he voted in favor of the restructuring plan in January.

However, he was concerned about the way the vote was handled, he said, and about the possible consequences for small brokerages.

"When the Nasdaq was created, each firm was given one vote, without regard to size," he said. Now, Nasdaq will make decisions based on the wishes of its shareholders, in a move that's akin to replacing the U.S. Senate with the House of Representatives, said Dana Stiffler, an analyst at Meridien Research Inc. in Newton, Massachusetts.

As a result, larger brokerages will have more of a say in how the exchange is run, and there will also be more money for information technology projects, Stiffler said.

"The current structure won't let them move fast enough," she said. "They can't make a decision to team up with an [electronic communication network]; they can't make a decision about the Central Order Limit Book."

For example, the spin-off would allow Nasdaq to move more quickly in forging alliances with exchanges in Europe and Japan in order to move closer to around-the-clock trading, said Stiffler.

But according to Davidson, 24-hour trading will benefit the largest brokerages - which have offices overseas - to the detriment of small firms.

"Those small members are like the Brazilian rain forest," he said. "They're very important to the growth of the small businesses in the United States. But as Nasdaq focuses more and more on big business, it creates an imbalance."

Not so, said LaRae Bakerink, president of the California Association of Broker Dealers, who pointed out that small firms make up the majority of the NASD membership - and thus most of the 84% who voted in favor of taking Nasdaq public.

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