There's a New Sheriff Coming to Town

There's someone coming to town that's getting a lot of folks excited.

It's not Santa.

Christmas has come early to Wall Street this year, and not in the form of extravagant bonuses for the likes of the Goldman Sachs and Morgan Stanley crowd (well, not this week, anyway). Just in time for the holiday season, the securities industry is celebrating a gift made possible by the NASD and the NYSE Group (NYSE: NYX  ) , and blessed by the SEC.

To those cynics out there who may think that can't mean anything good, think again. Yesterday, the two organizations announced the signing of a letter of intent to consolidate their regulatory operations into a new unnamed self-regulatory organization (SRO). Expected to begin operations in the second quarter of 2007, the new entity will serve as the private sector regulator for all broker-dealers doing business with the public in this country.

Currently, broker-dealers have to deal with the NASD, the NYSE, the SEC, and state regulatory agencies. That adds up to a lot of time, expenses, and sometimes redundant and even conflicting rules. The new SRO will serve as the top cop for enforcement action, dispute resolution, and the licensure of brokers, overseen by the SEC. While the NYSE will continue to police listed company compliance through its market surveillance division, spinning off its regulatory arm will give the exchange fewer potential internal conflicts with its operations as a public company.

If you're a NASD member firm, the gift is even greater. Each will receive a $35,000 one-time payment as a result of projected cost savings, and their annual dues will be reduced by $1,200 for each of five years. If you're a NYSE shareholder, don't look for extra glitter in your stocking -- according to the two organizations, the deal is expected to be financially neutral.

Beyond the immediate impact on the NASD and NYSE, the anticipated goals of increased efficiency and reduced expenses can certainly be appreciated. Streamlining regulations will also boost the competitiveness of U.S. financial markets, seen recently as losing their edge globally.

Hurdles still must be cleared before a definitive agreement is signed. Once the SRO is formed, it may take as long as three years to achieve real integration. Let's hope that this early present will not wind up being a gift that is returned.

NYSE Group is aMotley Fool Rule Breakerspick.

Fool contributor S.J. Caplan, a former vice president and assistant general counsel of Goldman Sachs and former vice president and derivative finance specialist at Lehman Brothers, owns shares of the NYSE Group. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 517661, ~/Articles/ArticleHandler.aspx, 12/22/2014 3:40:27 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement