It seems that the merger of the regulatory arms of the NASD and the NYSE is going to come down to the support of the little guy. Small firms have been complaining about the effects of the merger on their voice in the new organization. Small firms have notoriously been under-represented at the NASD. Small firm owners are concerned that the structure of the new organization will make matters worse.
That debate is getting a bit heated. Yesterday, Investment News reported that the NASD has blasted the Financial Industry Association's effort to collect votes against bylaw changes needed to consolidate NASD and NYSE regulatory units. The FIA has been collecting irrevocable proxies from member firms, to vote on the bylaw changes that are needed to go ahead with the merger. The NASD responded with an unsigned message that said asking for irrevocable proxies was an "unusual request." The NASD is urging its members to approve the merger, arguing that the move would improve efficiency and allow members to retain a voice on the new SRO.
It is all going to come down to the queston of what the voting structure will be at the consolidated entity, as small firms cannot afford to lose any more representation in the regulatory body.
Reading between the lines, it appears that the small firm movement may be gaining steam. Today Dan Jamison's article at Investment News reports that the NASD has obtained the approval of the small firms committee of the Securities Industry and Financial Markets Association of New York and Washington today sent a letter to more than 280 small firm SIFMA members saying that the consolidation would improve efficiency and give smaller firms more of a voice than they have now at NASD.
More information is going to be needed. The benefits of the consolidation will be greater for the larger firms, many of whom are members of both the NASD and the NYSE. Eliminating a regulator will reduce their costs. But smaller firms typically are not members of the NYSE, and for them the merger threatens their already weak voice in the self-regulatory arena.
