NASDAQ BARKS BACK
The recent article in your magazine is flawed in several crucial respects ("Who watches the watchdog at NASDAQ?" Finance, May 15).
It suggests that pressure is building to transform NASDAQ into a national electronic-execution system. To our knowledge, the only persons who are advocating such a concept are some academics. While nice in theory, in reality such systems do not provide the immediacy and liquidity demanded by today's investors. Efficient markets need intermediaries, such as specialists and market makers, to provide the other side of a trade when an offsetting order does not exist. That is why the liquidity that exists in U.S. markets is the envy of the world.
The article also suggests that the NASD is pursuing an agenda favoring large member organizations at the expense of smaller firms. The NASD agenda is determined by representatives of all firms--large, medium, and small. Industry members of the NASD's board and district committees are elected, and rules are approved on the basis of one vote per firm per district. That's as balanced a voting process as you can get. For the past five years, most NASD board members from the securities industry have come from small firms.
Joseph R. Hardiman
NASDAQ Stock Market