As the NASD prepares to spin off Nasdaq, some member firms are criticizing the deal.
NASD members have been informed that Salomon Smith Barney is working as an adviser on the transaction. But how SSB was chosen and how an initial valuation of 1 billion dollars was made is a mystery. The NASD would not respond to RR's questions. And NASD member firms say they have received no details.
As a major OTC player, SSB could be offered Nasdaq shares as part of a first tranche, due early this year. Smaller firms would be offered shares sometime in the fall. SSB also holds stakes in competing trading systems, as well as the NYSE.
Further, several NASD board members are executives at brokerage firms likely to be given first crack at the offering or are affiliated with major Nasdaq issuers who would also likely be offered initial shares.
"What we want [are disclosure] documents," says a principal at a New Jersey-based firm. "We don't have any."
"How can you spin off half of an organization without voting on it?" asks an owner of a small New York firm. The NASD has argued that competitive pressures don't allow time for a member vote on the deal prior to the first tranche.
Meanwhile, the NASD has delayed its board election. Six new board members were supposed to be in place before a board meeting this month. But as of mid-December, the NASD had yet to announce its candidates. At the earliest, an election could not be complete until February--possibly until after the first piece of Nasdaq is sold.
At press time, the NASD was making accommodating noises. The lead critic of the Nasdaq deal, NASD board member Alan Davidson, head of Zeus Securities in Smithtown, N.Y., says the NASD will make several "technical adjustments" to the transaction. He declines to specify those changes, but says they will make the spinoff fair for all member firms.
