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small boutique at the same time that you want to be a mass distributor. For Nasdaq to maintain a dealer-based negotiated mentality and still claim to be the high-tech market for the twenty-first century is inconsistent. Nasdaq will have to alter its market to accommodate the realities of the new electronic environment, and the SEC has already taken steps to take the market in that direction.
Prior to 1996, when the SEC caused major changes to be implemented, the NASD served three mutually conflicting and diametrically opposed functions. I call this functional trinity the Three Hats of the NASD. They are:
1.
SRO responsibilities
2.Membership organization
3.Nasdaq market operations

SRO Responsibilities
First, the NASD is supposed to be the public watchdog over its member firms. The NASD is a self-regulatory organization (SRO) authorized by Congress to supervise, and regulate all the activities of its broker-dealer members. The NASD acts as a police officer and watchdog. The NASD also has authority to propose rules and to interpret the rules it has proposed for the SEC's approval (an approval that was often all too readily delivered based upon historic relationships). NASD officials carried with them the color of right, and their proposals were seldom challenged by the SEC's Market Regulation Division. This arrangement gave the NASD officials excessive power to grant the wishes of their influential members, who often sat on the major committees and the board of governors.
Membership Organization
Second, the NASD is a dues-paying membership organization. As such, it looks to advance the interests of its members.

 
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