Nasdaq stock market was originally a wholly-owned for-profit subsidiary of the nonprofit NASD, which also served as its direct regulator or self-regulatory organization (SRO). In April 2000, however, the NASD membership approved spinning off the for-profit Nasdaq from the non-profit NASD and converting it into a shareholder-owned market. The process was initially envisioned to have three broad stages: (1) issuing privately placed stock; (2) converting to technical exchange status; and (3) issuing public stock. The private placement took place in two sub-stages. On March 15, 2001, Nasdaq submitted an initial application for exchange status to the SEC, an application that the agency published for comment on June 14, 2001. On January 13, 2006, the SEC approved Nasdaq's application to become a registered national securities exchange. Nasdaq is now officially a registered an exchange, but the SEC will not permit Nasdaq to begin operations as an exchange and to fully relinquish its independence from ongoing control by the NASD until various conditions, including the following key ones, are satisfied:
Nasdaq must join the various national market system plans and the Intermarket Surveillance Group; The NASD must determine that its control of Nasdaq through its Preferred Class D share is no longer necessary because NASD can fulfill through other means its obligations with respect to non-Nasdaq exchange-listed securities under the Exchange Act; The SEC must declare certain regulatory plans to be filed by Nasdaq to be effective; and Nasdaq must file, and the Commission must approve, an agreement pursuant to Section 17d-2 of the Securities Exchange Act of 1934 that allocates to NASD regulatory responsibility with respect to certain activities of common members.
Traditionally, the Nasdaq stock market was a for-profit, but wholly-owned subsidiary of the nonprofit National Association of Securities Dealers, Inc. (NASD), the largest self-regulatory organization (SRO) for the securities industry. In 2000, in a strategic response to an increasingly competitive securities trading market, the NASD membership approved spinning off the for-profit NASD-owned Nasdaq and converting it into a for-profit shareholder-owned market that later planned to issue publicly traded stock. For Nasdaq, this process has involved three basic stages: (1) issuing privately placed stock; (2) converting to technical exchange status; and (3) issuing publicly-held stock. Stage one, the private placement stage has been completed. In March 2001, Nasdaq submitted an application for exchange status to the Securities and Exchange Commission (SEC), an application that has been amended several times to address certain criticisms. Obtaining exchange status is necessary for Nasdaq to proceed to stage three, the issuance of publicly held stock. Realization of that stage became much closer on January 13, 2006, when after more than a half decade, the SEC approved Nasdaq's application to become a registered national securities exchange.