Boards of NASD, Amex OK Merger

The boards of the National Assn. of Securities Dealers and the American Stock Exchange approved merging the nation’s second- and third-largest stock markets, a combination that would save the securities industry “hundreds of millions of dollars.”

The merger of NASD’s Nasdaq Stock Market with the Amex would result in an undetermined number of job cuts, and may be only the first such combination, NASD Chairman Frank Zarb told a news conference in New York.

Zarb said the NASD has talked to exchanges both in the U.S. and abroad. “We clearly would listen to others who would want to talk.”

A regulator familiar with the NASD’s plans said the association will consider in about a month the purchase of a derivatives market such as the Philadelphia Stock Exchange, the Chicago Board Options Exchange or the Pacific Exchange. Zarb declined to comment.

The merger announced Wednesday would combine the Nasdaq, an electronic market run by dealers, and the Amex, an auction market with a trading floor where brokers meet face to face.

The agreement now goes to the Amex’s 864 members--brokers, specialists, options traders and investors who own exchange seats and lease them--whose support is less certain. Members said they are concerned that seats could become less valuable and that floor brokers could lose jobs.

“The idea of the merger is appealing, but we’re not going to decide how we’re voting until we get more information,” said Alan MacKenzie, an owner of Orbit II Partners, which makes markets in options on the floor of the Amex and holds four seats.

The agreement contains provisions to soften the impact of the combination on Amex member firms. Amex Chairman Richard Syron said the agreement guarantees that the exchange’s trading floor and options market will be left as is for 10 years.

The agreement also calls for NASD to set aside $30 million to compensate Amex seat owners if their seats lose value.