The NASD, acting through its subsidiary, The Nasdaq Stock Market, Inc. ("Nasdaq"), recently filed a proposal with the Securities and Exchange Commission to transform the OTC Bulletin Board Service ("OTCBB") from a dealer-driven quotation service into a marketplace of listed stocks called the Bulletin Board Exchange ("BBX").

Under the current proposal, Nasdaq will continue to operate the OTCBB in the form of a "Transitional Bulletin Board" until the launch of the BBX, which is currently scheduled for the first quarter of 2003. From the launch of the BBX until six months thereafter, Nasdaq will operate both the Transitional Bulletin Board and the BBX. After this six-month period, Nasdaq will terminate the transitional OTCBB and operate only the BBX.

Although the OTCBB has played a vital role in fostering capital formation for growing companies since 1989, access to capital remains limited, and a more difficult climate for small company capital formation has made the environment in which these companies operate increasingly challenging. Nasdaq recognizes the important role that the OTCBB played in providing a liquid trading environment for securities that were previously listed on a national securities exchange (after such securities are delisted, shareholders continue to need a trading venue for their securities) and is committed to preserving and improving this critical segment of the market for the benefit of issuers and investors.

To accomplish these goals more efficiently, Nasdaq proposes to transform the OTCBB from a dealer-driven quotation service into an issuer-driven marketplace. Nasdaq will require issuers that apply to the BBX to demonstrate the existence of 100 round-lot shareholders and 200,000 shares in the public float, and for each issue to be assigned to at least one market maker.

Nasdaq is proposing a listing fee structure that will be lower than that of the Nasdaq SmallCap Market, largely because BBX issuers will have fewer resources with which to pay fees. In addition, trading on the BBX will be subject to marketplace rules modeled on current Nasdaq marketplace rules, with changes to reflect the slightly different trading environment for BBX issues.

Nasdaq will also impose qualitative listing standards largely equivalent to those currently applicable to Nasdaq National Market and SmallCap issues, with modifications to the independent director and audit committee standards in recognition of the burden these requirements place on small companies. Nasdaq believes that these qualitative requirements will elevate the quality of issuers attracted to listing on the BBX and provide benefits for all investors.

The proposed listing standards and requirements for the new BBX have been summarized into three separate charts: listing requirements, listing fees and key corporate governance standards. Each of these charts compares the specific standards and requirements of the proposed BBX with those of the existing OTCBB and the Nasdaq SmallCap Market.