And it says the Big Board must completely shed its regulatory arm.

It will work closely with the association's regulatory arm and the Nasdaq stock market.

Would the regulatory arm of the exchange have the courage to move against its biggest shareholder if the broker was found to be at fault?

One measure being considered would divide the exchange's regulatory and commercial arms.

Mr. Reed has been defending the regulatory arm as a crucial component of the stock exchange.

"They do not have the regulatory arm to make it happen."

A private stock sale would generate cash to help finance the association's regulatory arm, which would remain under the control of the parent group.

Local authorities will now have to divorce their regulatory arms from the disposal organisation by forming separate companies which would normally be in private hands.

In December 2003, it created a chief regulatory officer and formally separated its regulatory arm from the business side.

And its regulatory arm has made real progress in cleaning up the sleazy side of the brokerage business.