FER examined the external reporting requirements for financial assets and liabilities as well as derivatives. We conclude that the informational content and comparability of financial statements would be enhanced by adoption of the following external reporting requirements:

All financial assets and liabilities should be recorded at "fair value", i.e. marked to market, except for derivative positions established to hedge cash flows related to non-financial assets or to future expenditures. When prices cannot be directly observed in the market by reference to liquid instruments, marking to market entails the use of models to infer fair value.

The FER is skeptical that an effective and sustainable collusive arrangement is possible among Nasdaq dealers. Both economic theory and history provide substantial support for the belief that effective collusive arrangements generally require that two conditions be met: (1) there be a small number of firms, and (2) there exist significant barriers to entry. Neither of these conditions is met in Nasdaq. The number of dealers is large (as many as 60 dealers trade the more active stocks) and entry is easy (any existing securities firm that meets minimum capital requirements can become a dealer in any stock by merely notifying Nasdaq).