The

Nasdaq

market and

New York Stock Exchange

should stop spending so many millions tooting their own horns and focus instead on processing stock trades efficiently, the nation's top securities regulator says.

"I hate it when I see the

NASD

and the New York Stock Exchange advertise,"

Securities and Exchange Commission

Chairman

Arthur Levitt

told an audience of investors recently in New York. With Nasdaq building an eight-story-tall blinking billboard in Times Square and the NYSE rolling out celebrities in splashy television commercials, Levitt must be frequently annoyed.

Criticizing the exchanges' ad blitz, however, puts Levitt in a strange position. He has pushed competition between trading systems such as ECNs and established exchanges, but he also wants them to make advances in their technology, endeavors that both dictate exchanges expend capital.

But to the exchanges, which face competition from upstart electronic trading networks, or ECNs, the self-marketing isn't just a matter of image polishing. To them, it's become survival. Together, the Big Board and Nasdaq's parent, the National Association of Securities Dealers, have spent about $180 million on advertising over the past five years, according to

Competitive Media Reporting

and

Publishers Information Bureau

.

Tech Wars

The Big Board is advertising, in part, to correct what it sees as a misperception, says Robert Zito, the NYSE's senior vice president of communications.

"The media madness suggests that all technology resides at Nasdaq. The market cap of our tech companies is larger than the market cap of Nasdaq's tech companies," he says.

The NYSE's television ads feature characters, including pro football great

Terry Bradshaw, asking where the centers of technology and sports are, and after being led around the world, are finally taken to the Big Board's floor.

Nasdaq, launched in 1971, has advertised to increase visibility of its listed companies, spokesman Andy MacMillan says. Nonetheless, Nasdaq's ad budget is less than 10% of its spending on technology this year, he says. "Our emphasis is where it should be," he says.

Levitt's not sure, or at least that's what he's told audience after audience.

"It's definitely a burr under his saddle," says SEC spokesman Chris Ullman. "He's particularly concerned about image advertising when there are other infrastructure issues."

Bill Freund, a former chief economist for the NYSE and now director of the

Pace University Centre for the Study of Equity Markets

, says advertising is a necessity for the exchanges. "They compete for listings. Advertising is part of their marketing," he says.

"It's probably just

Levitt's opinion, not that his opinion doesn't count, but it's not enforceable," Freund says.

Big Board Spends Big Bucks

There is no disputing at least part of what Levitt says.

The NYSE, which reported an $800,000 quarterly net loss at the end of last year -- its first quarterly loss in nearly a decade -- spent about $15 million on advertising that year, Zito said.

That was about double its annual advertising spending in each of the years 1995, 1996 and 1997, according to Competitive Media Reporting.

Zito says the Big Board plans to spend just shy of $15 million on advertising this year.

For its part, NASD has spent more heavily on advertising than the NYSE in recent years, though the gap between the two has narrowed.

In 1995, NASD's ad spending was five times that of the Big Board. Last year, by comparison, it was $26 million, a little more than two times what the NYSE says it spent for advertising.

Nasdaq's image building hasn't relied solely on ads.

Because the electronic Nasdaq has no trading floor, it built something it hoped would look just as spectacular in front of the television cameras and to pedestrians -- a $37 million market site. The accompanying electronic billboard -- with 18.7 million LED indicators, NASD claims it's the world's largest video screen -- wraps around the corner of the Conde Nast building at the intersection of 43rd Street and Broadway, in Times Square.

The NYSE hasn't had to build such a media center. It has a real trading floor, in use in the same marble-columned building at Wall and Broad streets in downtown Manhattan since 1903, and plays host to several Web sites and broadcast outlets.

Levitt's Longing

There's also no disputing some of the concerns Levitt has voiced about capacity.

The NASD acknowledged its own capacity limits when it recently asked the SEC to move back its July 3 deadline for the exchanges to begin quoting stocks in decimals rather than the current system of prices in fractions of a dollar.

The SEC so far has not changed the decimalization deadline.

Nasdaq also has had technology difficulties that have disrupted its trade-reporting and quotation systems on at least two occasions in the last six months.

But NASD is spending $280 million on technology this year, and the issue isn't whether its advertising budget is disproportionately large, Macmillan says.

"Look at what we're spending on advertising vs. what we're spending on technology. There's no comparison," he says.