Talks between the National Association of Securities Dealers and the regulatory arm of the New York Stock Exchange about creating a joint regulatory entity are moving ahead, and the NASD is optimistic that a deal will be struck, an NASD spokesman said.

Plans for an outright merger of the NASD and NYSE Regulation, a unit of NYSE Group Inc., don’t appear to be on the table. Rather, the two big Wall Street cops are in discussions about creating an “independent entity” that would deal with oversight of brokerage firms, the spokesman, Howard Schloss, said.

While the two organizations have been looking for ways to cooperate for a while — they also have been working on a plan to “harmonize” their rules — the NASD’s latest statement suggests that the negotiations may be gathering momentum. Earlier Thursday, NYSE Group Chief Executive John Thain said he expects there will be a “consolidation” or “combination” of the memberfirm examination functions of the NASD and NYSE Regulation.

“I think it’ll be soon,” Mr. Thain told reporters at the annual conference of the Securities Industry and Financial Markets Association. When asked if that meant sometime next year, Mr. Thain said he hoped a deal would materialize even earlier.

“Both sides are talking and committed to getting it done,” Mr. Schloss said Thursday, also at the conference.

While combining firm-regulation duties would fall short of an actual merger — since the NYSE would appear to keep its market-surveillance functions under its own roof — such an arrangement may please critics who now complain about costly regulatory overlap. Brokerage officials dislike the extra burden and expense that they say comes from being policed by two large, separate regulators.

SIFMA officials, for example, have called for a “hybrid” self-regulator to be carved out of the NYSE and NASD. James Gorman, head of Morgan Stanley’s global wealth management group, said he and others at SIFMA were”very encouraged” by the progress on the part of the NYSE and NASD. Upon hearing Mr. Thain’s expectation that a deal may occur soon, Edward Forst, Goldman Sachs Group Inc.’s chief administrative officer, reacted with glee.”I love that!” he told reporters.

The subject of a combination of regulatory functions is a delicate issue. Mr. Thain brought up the idea last year at this same conference, but no deal emerged. It’s also unclear whether and when an agreement will be reached. Reacting to Mr. Thain’s suggestion that something could be decided soon, perhaps as early as this year, Mr. Schloss said the NASD is “optimistic on timing,” but declined to be more precise.

It remains to be seen what effect a regulatory combination would have on investors. The NYSE and NASD play an important role in investor protection, meting out fines for improper behavior by firms and individuals and setting standards and rules. Some investor advocates like multiple regulatory layers, praising, for example, the added scrutiny that investigations by the likes of New York’s outgoing state attorney general, Eliot Spitzer, have brought upon the financial-services industry.

But Wall Street dislikes the argument that two sets of eyes are better than one when it comes to regulation. Marc Lackritz, SIFMA’s co-chief executive, argued that an integrated hybrid regulator would work more efficiently for all parties. “Regulatory competition makes no sense,” Mr. Lackritz said.