Picked this up from a message board which so often defended MM's and specialists and their abuse of the system, with exceptions allowing for naked shorting. Those who posted about NSS and MM's were subject to criticism and comments to the effect that MM's provided a public service and did not make that much providing this service.
Here they had to pay $70 million, so you can only begin to imagine how much they have stolen from the public trust and how investors have been screwed.
Specialists Pay $70 Million to Settle S.E.C. Charges
March 4, 2009, 3:43 pm
dealbook.blogs.nytimes.com
The Securities and Exchange Commission said Wednesday that 14 specialist firms, including those run by Goldman Sachs, Knight Financial and E*Trade, had agreed to pay nearly $70 million to settle charges that they had made improper trades that benefited themselves ahead of customers.
The S.E.C. charged that the specialist firms had violated their “fundamental obligation to serve public customer orders over their own proprietary interests” by “trading ahead” of customer orders, or “interpositioning” the firms’ proprietary accounts between customer orders.
“These firms violated the public trust by abusing the privileged position they had as specialists on the various exchanges,” James Clarkson, the acting director of the S.E.C.’s New York regional office, said in a statement.
David Rosenfeld, associate director of the New York office, added, “Specialists who engage in unlawful proprietary trading hurt the investing public and undermine confidence in the fairness of our capital markets.”
Specialists are responsible for maintaining fair and orderly markets at exchanges.
The S.E.C. said the improper proprietary trading occurred from 1999 to 2005 on the American Stock Exchange, the Chicago Board Options Exchange, the Philadelphia Stock Exchange and the Chicago Stock Exchange.
The agency said it had settled administrative and cease-and-desist proceedings against Botta Capital Management, Equitec Proprietary Markets, Group One Trading, Knight Financial Products, Goldman Sachs Execution and Clearing, SLK-Hull Derivatives, the Susquehanna Investment Group and TD Options.
Those eight firms agreed to disgorge more than $22.7 million in profits and pay more than $4.3 million in penalties.
The S.E.C. also settled civil actions against Automated Trading Desk Specialists, E*Trade Capital Markets, Melvin Securities, Melvin & Company, Sydan and TradeLink.
Those six firms agreed to disgorge more than $35.7 million in profits and pay more than $6.7 million in penalties.
The firms agreed to settle without admitting or denying the charges.
The S.E.C. said its investigation of improper specialist trading was continuing.
Go to Press Release from the S.E.C. »
sec.gov
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