Price spreads have been a topic on this thread, so I think this is
worth a post... -Eric
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Thursday, November 28, 1996
Investors' Suit Against Nasdaq Is Class Action
Securities: Brokerages accused of inflating the spread could
face major damages. Lawyer notes part of ruling favors their
side.
By SCOT J. PALTROW, Times Staff Writer
A federal judge in New York ruled Wednesday that a
lawsuit against Nasdaq dealer firms can go forward as a suit on
behalf of investors nationwide, greatly increasing chances that
Wall Street brokerage firms will have to pay major damages in
connection with allegations of conspiring to inflate the cost of
trading Nasdaq stocks.
<snip>...
The suit is based on allegations that Nasdaq dealers
conspired to increase the spread, or profit margin, on trades of
Nasdaq stocks. Each stock is quoted with two prices, one at
which a dealer offers to buy a stock and a higher one at which
it offers to sell. The gap is the spread.
The suit is based on a report by two business school
professors in 1994, who found that dealers systematically
avoided quoting stocks in odd eighths. A stock's price would
be quoted at 20, or 20 1/4 or 20 1/2, for example, but almost
never at 20 1/8 or 20 3/8. As a result, the spread on these
stocks could never be less than 1/4, or 25 cents. Spreads of
1/8, or 12.5 cents, have long been typical on the New York
Stock Exchange.
<snip>...
(Gasp... URL too long to make link)
latimes.com; |
