SEC said to probe NYSE specialists
By CBS.MarketWatch.com
Last Update: 3:50 PM ET Nov. 1, 2003
SAN FRANCISCO (CBS.MW) -- The Securities and Exchange Commission has opened a parallel investigation to the New York Stock Exchange's probe of specialist trading firms, according to a published report.
The SEC sent subpoenas Friday to seven specialist trading firms from its New York office, Bloomberg News reported Saturday, quoting sources who declined to be named.
Companies that were included in the federal investigation, the report said, included LaBranche & Co. (LAB: news, chart, profile), FleetBoston Financial's Fleet Specialists (FBF: news, chart, profile), Bear Stearns' Bear Wagner Specialists (KBB: news, chart, profile), Goldman Sachs' Spear, Leeds & Kellogg (GS: news, chart, profile), Van der Moolen Holding's Van Der Moolen Specialists (VDM: news, chart, profile), Performance Specialist Group and Susquehanna Specialists Inc.
Bloomberg said the subpoenas asked for trading data, organizational charts and e-mail reaching back to 2000. Responses were sought by Nov. 10, Bloomberg said.
The New York Stock Exchange said Oct. 16 that it would fine five of the floor-trading companies for improper trading that has cost investors more than $100 million. See full story.
The NYSE said the companies improperly profited at the expense of customers from 2000 through 2002 by buying shares and reselling them, rather than simply matching the orders, so called-front-running. Trading companies had expressed satisfaction with the NYSE announcement of penalties. See full story.
Specialists have provided liquidity for buyers and sellers on the NYSE for more than two centuries. These floor brokers are required to stand aside until buying and selling prices match. If two sides can't agree on a price, specialists are supposed to take their own positions in the stock to facilitate trading.
But mutual fund companies and other large institutional traders have long contended that specialists -- who know whether there's demand or not for their stocks -- will step between buyers and sellers to benefit their own accounts.
Despite the controversy over specialist trading abuses, SEC Chairman William Donaldson said Thursday that the NYSE's auction-based trading provides benefits that "we do not want to lose." See full story.
According to Bloomberg, the SEC has been tracking the NYSE investigation and the new subpoenas seek information that has already been provided to the exchange. |
