- Wall Street Journal -
SEC Blasts Big Board Oversight Of 'Specialist' Trading Firms
Investors Were Shortchanged $155 Million Over 3 Years, Confidential
Report Says
The Securities and Exchange Commission, in a confidential report,
blasted the New York Stock Exchange for failing to police its elite
floor-trading firms and for ignoring blatant violations in which
investors were shortchanged by millions of dollars in trades
involving more than two billion shares over the past three years.
The 40-page report, dated Oct. 10 and reviewed by The Wall Street
Journal, is a severe rebuke of both the floor-trading firms, known
as "specialists," and the self-regulatory structure that monitors
the Big Board floor. It paints a picture of a floor-trading system
riddled with abuses, with firms routinely placing their own trades
ahead of those by customers -- and an in-house regulator either ill-
equipped or too worried about increasing its workload to care. And
it concludes that when the NYSE does act on investor abuses, the
exchange often does little more than admonish the specialists in a
letter or slap them on the wrist with a light fine.
The SEC staff "is concerned that the NYSE's disciplinary program is
viewed by specialists and specialist firms as a minor cost of doing
business, and that it does not adequately discipline or deter
violative conduct," the report says. It adds that the floor-trading
firms "have no meaningful compliance programs for reviewing their
specialists' compliance" to various trading rules. |
