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To: TFF who started this subject	1/24/2004 6:07:08 PM
From: TFF	of 12617

SEC threatens NYSE specialists By Andrei Postelnicu in New York Published: January 24, 2004 The Securities and Exchange Commission has threatened at least four of the five largest market makers at the New York Stock Exchange with civil charges for possible trading violations. The top financial regulator has sent Wells notices warning that charges could be filed to put pressure on the firms to settle an investigation that has lasted several months. The specialists and the SEC are understood to be negotiating the terms of a possible settlement that could include fines and the restitution of profits alleged to have been obtained illegally. LaBranche, the largest NYSE specialist, Fleet Specialist, the third largest firm, and Van Der Moolen, the fourth largest, on Friday said they had received the notices, which warn of potential action, and intended to continue co- operating with regulators. The Spear Leeds Kellogg specialist unit of Goldman Sachs is also understood to have received a Wells notice. The other firm under investigation is Bear Wagner. The five firms have been under investigation by the NYSE since the spring of last year for allegedly trading on their own behalf before carrying out customer orders and unnecessarily intervening in trades that would have matched naturally in the auction market system of the NYSE. The probe has put the spotlight on the structure and supervision of trading on the NYSE, which is the last of the world's main stock exchanges not to have adopted a fully automated market. The SEC became frustrated with the slow progress of the NYSE investigation and started its own probe in the summer. In a damning report in October it accused the exchange of poor supervision of the specialists and estimated that investors were deprived of about $155m. The specialists have contested the figure and the methodology used to calculate it. They have argued that the SEC unreasonably narrowed the period within which an order had to be executed in order to conclude that trading ahead of investors was rampant on the NYSE floor.

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