SEC said examining trades at big firms
By David Weidner, CBS.MarketWatch.com
Last Update: 9:36 AM ET Nov. 8, 2004
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NEW YORK (CBS.MW) -- The Securities and Exchange Commission is investigating whether big brokerage firms made trades for their customers without securing the best price, a possible violation of the law, according to a report.
The SEC is looking at whether firms -- including Morgan Stanley (MWD: news, chart, profile), Merrill Lynch & Co. (MER: news, chart, profile), Ameritrade Holdings Corp. (AMTD: news, chart, profile) and Charles Schwab & Co. (SCH: news, chart, profile) -- ignored the best price in the market during a four-year period, according to a report in Monday's New York Times citing anonymous sources.
The transactions in question are believed to have been made in Nasdaq-traded securities when the market opened and volume was heavy. The Times said that the SEC believes some of the trades may have been executed at a price that benefited the broker, not the customer -- a practice known as front running.
John Nester, a spokesman for the SEC, declined comment.
Another practice under investigation, the report said, involves order flow, with retail brokers sending aggregated small orders to market makers - firms that buy and sell stocks in order to create supply and demand and lower volatility.
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