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Non-Tech : Bid /Ask Spreads - Market Manipulation
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To: Jeff Gibbons who wrote (170)10/29/1996 6:04:00 PM
From: ----------   of 308
 
I contacted ADP, (Automated Data Processing) and U.S. Clearing Corp.

I was unable to get any specifics on Scwab's sytem. Here's the way
"on-line trading" works through ADP:
1. Orders entered by a customer are routed to a terminal at the brokerage firm. This terminal is a direct entry order placement
system.

2. The orders must be "released" (forwarded on to the trading floor)
by a human action. Whether or not the orders are actually reviewed
PRIOR to release is determined by parameters set by the brokerage
firm.

3. There are various levels of authority for order release should
an order fall outside these parameters.

My guess is, and again ONLY a guess, that SCHWAB was telling you
only 50% of the order's are reviewed before being sent on. The other
50% are sent on without review, but still take a human to release them.

These individuals who release the orders must also be registered.
Section 1041 of the NASD Manual specifies : "Persons associated
with a member who accept unsolicited customer orders for submission
for execution are designated as Assistant Representatives -Order
Processing."

The rules also state that "All persons engaging in the investment banking or securities business...shall be registered." The entry
of orders on an exchange or into the NASDQ system would be considered
engaging in the securities business.

IMO, every order entered into a PC by a member of the public is
required to be passed on by a registered employee of a brokerage
firm. Whether or not each firm calls this a "review" is merely
semantics. There is not a link from the home PC to the floor of the
exchange.

Regards,

Doug
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