PRICE-FIXING, CONFLICTS ON AMEX ALLEGED
By BETH PISKORA
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The American Stock Exchange is facing sweeping allegations of rampant price-fixing, illegal trading and conflicts of interest by top traders and executives.
A whistle-blower, who had tried and failed to work within the Exchange's self-regulating organization, took his story to Business Week, which launched a six-month investigation to uncover the fraudulent and criminal behavior.
The Exchange, which merged last year with the National Association of Securities Dealers, is sure to be rocked by the scandalous stories published in the magazine.
According to the six-story package in Business Week, Amex options specialists and traders allegedly engage regularly in price-fixing in order to keep as wide as possible the spread between the bid - what the public can get to sell an option - and the ask, which is what the public must pay to buy an option.
This pernicious practice costs the public at least $150 million per year, according to Business Week estimates.
The Amex denied knowledge of improper options trading and declined further comment.
But that is not the only scandal at Amex. Brokers and traders are allegedly trading regularly for their own personal accounts, in clear violation of Exchange rules.
The worst offender, according to the magazine, is Joseph Giamanco, head of GHM Inc., who is alleged to trade for his own account on several different names and who regularly obtains private-issue shares of stock prior to becoming a specialist in those companies' shares. An attorney for Giamanco told Business Week that "he has fully complied with all the applicable regulations and rules."
Why are traders allowed to obtain private-placement of stock that they will later be responsible for trading in public markets? Amex CEO Dick Syron maintained that there is no problem as long as the Exchange is aware. He did not say which policies are in place to ensure that the Exchange stays aware of these potential conflicts of interest.
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