***OT**** Has anybody seen this article???
europe.cnnfn.com
below is a lot of reading, IMO, something to keep a hard copy of for future reference...our good buddy HERZOG seems to be named in these suits a few times.....let's hope he's not up to his old dirty tricks..
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Hays Gorey, Jr. (HG 1946)
United States Department of Justice
Antitrust Division
600 E Street, N.W., Room 9500
Washington D.C. 20530
(202) 307-6200
Attorney for Plaintiff United States of America
UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK
______________________________
)
UNITED STATES OF AMERICA, )
)
PLAINTIFF, )
v. ) Civil Action No.
ALEX. BROWN & SONS INC.; )
BEAR, STEARNS & CO. INC.; CS )
FIRST BOSTON CORP.; DEAN )
WITTER REYNOLDS INC.; )
DONALDSON, LUFKIN & JENRETTE )
SECURITIES CORP.; FURMAN SELZ )
LLC; GOLDMAN, SACHS & CO.; )
HAMBRECHT & QUIST LLC; HERZOG,)
HEINE, GEDULD, INC.; J.P. )
MORGAN SECURITIES, INC.; )
LEHMAN BROTHERS, INC.; MAYER )
& SCHWEITZER INC.; MERRILL )
LYNCH, PIERCE, FENNER & SMITH,)
INC.; MORGAN STANLEY & CO., )
INC.; NASH, WEISS & CO.; OLDE )
DISCOUNT CORP.; PAINEWEBBER )
INC.; PIPER JAFFRAY INC.; )
PRUDENTIAL SECURITIES INC.; )
SALOMON BROTHERS INC.; )
SHERWOOD SECURITIES CORP.; )
SMITH BARNEY INC.; SPEAR, )
LEEDS & KELLOGG, LP; and )
UBS SECURITIES, LLC. )
)
DEFENDANTS. )
______________________________)
COMPETITIVE IMPACT STATEMENT
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act ("APPA" or "Tunney Act"), 15 U.S.C. 16(b)-(h),
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the United States submits this Competitive Impact Statement relating to the proposed Stipulation and Order submitted for entry with the consent of defendants in this civil antitrust proceeding.
I. NATURE AND PURPOSE OF THE PROCEEDING
On July 17, 1996, the United States filed a Complaint alleging that the defendants have engaged in price fixing in violation of Section 1 of the Sherman Act, 15 U.S.C. 1. On the same day, the United States and the defendants filed a Stipulation and Order ("proposed Order") to
resolve the allegations in the Complaint. Entry of the proposed Order
is subject to the APPA. The defendants are all major "market makers" in over-the-counter ("OTC") stocks quoted for public trading on the computerized stock quotation system known as Nasdaq.1 The United States alleges in its Complaint that the defendants and others adhered to and enforced a "quoting convention" that was designed to and did deter price competition among the defendants and other market makers in their trading of Nasdaq stocks with the general public. The United States believes that investors have incurred higher transaction costs for buying and selling Nasdaq stocks than they would have incurred had the defendants not restrained competition through their illegal agreement. The proposed Order will eliminate the anticompetitive conduct identified in the Complaint and establish procedures that will ensure that such conduct does not secur. Specifically, the proposed Order prevents the defendants from agreeing with other market makers to adhere to the quoting convention, or to fix, raise, lower, or maintain prices or quotes for Nasdaq securities. The proposed Order also requires each defendant to adopt an antitrust compliance program and designate an antitrust compliance officer to ensure the firm's future compliance with the antitrust laws. To this end, the proposed Order requires the compliance officer to (1) randomly monitor and tape record telephone conversations between stock traders and (2) report any violations of the proposed Order within ten business days to the Antitrust Division of the Department of Justice ("the Department"). The proposed Order also requires that these tape recordings be made available to the Department for its review. The proposed Order gives the Department authority to receive complaints of possible violations, to visit defendants' offices unannounced to monitor trader conversations as they are ongoing, to direct taping of particular suspected violators, and to request copies of tapes as they are made. The Court may punish violations of
IV. PROHIBITED CONDUCT
A. Unless permitted to engage in activities by Section IV.
B. of this stipulation and order, each defendant shall not, directly or through any trade association, in connection with the activities of its OTC desk in making markets in Nasdaq securities: (1) Agree with any other market maker to fix, raise, lower, or maintain quotes or prices for any Nasdaq security; (2) Agree with any other market maker to fix, increase, decrease, or maintain any dealer spread, inside spread, or the size of any quote increment (or any relationship
between or among dealer spread, inside spread, or the size of any quote increment), for any Nasdaq security; (3) Agree with any other market maker to adhere to a quoting convention; (4) Agree with any other market maker to adhere to any understanding or agreement (other than an agreement on one or a series of related trades) requiring a market maker to trade at its quotes on Nasdaq in quantities of shares greater than either (1) the minimum size required by Nasdaq or NASD rules or (2) the size displayed or otherwise communicated by that
market maker, whichever is greater; (5) Engage in any harassment or intimidation of any other market maker, whether in the form of written, electronic, telephonic, or oral communications, for decreasing its dealer spread or the inside spread in any Nasdaq security; (6) Engage in any harassment or intimidation of any other
market maker, whether in the form of written, electronic, telephonic, or oral communications, for refusing to trade at its quoted prices in quantities of shares greater than either (1) the minimum size required by Nasdaq or NASD rules or (2) the size displayed or otherwise communicated by that market maker; (7) Engage in any harassment or intimidation of any other market maker, whether in the form of written, electronic, telephonic, or oral communications, for
displaying a quantity of shares on Nasdaq in excess of the minimum size required by Nasdaq or NASD rules; and (8) Refuse, or threaten to refuse to trade, (or agree with or encourage any other market maker to refuse to trade) with any market maker at defendant's published Nasdaq quotes in amounts up to the published quotation size because such market maker decreased its dealer spread, decreased the inside spread in any Nasdaq security, or refused to trade at its quoted prices in
a quantity of shares greater than either (1) the minimum size required by Nasdaq or NASD rules or (2) the size displayed or otherwise communicated by that market maker.
C. Notwithstanding the provisions of Section IV.A.(1)-(8), any defendant shall be entitled to: (1) Set unilaterally its own bid and ask in any Nasdaq security, the prices at which it is willing to buy or sell any Nasdaq security, and the quantity of shares of any Nasdaq security that it is willing to buy or sell; (2) Set unilaterally its own dealer spread, quote increment, or quantity of shares for its quotations (or set any relationship between or among its dealer
spread, inside spread, or the size of any quote increment) in any Nasdaq security; (3) Communicate its own bid or ask, or the price at or the quantity of shares in which it is willing to buy or sell any Nasdaq security to any person, for the purpose of exploring the possibility of a purchase or sale of that security, and to negotiate for or agree to such purchase or sale; (4) Communicate its own bid or ask, or the price at or the quantity of shares in which it is willing to buy or sell any Nasdaq security, to any person for the purpose
of retaining such person as an agent or subagent for defendant or for a customer of defendant (or for the purpose of seeking to be retained as an agent or subagent), and to negotiate for or agree to such
purchase or sale; (5) Engage in any conduct or activity authorized or
required by the federal securities laws, including but not limited to the rules, regulations, or interpretations of the SEC, the NASD, or any other self-regulatory organization, as defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended; (6) Engage in any underwriting (or any syndicate for the underwriting) of securities to the extent permitted by the federal securities laws; (7) Act as Qualified Block Positioners as defined in SEC Rule 3b-8(c), promulgated under the Securities Exchange Act of 1934, as amended, to the extent permitted by the federal securities laws; (8) Except as provided in Sections IV.A.(5) - (8) of this stipulation and order, take any unilateral action or make any unilateral decision regarding the market makers with which it will trade and the terms on which
VI. PLAINTIFF'S ACCESS
A. For the sole purpose of determining or securing compliance with this stipulation and order, and subject to any legally recognized privilege or work product protection, from time to time duly authorized representatives of the Department of Justice shall, upon written request of the Attorney General or of the Assistant Attorney General in charge of the Antitrust Division, and on reasonable notice to any defendant at its principal office, be permitted: (1) Access during office hours of such defendant, which may have counsel present, to inspect and copy (or to require defendants to produce copies of) all records and documents, excluding individual customer records,
in the possession or under the control of such defendant, and which relate to compliance with this stipulation and order; and (2) Subject to the reasonable convenience of such defendant and without restraint or interference from the defendant, to interview officers, employees, or agents of such defendant, each of whom may have counsel present, regarding compliance with this stipulation and order.
B. Upon the written request of the Attorney General or the Assistant Attorney General in charge of the Antitrust Division made to any defendant, such defendant shall prepare and submit such written reports, under oath if requested, relating to defendant's compliance with this stipulation and order as may be requested.
C. No information, tape recordings, or documents obtained by the means provided in Sections IV, V, and VI shall be divulged by any representative of the Department of Justice to any person other than a duly authorized representative of the Executive Branch of the United States, or the SEC, except in the course of legal proceedings to which the United States is a party, or for the purpose of securing compliance with this stipulation and order, or as otherwise required by law.
D. If at the time information, tape recordings, or documents are furnished by any defendant to plaintiff, such defendant represents and identifies in writing the material in any such information or documents to which a claim of protection may be asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure and said defendant marks each page of such material, "Subject to Claim of Protection under Rule 26(c)(7) of the Federal Rules of Civil Procedure," then ten (10) days notice shall be given by plaintiff to such defendant at its Office of General Counsel prior to divulging such material in any legal proceeding (other than a grand jury proceeding) to which that
defendant is not a party.
E. Defendants may claim (which claim plaintiff shall honor to the extent legally permissible) protection from public disclosure, under the Freedom of Information Act, 5 U.S.C. 552, or any other applicable law or regulation, for any material submitted to the Antitrust Division under this stipulation and order.
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**RE: SET UP OF PHONES FOR IN HOUSE MONITORING.
The cost of monitoring under the decree is likely to be substantial. The defendants will have to employ 30 people full time to fulfill this monitoring requirement. A129. Given the cost and potential for disclosure to the government, it is unlikely that defendants would seek to create more tapes than necessary pursuant to the decree merely to take advantage of the limitation on disclosure to private litigants.
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usdoj.gov
FOR IMMEDIATE RELEASE
WEDNESDAY, JULY 17, 1996
JUSTICE DEPARTMENT CHARGES 24 MAJOR NASDAQ SECURITIES
FIRMS WITH FIXING TRANSACTION COSTS FOR INVESTORS
This meant that investors were paying higher trading costs for buying and selling stocks on the Nasdaq market.
The Department's Antitrust Division filed a civil antitrust suit charging 24 major Nasdaq market makers who buy and sell stocks to the investing public with inflating the quoted "inside spread" in certain Nasdaq stocks, resulting in investors having to pay more to buy or sell stocks than they would have in a competitive market. The inside spread is the difference between the best buying price and the best selling price of a stock.
Transaction costs were raised through a long-standing "quoting contention" followed by traders and enforced industry-wide for many years, according to the Department's court papers.
"As a result of this conduct American investors had to pay more to buy and sell stocks than they would have if there had been true competition," said Attorney General Janet Reno. "We have found substantial evidence of coercion and other misconduct in this industry. By providing for the random monitoring of traders' telephone calls, we expect to deter future price fixing on Nasdaq."
Also, Department representatives can show up at a firm's office, unannounced, to listen in on trader conversations as they occur. These unprecedented enforcement provisions were put in place to ensure that the firms do not engage in further anticompetitive conduct.
The Antitrust Division has established a hotline to receive complaints about Nasdaq or any other subject, which is operative as of today at 1-888-7DOJATR.
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Among the 24 firms are some of Nasdaq's biggest market makers. They are:
Alex. Brown & Sons Inc.
Bear, Stearns & Co. Inc.
CS First Boston Corp.
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Furman Selz LLC
Goldman, Sachs & Co.
Hambrecht & Quist LLC
Herzog, Heine, Geduld Inc.
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Mayer & Schweitzer Inc.
Merrill, Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley & Co. Inc.
Nash, Weiss & Co.
OLDE Discount Corp.
PaineWebber Inc.
Piper Jaffray Inc.
Prudential Securities Inc.
Saloman Brothers Inc.
Sherwood Securities Corp.
Smith Barney Inc.
Spear, Leeds & Kellogg LP (Troster Singer)
UBS Securities LLC
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