Friday, December 10, 2004

Specialists Specializing in Crooked Practices

In light of
a specialist from Van der Moolen Specialists being barred from the industry earlier this week it seems like a good idea to briefly review how the NYSE has changed over the past 18 months. Read about the most recent barring here: Slowly, but surely, the Buttonwood Bourse (read: NYSE) is being shaken up and becoming less of a club and more of a fair market. Reg. NMS is a giant step in that direction! So here's the Cliffs Notes:

The relevance of this and the seven other specialist firms that have fired or suspended employees due to crooked practices (read: trading for their own account ahead of customers) against the backdrop of Reg. NMS is this:

If and when the new regulations are adapted, there will no longer be an opportunity for shady operators. One can only imagine how much illegal activity must've existed on the NYSE (and the AMEX and Philly, for that matter) in decades past. How many shady operators over the years have profited from illegal schemes that were never unearthed? It's simply a wonder that it took the SEC so long to clean things up!

It's doubtful that Goldman Sachs' specialist division, Spear Leads & Kellog just recently started to act illegally (six senior executives left that company earlier this year). Moreover, dozens of brokers, clerks and specialists have left the NYSE over the last year and a half due to layoffs, and regulatory investigations which led them to believe their game of fleecing the public for their own benefit was over. Fleet Specialist President Miles Gillespie pretty much led this mass exodus. Likewise, LaBranche, the biggest specialist firm at the NYSE fired at least two employees last month - and it's doubtful that they just recently began to operate illegally -- they just started to get caught

You can read about this mass exodus here:


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