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NYSE Chairman Promises Detailed Report on Probe

May 01, 2003|From Bloomberg News

New York Stock Exchange Chairman Richard Grasso, trying to restore investor confidence amid an investigation of NYSE traders, said Wednesday that he would make available any "gory" details of the probe into allegations of wrongdoing.

The NYSE last week said it was investigating five of its seven so-called specialist trading firms to see whether they violated rules requiring them to complete customer orders before trading for themselves.

Specialists are required to make fair and continuous markets in individual stocks in exchange for having the exclusive right to oversee trading in those shares.

In remarks titled "Restoring Investor Confidence Worldwide," Grasso said the exchange's self-regulatory system "is alive and well as evidenced by the fact that we are looking at the performance of the specialists on the floor and asking if they've met their obligations."

Grasso said if the investigation finds wrongdoing, he would reveal to the public and the news media "every gory detail."

The securities industry, under authorization of the Securities and Exchange Commission, makes its own rules through the NYSE, the Nasdaq Stock Market and regional exchanges, each of which is responsible for enforcing the rules.

The NYSE is investigating whether the floor traders violated their obligation to avoid trading or taking stock orders out of sequence when buyers and sellers could simply be matched directly.

Grasso reiterated that the probe is not looking at "front-running," in which trades are made for specialists' or brokers' own accounts based on knowledge of where pending orders will take the market.

Grasso would not comment on when the review would be completed.

New York Atty. Gen. Eliot Spitzer, who has led an unrelated probe into alleged abuses by Wall Street brokerages in the late 1990s, on Monday indirectly criticized the NYSE and NASD -- formerly the National Assn. of Securities Dealers -- for failing to uncover problems.

"This investigation has shaken my confidence in the self-regulatory system. I think we should use what we've learned here to restore or reenergize that system," Spitzer said after he and other regulators announced a $1.4-billion settlement with 10 major brokerages.

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