[LINK] e-trading

[stephen at melbpc.org.au]

Poor America, even major traders are dishonest. Welcome 'open' e-trade,
especially if it's well regulated world-wide and no naked short selling.


> 14 Trading Firms Settle Charges for $69 Million 
> DIANA HENRIQUES nytimes.com  Pub: March 4, 2009 

More than a dozen Wall Street trading firms systematically cheated their 
customers of millions of dollars by improperly slicing bits of profit 
from countless trades, federal regulators said on Wednesday.

The Securities and Exchange Commission disclosed the allegations after 
negotiating settlements. The firms did not admit or deny the charges but 
agreed to pay a total of more than $69 million in forfeited profits and 
penalties.

The 14 firms named in the complaints are all "specialists" (and) include 
units or subsidiaries of well-known Wall Street names, including E*Trade 
Capital Markets, Goldman Sachs Execution and Clearing, Knight Financial 
Products and TD Options.

Regulators said the firms had engaged in various types of "front-
running," which involves trading ahead of customer orders or timing their 
own trades to seize profits. 

For instance, specialists that had a big order to buy a stock would first 
buy it from a seller themselves and then illegally bid up the price 
moments before selling it to profit on the transaction. Regulators say 
specialist firms made a total of $58.4 million, which should have gone to 
their customers. 

In recent years, many customer orders have been routed to electronic 
trading networks, which automatically match buy and sell orders without 
human intervention. But specialist firms still play a role in securities 
trading at many exchanges, handling orders that cannot (yet) be filled 
electronically and maintaining reliable markets when trading becomes 
volatile.

The specialist business is lucrative because it has exclusive rights to 
oversee trades in particular stocks, and it was especially so before more 
automated trading became prevalent in the middle of the decade. 

Firms are compensated for the risks and duties they take on as 
specialists, which makes the violations cited by the agency more 
shocking, said James Clarkson, acting director of the S.E.C.’s New York 
regional office..

The allegations are similar in nature to those the commission filed in 
2004 against five large specialist firms on the New York Stock Exchange, 
accusing them of collecting more than $150 million in improper profits.

Those firms, without admitting or denying the allegations, paid $241.8 
million to settle the cases.

According to regulators, the improper trading activity was detected 
through examinations by the S.E.C.’s compliance staff and investigated by 
its enforcement division, with the cooperation of the Financial Industry 
Regulatory Authority, the securities industry’s self-regulatory 
organization, and compliance staff members at the various exchanges.

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Cheers people
Stephen Loosley
Victoria, Australia