Posted on 04/25/2003 9:26:13 AM PDT by hripka
The New York Stock Exchange confirmed it is investigating the trading practices of some of its floor specialists, the same week one of them was reportedly suspended by his firm for allegedly abusing his position as a market-maker. "While exchange policy precludes us from commenting on regulatory matters, the NYSE does confirm that, as part of its ongoing commitment to surveilling the marketplace, it is conducting a review of trading practices at several specialist firms," the NYSE said in a statement.
The investigation reportedly centers on an illicit practice known as "front-running," in which market makers take advantage of their knowledge of existing orders to buy or sell stock at virtually a guaranteed profit.
The Wall Street Journal reported that the probe centers on two big specialist firms, FleetBoston (FBF:NYSE - news - commentary) and Labranche (LAB:NYSE - news - commentary) , and that Fleet had suspended its specialist for General Electric (GE:NYSE - news - commentary) based on an internal probe that was initiated after the NYSE investigation began.
Labranche shares were down more than 5% to $16.90 Thursday. FleetBoston was down 6 cents at $25.24.
The NYSE said it wouldn't release more information on the probe until it and the "prosecutorial process" was complete.
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