Dollars and Jens
Wednesday, December 17, 2003
CALPERS sues NYSE
It's been a while since blogger ate one of my posts, but this is a better link than what I chased up before. (Which was at the New York Times. Go to Forbes for financial reporting instead, right?)
So of course it grates on me if the suit is complaining about boosting specialist profits rather than costing ordinary investors money, but they are in this case tied to each other, and I can't do anything about the suit, so we'll let it go. Front-running is something I kind of assumed took place, but figured was part of the NYSE system, and was one of the perks I assumed was thought to be afforded the specialists for maintaining liquid markets. The other charges seem more serious, and all of these violations are impossible with an ECN, i.e. electronic trading. (They wouldn't be impossible, but it would be awfully hard to pretend you weren't doing them if you were, and I don't believe any ECNs right now are. If they are, that definitely is fraud.) I have some nostalgic sympathy for floor trading, but this is probably going to give another push in the direction of electronic trading.
NEW YORK - CalPERS, the United States' largest public pension, is aiming for the head of the class.
On Tuesday, the $137 billion (assets) California Public Employees' Retirement System filed a civil lawsuit against the New York Stock Exchange and the specialist firms that oversee trading in listed stock. Backed by law firm Milberg Weiss, CalPERS accuses all defendants with two violations of the Exchange Act and breach of fiduciary duties to their customers. The NYSE was accused with an additional Exchange Act violation.
...
The CalPERS suit covers purchases or sales made of New York Stock Exchange-listed securities from Oct. 17, 1998, to Oct. 15, 2003. The suit alleges specialists engaged in three practices known as inter-positioning, front-running or freezing trades in direct violations of SEC, NYSE and Exchange Act rules. In sum, all three resulted in boosting specialist profits, the suit claims.
Now let's save this before we try to post it.
