15 NYSE specialists to be indicted

re: Prosecutor to Indict 15 Specialists (WSJ, 4/12/05) http://online.wsj.com/article/0,,SB111331189063804529,00.htm? or http://quote.bloomberg.com/apps/news?pid=10000006&sid=attrxLTnIS5g To the Editors: As a longtime financial markets professional, I am well aware that stock trading is a world full of questionable behavior. It was only a matter of time before specialists were caught putting their bonuses ahead of their fiduciary responsibility. The only surprise is that it took this long. Trading in a NYSE stock can be extremely frustrating, such as watching the specialist jump in front of my orders by a penny so he can "lean on me" or try to front-run me if he thinks I will chase the stock. Most specialists are ethical but they have much more information than any other market participant allowing strong temptation to take advantage of that position. Despite the fact that a specialist system it does have its benefits, today's indictments are another nail in the coffin of floor- and person-based trading and a boost for electronic markets. The anonymity, speed, and independence from a specialist of electronic markets in stocks, options and futures around the world show the NYSE and AMEX's specialist-based markets to be anachronisms. If I were a betting man, and I am, I would expect those exchanges to be primarily electronic within a few years. The sooner the better.
  • DRH
    Comment from: DRH
    04/14/05 @ 01:21:54 pm

    Here! Here! I agree that our financial markets will soon be completely electronic. Unfortunately, the self-preservation ability of the existing specialist system has been successful in delaying that transformation for many years already.