Five firms told they face disciplinary action, fines for practices said to hurt investors.
October 16, 2003: 5:09 AM EDT
NEW YORK (Reuters) - The New York Stock Exchange said Thursday it has told five floor-trading firms that it plans disciplinary action and possible fines for improper trading practices that may have prevented investors from receiving the best prices possible.
The exchange did not immediately name the five firms, but Dutch-based market maker Van der Moolen said in a statement it faced disciplinary action and added it had questioned the accuracy of the NYSE's data.
The Wall Street Journal and New York Times named Van Der Moolen along with LaBranche & Co. (LAB: Research, Estimates); Goldman Sachs Inc (GS: Research, Estimates)'s Spear, Leeds & Kellogg; Fleet Boston Financial Corp. (FBF: Research, Estimates) unit Fleet Specialists; and Bear Wagner, owned by Bear Stearns (BSC: Research, Estimates).
The exchange said the firms sometimes traded inappropriately ahead of customer orders. At other times, a specialist had customer buy-and-sell orders on the electronic order book that should have been executed with or against each other, but instead the specialist traded for the firm account to the disadvantage of the customers, the NYSE said.
"We have notified the specialist firms and the Securities and Exchange Commission of the actions that we are prepared to take," said Edward Kwalwasser, a group executive vice president for regulation at the Big Board, in a statement.
The NYSE will ask the specialist firms for changes in how they self-monitor and comply with regulations, as well as reimbursement for investor losses.
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