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NYSE Facing Calpers Lawsuit

by Glen Shapiro, LawAndTax-News.com, New York

24 December 2003


The New York Stock Exchange (NYSE), which recently had changes to the way in which it regulates itself approved by the Securities and Exchange Commission (SEC), has found itself in the news again, this time because of a lawsuit filed against it by the California Public Employees' Retirement System (Calpers).

In a complaint filed at New York's Southern District Court on December 15, Calpers accused the NYSE's seven specialist firms of engaging in interpositioning and front-running. The pension scheme also alleged that the exchange itself did nothing to stop the practices from taking place, despite being aware of them.

The specialist firms trade in individual stocks on the NYSE floor, and bring buyers and sellers together at an agreed price. However, according to an LMG report, in some cases they have been accused of adding a price differential to trades, a practice designed to generate a profit for the firm and a loss for the trader.

Additionally, according to LMG, the firms were said to be using inside knowledge of investor orders to trade on their own account before completing the orders.


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