Early this morning, Amsterdam-based Van der Moolen
VDM is awaiting SEC approval of its petition, and states that the amount paid will range from $51.8 million to $57.7 million, depending on the SEC's decision. As part of the accord, VDM does not admit or deny the charges, which include alleged wrongdoing as far back as 1993.
Within hours of VDM's lead, other specialist firms got in line to settle with regulators. The largest, LaBranche
It remains to be seen whether this settlement forestalls the end of the specialist system at the NYSE. In the midst of the controversy, Fidelity Investments, which can account for as much as 5% of the exchange's daily volume, urged the NYSE to scrap the system and go to an electronic system such as the one at the Nasdaq. Fidelity noted that the specialist system is potentially harmful to investors since the specialists can trade for their own accounts, building an intractable conflict of interest. Fidelity was joined by other companies, including insurance and finance giant American International Group
Under that backdrop, it was probably pretty smart for the firms to settle as quickly as possible. There's really nothing like an overhanging regulatory and legal action to convince groups to press harder for change. Better to take the medicine and maintain control than to fight and have the rug pulled out from under you.
The rise of John Thain to the chief executive's chair at the NYSE has created plenty of speculation that the age of the specialists is on the wane. He has long championed increased technology to improve trading. Sure enough, the NYSE last week announced its initiative to improve its electronic trading capabilities. The best thing that the specialists could do in such an environment is make themselves look as clean as a whistle. Getting the specter of SEC action out of the way was step one.
Bill Mann owns no companies mentioned in this article.