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To put this all-encompassing conspiracy in perspective, one-eighth of a point does not sound like a great amount of money. It adds $125 on to the purchase price of 1000 shares. If you were mugged in the street for $125, you would probably be screaming bloody murder. But when robbery happens as a matter of routine during a commonplace business transaction, you don't complain because it is business as usual and you are conditioned to expect it. And there is no one to complain to who would be sympathetic to your plight. |
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Most major stocks used to move in quarters and seldom in eights of a point. Could it be that no market maker or trader ever considered the possibility of moving stock prices by only eighth of a point to create a little real competition based upon price? I was astonished that virtually no market maker or trader ever broke the line. The reason, of course, was that the industry wanted to keep spreads artificially wide. The industry maintained high spreads by collusive agreement in which no one would change a bid from a quarter to an eighth of a point. |
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The SEC censured the NASD for running a stock market that was akin to Dodge City with no sheriff. The SEC ordered the NASD to clean up its act and run a fair market. For years, I condemned the NASD for closing its eyes and turning a deaf ear to the complaints of the general public. |
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The SEC imposed significant remedial measures on the NASD. These "remedial" steps appeared "punitive" because they related to the NASD governance and regulatory structure. Other SEC-ordered changes included the introduction of new Order Handling Rules, declared effective in January 1997. |
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It appears as if the SEC and the NASD have entered into a separation agreement pending a final divorce. The NASD has sincerely earned the indignation of the SEC and brought the ire of real regulation upon itself. At this point it is no longer politically correct to be too closely associated with the market-making community. The activities of the market makers and |
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