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Donaldson May Be Haunted By Past With Nyse

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Wasn't Boesky available, W?







December 12, 2002



DON'T go attaching the title SEC Chairman to William Donaldson's name quite yet.


Despite all the wonderful things said about this guy in the past few days, he has a past. The Democrats know about it, and it could prove Donaldson's undoing.


You've heard of all the corporate cheating that went on during the 1990s. Well, some nasty stuff was also occurring down at the New York Stock Exchange when Donaldson was its head.


Lucky for the NYSE that this mother of all trading scandals turned out to be a mere sideshow to the euphoric 1990s tech stock circus.


To recap: in 1998 a handful of traders were caught doing naughty stuff like front-running customers' orders so they'd be guaranteed that their trades would be profitable, and flipping stocks in quick trades to capture the "eights," or fractions, of dollars that usually go unnoticed. There was also the not-so-little issue of profit sharing.


A quick explanation: an NYSE floor broker gets an order to buy stock from a brokerage firm. Instead of charging a normal commission to process the trade the floor broker tells the customer that he will just take a piece of the trading profit.


The trouble is, if the broker is sharing in the profit you can be damned sure that there will be a profit. And it's just as certain that some poor schnook who doesn't have an in with the floor broker - that's you and me in case you didn't recognize yourself - will find the losing trades placed in his portfolio....



John Crudele - NY Post

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