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Jared Dillian
Traders Magazine Online News

Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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July 31, 2002

A Wholesalers' Limit Order Woes

By Gregory Bresiger

Blame it on technology. That was Knight Securities' defense when it agreed to pay $75,000 to settle federal charges that it violated the SEC's limit order display rule.

The Securities and Exchange Commission contended that the market maker, which dominated trading in Nasdaq stocks through the recent bull market, had failed to display customer limit orders that were better than the dealer's posted quote.

On one trading day in May 1999, an SEC examination showed that Knight failed to redisplay more than 6,000 eligible limit orders promptly. All told, 1,350 of those orders improved the National Best Bid and Offer. As a result, the prevailing NBBO reflected an inferior quote and a wider spread between the bid and ask, regulators said.

A spokeswoman for Knight said the problem was in "the automated order routing and execution system available to the market at the time." Knight had since developed systems to remedy the situation, the spokeswoman said.