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Tim Quast
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We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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July 31, 2003

Charges Still Fly In NYSE Specialist Flap

By Gregory Bresiger

Big Board specialists are engaging in practices that are "fleecing the public," some institutional traders continue to complain.

Specialists jumping in front of traders are outraging many institutional traders who want changes into what they see as dishonest practices on the New York Stock Exchange. "Those kind of charges of fleecing don't dignify a response," said Ray Pellecchia, a spokesman for the NYSE. "We have launched an investigation into these charges, but the exchange has made every attempt to ensure fair trading."

The NYSE has examined whether specialists violated their "negative obligations," intervening for their own account on orders where there are sufficient buyers and sellers. Nonetheless, Mark Madoff, an executive with Bernard L. Madoff Investment Securities says the NYSE's specialist system is not broken. Rather, he says, problems come from its interaction with other market centers.

"That's what needs to be corrected," Madoff added. "The specialist system itself should not be scrapped. But what we need is better interaction so we can promote more effective competition between market centers." Madoff said reforms are needed on the Intermarket Trading System and linkages must also be improved. He also questioned if regulators can solve all the problems caused by penny trading and trading ahead. "It's tough to tell a customer at what point he can or can't trade," Madoff said.