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June 20, 2005

Specialists Under Regulatory Watch: Ketchum

By Gregory Bresiger

The regulators are going to closely watch that floor trading has the "appropriate controls, particularly with regard to specialists," the New York Stock Exchange's top regulator recently told a Security Traders Association conference in Washington.

"Were I you," Richard Ketchum announced to a roomful of attentive securities officials, "I would be looking at the misuse of confidential information and how you handle large blocks and volume weighted orders." He added that trading at the close continues to be "a worry."

Issuer fraud, the bulletin board and the unlisted market in general will be areas that the NASD will focus on, added Stephen Luparello, executive president for market regulation for the NASD.

"We see that there are fewer players so it is an area that we are going to closely look at," he added.

Luparello also predicted that those trading firms that have high "failure to deliver" rates will be scrutinized. Options trading will also be under review, another regulator promised.

"We're really pressing the options traders to rationalize what they do," according to John McCarthy, associate director of the Securities and Exchange Commission's Office of Market Oversight.