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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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October 19, 2006

NASD to Traders: Stop Fish Tales

By Gregory Bresiger

The NASD warned sellside trading desks not to send out inaccurate or misleading indications of interest and/or trade reports via third-party services.

Broker-dealers often transmit such data through several service providers that pass the information to their subscribers.

NASD, which didn't name any brokerages providing inaccurate execution numbers, said firms could use service providers to advertise activity in a security to attract order flow. However, "members are reminded," the NASD wrote, "that, to the extent they use these services to communicate or advertise trading activity or interest, such information must be truthful, accurate and not misleading."

The NASD noted that firms transmitting erroneous data could be in violation of NASD and other securities rules.

Traders have long complained that many indications of interest (IOIs) sent out by brokers did not represent a true trading intent. They have also decried the inflated numbers used when reporting trades. A 30 percent "fudge factor" is not unusual, one trader said.

Thomson (AutEx and Block Data), Bloomberg and Reuters are the primary vendor-distributors of advertised trades and IOIs. None of the vendors was mentioned in the memo.