Specifications | Bear Stearns & Co. Inc., New York Stock Exchange Hearing Panel Decision 05-163 \December 22, 200\ 5\ |
Business section |

Specifications | Bear Stearns & Co. Inc., New York Stock Exchange Hearing Panel Decision 05-163 \December 22, 200\ 5\ |
Business section |
Specifications | Bear Stearns & Co. Inc., New York Stock Exchange Hearing Panel Decision 05-163 \December 22, 200\ 5\ |
Suggested Link Details/Purchase | |
Content | 6 Program Trading Report ( DPTR ) in a timely fashion. The Firm provided data on these trades months after the trades occurred subject to a request from the Exchange. During times relevant hereto, the Firm s derivatives traders were involved in trading Exchange Traded Funds ( ETFs ). ETFs are index funds representing a basket of stocks that trade on the American Stock Exchange ( AMEX ) and the I.IYSE throughout the day, with intra-day pricing. The ETFs offer diversity in the combination of stocks in the basket that reflect the performance of the market index, industry or sector in one security.4 The Firm utilized a data feed that advised its traders of changes in the DJIA for business purposes. The traders took advantage of changes in the DJIA by selecting a pre-configured basket and executing a long transaction or engaging in various hedging strategies for the Firm s proprietary account or accounts for which the Firm actd as agent including affiliates. On July 6, 2001, the Firm engaged in index arbitrage trading without having a system to calculate, determine and inform its traders that a collar was in place and failed to have in place a system that would inhibit trades from being transmitted to the Floor of the Exchange when a rule 80A restriction was in place without the appropriate tick indicators. At the time, the Firm s traders performed a manual calculation of changes in the DJIA for Rule 80A purposes and disseminated this information to each other by word of mouth. In addition to the systems and procedural deficits, the Firm failed to adequately educate itstraders regarding procedures when a Rule 80A collar is in place. The October 2. 2002 Violations 19. On October 2,2002, the quantity of an index arbitrage order was misstated and a $4 billion rather than a $4 million dollar trade was transmitted fior execution. Portions of such order violated Exchange Rule 4408 (the short sale rule) in 38 of the issues in the order sent to the Floor of the Exchange. The Firm s Basket Trading System (*BTS ) lacked a trade confirmation or pop-up feahue for the hader to confirm the trade and lacked a feature (inhibitor) to prohibit the transmission of trades that exceeded the trading desk s daily $2 billion limit. 20. On October 2,2002,the Firm was long 2.5 billion Standard & Poor 500 (*S&P-) component stocks; short futures, and short S&P 500 Stock Price Index ( SPX ) and S&P Depository Receipts alkla*SPYDERS . During the trading day, the Firm traded The Firm was cngaged in index arbitrage trading, a hedge stratery in which the Firm was long certain sccurities which are part of the S&P500 against which they create a short utilizing ETFs on the American Stock Exchange as options. The spread made in these trades represents the arbiragc opportunity. 14. 15. 16. t7. 18. |
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