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The above report was jointly authored by two offices within the Security and Exchange Commission that were (are?) investigating suspected problems at the American Stock Exchange (Amex). The New York Times reported:

October 17, 2003, Friday

BUSINESS/FINANCIAL DESK

Can Exchanges Regulate Themselves as Rivalry Grows?

By FLOYD NORRIS

.... The Amex's regulatory operation has done such a horrible job that it is all but certain that some of its employees -- and possibly the exchange itself -- will face disciplinary action by the Securities and Exchange Commission.

The Amex's sins, as laid out in a blistering S.E.C. staff report, include routinely overlooking rule violations by Amex specialists. The exchange promised to improve its regulation and then tried to cover up its failure to do so....

The S.E.C. staff report, a copy of which was provided to me after it was reported by Bloomberg News, found a pattern of what might politely be called captive regulators who did little....

The day traders complain that the specialists routinely fail to comply with the exchange's ''firm quote'' rule, which basically says that if a specialist quotes a price he will stand by it.

The S.E.C. report, dated June 23, found that the exchange ''has not meaningfully enforced the rule'' since it became effective in 2001. Moreover, it found that specialists routinely discriminated against orders from brokerage firms that catered to day traders.

full article is in the NYT pay-archives here

Originally accompanying this NYT article was a copy of the leaked SEC staff report. Pretty quickly, though, the Times removed the report. You'll find the "Summary of Significant Findings" below and the entire report at the link at the top of this page.

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