Executives at AB Watley being investigated

Quote from I Missed Boat:

Please explain how I am being a hypocrite when I say that the more crooks taken off, the better, until the system is improved to get them all? And please explain your own hypocritical statement, which is that a small minority of daytraders illegally screwing many other honest ones is a "level playing field." If it were level, then we'd ALL have the information.
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Because AB Watley is small fries when it comes to front running information. You got big players moving half mil blocks based on inside info and floor traders front running hundreds thousands of shares. You have specialists going for sell stops prior to a big institutional buyers, yet when some daytraders decide to get some order flow info and trade on it, they get arrested.

Who cares if AB Watley got busted for front running. It only goes to say that when you try to play the game the same way the big boys do it, you will get shut down. You talk about them screwing you, well how about the whole NYSE floor which screws you every day and on a much larger scale. So you're happy that the SEC will go after small fries yet will allow the crimes by the big boys to continue. What we as the daytraders should be doing is banding against the big boys, not getting mad at each other if some of us get access to the same advantage as the big players. Thinking that AB Watley being busted is in any way helpful to you is just stupidity. It only goes to show that if you try to level the playing field, you too will get busted.
 
I think 'dro has a good point here. Sweeping up a little speck of dust while leaving a big pile of stinking shit on your floor is no way to clean your house.

http://bear.cba.ufl.edu/karceski/fin4504k/wsj/wsj 110303.html

From the WSJ article:

SEC Blasts Big Board Oversight Of `Specialist' Trading Firms
Investors Were Shortchanged $155 Million Over 3 Years, Confidential Report Says --- In 2 Hours, 21 Violations
By Deborah Solomon and Susanne Craig
3,180 words
3 November 2003
WSJ

The Securities and Exchange Commission, in a confidential report, blasted the New York Stock Exchange for failing to police its elite floor-trading firms and for ignoring blatant violations in which investors were shortchanged by millions of dollars in trades involving more than two billion shares over the past three years.

The 40-page report, dated Oct. 10 and reviewed by The Wall Street Journal, is a severe rebuke of both the floor-trading firms, known as "specialists," and the self-regulatory structure that monitors the Big Board floor. It paints a picture of a floor-trading system riddled with abuses, with firms routinely placing their own trades ahead of those by customers -- and an in-house regulator either ill-equipped or too worried about increasing its workload to care. And it concludes that when the NYSE does act on investor abuses, the exchange often does little more than admonish the specialists in a letter or slap them on the wrist with a light fine.
 
Quote from Hydroblunt:

Because AB Watley is small fries when it comes to front running information. You got big players moving half mil blocks based on inside info and floor traders front running hundreds thousands of shares. You have specialists going for sell stops prior to a big institutional buyers, yet when some daytraders decide to get some order flow info and trade on it, they get arrested.

Who cares if AB Watley got busted for front running. It only goes to say that when you try to play the game the same way the big boys do it, you will get shut down. You talk about them screwing you, well how about the whole NYSE floor which screws you every day and on a much larger scale. So you're happy that the SEC will go after small fries yet will allow the crimes by the big boys to continue. What we as the daytraders should be doing is banding against the big boys, not getting mad at each other if some of us get access to the same advantage as the big players. Thinking that AB Watley being busted is in any way helpful to you is just stupidity. It only goes to show that if you try to level the playing field, you too will get busted.
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Band together? Most AB guys weren't real traders. The vast majority of the AB guys were brought in, as new or failed traders, ONLY to trade off this box. In fact, that was the rule starting out (you could only trade what came over the squawk box). And for whatever games on the NYSE floor, I can typically see and figure out what is going on before I get hurt bad. But when 100 AB Watley traders jump on a 50,000 or 100,000 order that comes over their box, suddenly I don't have a fair chance for recognizing a very sudden turn of the tide and get out. Think about being in a stock that is slowly moving up, for flatlining, and suddenly it gaps way down, and even if you sell, all these guys have their sell orders in before you even knew the stock was about to move down. Yes, I'm happy not to have to compete against that!
 
Quote from Rearden Metal:

I think 'dro has a good point here. Sweeping up a little speck of dust while leaving a big pile of stinking shit on your floor is no way to clean your house.

http://bear.cba.ufl.edu/karceski/fin4504k/wsj/wsj 110303.html

From the WSJ article:

SEC Blasts Big Board Oversight Of `Specialist' Trading Firms
Investors Were Shortchanged $155 Million Over 3 Years, Confidential Report Says --- In 2 Hours, 21 Violations
By Deborah Solomon and Susanne Craig
3,180 words
3 November 2003
WSJ

The Securities and Exchange Commission, in a confidential report, blasted the New York Stock Exchange for failing to police its elite floor-trading firms and for ignoring blatant violations in which investors were shortchanged by millions of dollars in trades involving more than two billion shares over the past three years.

The 40-page report, dated Oct. 10 and reviewed by The Wall Street Journal, is a severe rebuke of both the floor-trading firms, known as "specialists," and the self-regulatory structure that monitors the Big Board floor. It paints a picture of a floor-trading system riddled with abuses, with firms routinely placing their own trades ahead of those by customers -- and an in-house regulator either ill-equipped or too worried about increasing its workload to care. And it concludes that when the NYSE does act on investor abuses, the exchange often does little more than admonish the specialists in a letter or slap them on the wrist with a light fine.
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In my view, that is the real problem and solution. Not to throw the baby out with the bath water, but rather to make the NYSE enforce its own rules. It is a good system, with good rules, that have not been adequately enforced. That said, many traders blame their poor trading on the specialist, when it may not have anything to do with the specialist (and they're often jumping to conclusions about trades) because that is the easiest thing to do.
 
Doesn't someone have to get the call first ?? The info gets put on the box so that sales traders and brokers can tell their clients - So if a firm like AB Watley is a customer of Merril Lynch -- and gives them commision dollars in exchange for intraday calls -- whats wrong with that - Does the call have to get to SAC first ??
Maybe keeping the phone line open all day is shady - but someone has to get the info first - If they are going to prosecute firms for this - they need to require that the info gets distributed by a major news agency before anyone gets calls - but then that would defeat the whole purpose of a firms research department - which is to provide research/market commentary to it's own customers first.
 
I heard from the grapevine that Gary Mednick was ousted at AB Watley soon after the expo in NYC. I dont know the reasons why just that he is gone. Hopefully he will stay away from the industry all together and go burry himself in a hole.
 
Yeah, this is the same old. This kind of thing must be going on wholesale and for billions.

So they pick on a jerk who advertised the scam to loser daytraders by the dozen. Someone musta talked in thier sleep.
 
Quote from traderjimbo:

Doesn't someone have to get the call first ?? The info gets put on the box so that sales traders and brokers can tell their clients - So if a firm like AB Watley is a customer of Merril Lynch -- and gives them commision dollars in exchange for intraday calls -- whats wrong with that - Does the call have to get to SAC first ??
Maybe keeping the phone line open all day is shady - but someone has to get the info first - If they are going to prosecute firms for this - they need to require that the info gets distributed by a major news agency before anyone gets calls - but then that would defeat the whole purpose of a firms research department - which is to provide research/market commentary to it's own customers first.
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Buddy, they were announcing their customers orders (you know, the ones they have a fiduciary responsibility to get the best price for), announcing over the squawk box "100,000 to sell in XYZ" before they began selling, often naming the price they were gonna go to. Then a room of 100 daytraders starts selling and counting the shares going off. How would this be something they would publish with a "major news agency" first?
 
TheStreet.com
Ex-Watley CEO Has Checkered Past
Friday March 11, 5:18 pm ET
By Matthew Goldstein, Senior Writer


John Amore, the former chief executive of AB Watley (OTC BB:ABWG.OB - News), a small daytrading firm that's embroiled in an illegal stock-tips scandal on Wall Street, was indicted last year in an unrelated securities investigation, court documents show.
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Federal prosecutors in the Eastern District of New York charged Amore with defrauding investors in a small hedge fund he managed, Amore Capital Group.

The 18-count indictment, filed several months ago, charges that Amore lied to his investors about his education and his employment history. He also allegedly falsified records concerning a $3.2 million personal loan taken from the fund, and created "fictitious quarterly statements" that were mailed to investors.

The charges are still pending.

Federal prosecutors filed their charges against Amore around the same time they also began looking into allegations that daytraders were paying Wall Street brokers for the privilege of listening in on confidential communications at several big Wall Street firms.

Amore was fired from Watley in September 2003. Soon after, the New York-based daytrading firm filed a lawsuit alleging Amore misled the company about his background and committed a wide array of "improprieties."

TheStreet.com was the first to report on the illegal tips probe, which centers on brokerages' "squawk box" communication systems, and Watley's involvement in it. Next week, authorities are expected to take testimony from at least one senior Watley executive.

The Wall Street Journal reported Friday that federal prosecutors and securities regulators involved in the inquiry are investigating Amore's activities at Watley.

Nelson Boxer, Amore's attorney, declined to comment. Amore, who was last known to reside in Plandome, N.Y, a small village on Long Island's North Shore, could not be reached for comment. Amore's hedge fund was based in Great Neck, N.Y., a neighboring Long Island community that was home to a number of daytrading shops during the heyday of rapid-fire trading.

In the investigation, prosecutors and the Securities and Exchange Commission are looking into allegations that daytrading firms and hedge funds paid brokers to secure unauthorized access to internal brokerage calls to gather trading advantages, mainly information about big block trades. The investigation, which began last summer, is focusing on allegations of cash payments to the brokers, or agreements to route trades to the brokers in return for their cooperation.

Getting a tip about a block trade, a single trade of 10,000 or more shares, can be advantageous to traders trying to cash in on sudden price movement in a stock. Such tips could have permitted daytraders to engage in front-running, an illegal practice in which a person with inside information jumps ahead of the investor trading the big block.

People familiar with the inquiry said Amore would be of interest to investigators because he oversaw Watley's proprietary daytrading operation, which had agreements with a cadre of fast-fingered traders who conducted business for both their own accounts and the firm's.

People familiar with Watley said traders in the proprietary operation had access, at times, to squawk box communications coming from several brokerage houses. Watley shut down its proprietary trading operation early last year, soon after the firm fired Amore.

A squawk box is part of a network used by brokerage houses to permit direct communications between research analysts, traders and brokers. The communications generally come through a desktop speaker system.

After being ousted from Watley, Amore briefly worked for E*Trade (NYSE:ET - News), the big online brokerage and bank. People familiar with Amore said he worked with E*Trade's proprietary trading group until last July. Before he was fired at Watley, Amore had helped negotiate a deal with E*Trade in which the online brokerage licensed some of Watley's daytrading software. E*Trade ultimately purchased the software from Watley.

An E*Trade spokeswoman declined to comment.

Meanwhile, Amore and his former colleagues at Watley continue to go at each other like cats and dogs, filing and cross-filing lawsuits seeking millions of dollars in damages.

In one, Watley contends Amore misled it about his background in order to be named the company's CEO in 2002. The litigation also lists a wide array of infractions allegedly committed by Amore during his brief tenure as CEO, including the misappropriation of rent money and deposits from some of Watley's traders.

Watley also accused Amore of taking kickbacks and secretly recording employees as part of a plot to "blackmail" them.

For his part, Amore has filed a lawsuit seeking $5 million in damages, claiming Watley's chairman, Steven Malin, slandered him. Amore contends Malin slandered him by telling a group of Watley executives in September 2003 that Amore was a "criminal" who had stolen "$3.5 million from the firm."
 
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