Swift Trade Securities accused of fraudulent trading scheme

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Swift Trade Securities accused of fraudulent trading scheme
Last Updated Thu, 27 Jun 2002 13:58:59
NEW YORK - Swift Trade Securities – which gained fame as Canada's first day-trading brokerage firm – is facing allegations that it engaged in a fraudulent trading scheme involving fictitious "wash" transactions.

The complaint was filed by the NASD – the National Association of Securities Dealers. The NASD complaint also names Swift Trade president Peter Beck.

Regulators say Swift Trade this spring used a trading program to simultaneously buy and sell "QQQ" shares, which track the Nasdaq 100 index and are listed on the American Stock Exchange. The NASD complaint says Swift Trade executed identical buy and sell orders through the Island trading platform at the same price and quantity. Swift Trade was both the buyer and the seller. The NASD says "fictitious and non-bona fide transactions than do not result in a change of ownership are illegal."

Regulators say fraud occurred because Swift Trade gets a share of the market data revenue-sharing that is provided by Island to its subscribers. In a one-month period, the NASD said the trading scheme netted Swift Trade more than $19,000 US in what it called "ill-gotten" revenue.

Possible sanctions include fines, suspensions, or expulsion from the NASD. Swift Trade is based in Toronto, with 10 office across Canada.


Written by CBC News Online staff
 
with all due respect to our friends in the Great White North, what is it with you guys and securities fraud, eh? They used to call the Toronto exchange the 'bandit exchange.'
 
I'd like to comment on this as I know some things about it that arent in the press.....

First of all, Swift Trade denies doing any thing wrong, and Island agrees that Swift Trade did not do anything wrong or illegal, it is just the NASD who is pursuing this.

NASD offered Swift Trade a deal where they were to pay a little over $100,000 USD as a fine to settle this matter. Peter Beck said no way, we didnt do anything wrong, we arent paying anything. So this will likely go to binding arbitration. NASD said 'fine if you are going to do that then we are going to the press with the story.'

So that is why this minor allegation over a measly 19k has been all over the news, even on CNBC....the spirit of the whistleblower is in full effect right now, and the NASD wants to send a message.
 
the thing is , they obviously knew they were doing simultaneous buys and sells for their own account and since they all had to get licensed, ignorance of the rules is no excuse. $19k is no big deal, but being willing to break the rules and then fighting paying the fine IS a big deal, because it shows they don't give a crap about the rules. If I was working there I would be scared because they are hurting so bad that they need to scam $19k.
 
"From April 2002 through May 2002, Swift USA, an NASD-registered brokerage firm based in Toronto, Canada, under the direction of Beck, operated a computer software program to route simultaneously offsetting limit orders for QQQ to The Island ECN solely for the account of its Canadian-registered counterpart, Swift Trade Securities, Inc. its only customer. Because these orders were executed at the same price and quantity on both sides of the market for Swift Canada's proprietary account, they were not intended and did not result in any change of Swift Canada's ownership of QQQ shares. These fictitious and non-bona fide transactions that do not result in a change of ownership are illegal."
 
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