Specialist Insider Trading at the NYSE

The WSJ reports that specialists (the people who match buyers and sellers) are taking advantage of their priviledged position to trade for their own account. The article says computers and decimalization are crowding the profits out of the core business so these specialists have to make money through trading for their own accounts. My suspicion is that the computers just made the illicit behavior much more visible.

The problem here is the humans and not the intermediation of the specialists. There is no reason why the exchange couldn’t modularize and outsource specialization to whichever firms are willing to bid on the business. They could maintain the NYSE’s economic structure but get rid of the human inefficiencies.


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