this came across briefing.com this morning, any opinions on the matter...... Live In Play 11-Mar-05 06:52 Prosecutors are investigating if a small brokerage firm traded on information gleaned from Wall Street firms' "squawk boxes" -- WSJ Federal prosecutors are investigating whether a small brokerage firm and a former executive traded on confidential information about stock trades by listening in on large brokerage firms' internal broadcast systems, people familiar with the situation said. Authorities are investigating whether traders are using such information to buy or sell in advance of big market-moving orders. The squawk-box inquiry is being conducted by the Justice Department's U.S. attorney's office in Brooklyn, N.Y., and by the SEC. It involves trading at A.B. Watley Group Inc. One focus of the inquiry is trading by John J. Amore, who led a team of traders and was once the firm's chief executive, people familiar with the matter say. The authorities are looking into whether he and colleagues at A.B. Watley were able to obtain access to the squawk-box chatter by making payments to employees who worked at big-name Wall Street brokerage firms, these people said.
I had checked that place out. Toured and sat in for a little while. I could tell it was shady from the outset. They had multiple locked doors to go through, and of the numerous trading companies and branches I'd checked out, they were the only ones who were paranoid about strangers being escorted and watched. Almost nobody at that place new how to trade, they just listened to the squawk box and made easy money. I told some friends about it, and they confirmed my gut feeling (without even having to visit), that it sounded extremely shady. A couple of them told me that this was the kind of place that was going to get raided "soon." Well, I guess for the sad ass feds and sec this is "soon." Too bad nobody told Eliot Spitzer earlier. Then again, the fed gov't is doing all it can to shut him out for the future.
I predicted this in another thread a week ago. http://www.elitetrader.com/vb/showthread.php?s=&postid=701773#post701773 Jay Amore is a bum. He went to E*Trade pro after Watley. I would be careful there too.
( DJ ) 03/11 04:00AM WSJ(3/11) Did Day-Trader Eavesdrop On Brokers' Calls? (From THE WALL STREET JOURNAL) By Aaron Lucchetti, Kara Scannell and Susanne Craig In New York FEDERAL PROSECUTORS are investigating whether a small brokerage firm and a former executive traded on confidential information about stock trades by listening in on large brokerage firms' internal broadcast systems, people familiar with the situation said. The investigation focuses on information piped through Wall Street firms' storied "squawk boxes" -- desktop audio speakers that relay order information and in-the-know chatter on stocks to traders in multiple locations. The examination is the latest by regulators and prosecutors looking for abuses of confidential market data. Authorities are investigating whether traders are using such information to buy or sell in advance of big market-moving orders. Such trades could force prices to move, hurting the customers who placed the initial orders and any investors who bought or sold after them. The squawk-box inquiry is being conducted by the Justice Department's U.S. attorney's office in Brooklyn, N.Y., and by the Securities and Exchange Commission. It involves trading at A.B. Watley Group Inc., a small brokerage firm based in New York. One focus of the inquiry is trading by John J. Amore, who led a team of traders and was once the firm's chief executive, people familiar with the matter say. Mr. Amore couldn't be located. Nelson A. Boxer, a lawyer for Mr. Amore, declined to comment. A person who answered the phone at A.B. Watley late yesterday declined to comment, and one of the firm's senior executives, Robert Malin, couldn't be reached. The brokerage firm -- once a leading player in rapid-fire "day trading" -- recently said in an SEC filing that the agency was conducting a formal investigation into "trading that may have occurred on the company's premises." The regulatory filing added that the SEC had subpoenaed the company and several of its executives. Financial Web site TheStreet.com reported this month that authorities were investigating possible improprieties involving the squawk-box system, and yesterday that A.B. Watley was under scrutiny. The probe of Mr. Amore's activities wasn't previously disclosed. It is unclear how far along the investigation is and whether it will result in any charges. As part of the same broad investigation, the U.S. attorney's office in Brooklyn and the SEC this week charged a former floor clerk on the New York Stock Exchange with passing along information about large-client orders to a day trader, or short-term speculator, who the authorities said made $300,000 in ill-gotten gains. The floor broker, Frank Furino, pleaded not guilty to nine counts of securities fraud and one count of conspiracy. Authorities are looking at various ways in which confidential client information is abused. Among the scenarios they are looking at is whether nimble day traders -- who buy and sell stocks rapidly for quick profits -- are able to get access to brokerage firms' internal communications systems, including squawk-box broadcasts. Investigators suspect that Mr. Amore gained access to information from the squawk boxes of several large Wall Street firms, people familiar with the matter said. The authorities are looking into whether he and colleagues at A.B. Watley were able to obtain access to the squawk-box chatter by making payments to employees who worked at big-name Wall Street brokerage firms, these people said. E*Trade Financial Corp., a Wall Street brokerage firm, purchased A.B. Watley's technology in 2002, and investigators have asked the company for information about a group of A.B. Watley traders headed by Mr. Amore, according to a person familiar with the matter. Mr. Amore worked at E*Trade for a time in 2004, several people said. Mr. Amore worked at Bear Stearns Cos. from 1991 to 1993 on its international trading desk, according to regulatory filings. He had stints at smaller firms before jumping to A.B. Watley in 2001. A.B. Watley and Mr. Amore are suing each other over an employment dispute related to his departure from the firm, according to a regulatory filing by the firm.
"Authorities are looking at various ways in which confidential client information is abused. Among the scenarios they are looking at is whether nimble day traders -- who buy and sell stocks rapidly for quick profits -- are able to get access to brokerage firms' internal communications systems, including squawk-box broadcasts" Ive heard this is not uncommon in NY
I don't understand, the whole NYSE floor makes money front running big market moving orders. Cramer's hedge fund did the same exact thing and I'm sure Steve Cohen's does it also being that he is so keen on early information. I am not defending AB Watley here since they are scumbags but in this case, all they did was level the playing field. SEC and NASD are becoming bigger hypocrites by the day. I watched and traded in amazement as a stock was being run up 7% and then after the close, news containting higher guidance was released. Next trading day it gaps up and sells off from the open. Insider trading?? Nahhhh. It only counts when Joe Shmoe buys 5k shares prior to good news release, the ones moving half mil blocks get special treatment. Situation like these only make me lose any concern for securities laws being that they are complete BS anyway.
So they should just enforce nothing? AB Watley had hundreds of traders listening to this box and all diving into the same things. BTW, similar to your example, I remember Nike running up 2 points in like a minute, and then 10 minutes later Bloomberg (the fastest news service) finally reports something about earnings guidance or whatever. I haven't seen that kind of stuff in quite awhile actually, but it has been ridiculous at times.
AB Watley Questioned in SEC's 'Squawk' Probe The Street.com By Matthew Goldstein Senior Writer 3/10/2005 Daytrading firm AB Watley (ABWG.OB:OTCBB - commentary - research) is one of several small brokerages that federal authorities are questioning in their probe of illegal trading tips on Wall Street, people familiar with the inquiry say. Regulators with the Securities and Exchange Commission have subpoenaed documents from the New York-based brokerage and taken testimony from several executives and former traders, and more interviews are scheduled for next week, sources say. The inquiries at Watley are part of a joint investigation by the SEC and federal prosecutors in Brooklyn into allegations that stock daytrading firms paid brokers for the privilege of listening in on confidential communications at several big Wall Street firms. As reported earlier this week by TheStreet.com, authorities are looking into allegations that brokers gave hedge funds, daytraders and small, trading-oriented brokerages unauthorized access to internal "squawk box" calls to gather trading advantages, in particular, information about big block trades. The investigation began last summer and is focusing on allegations of either cash payments or agreements to route trades to the brokers. A block trade is generally a single trade of 10,000 or more shares. Getting a tip about one can be advantageous to traders trying to cash in on sudden price movement in a stock. That's especially the case when it involves a small-cap stock with few shares outstanding. A person familiar with the inquiry said Lehman Brothers (LEH:NYSE - commentary - research) was one of the Wall Street firms contacted by the SEC in conjunction with the Watley investigation. A Lehman spokeswoman, however, said she had no knowledge of any investigation. Meanwhile, officials with Watley, which at one time was the forefront of the daytrading movement before falling on hard times, did not return several telephone calls. But in a regulatory filing last December, the company reported that it had received subpoenas in conjunction with an SEC investigation of "trading activities that may have occurred on our premises." The company said the "exact scope of the SEC investigation is uncertain." The filing said Watley's vice chairman, Robert Malin, and others were expected to provide testimony to regulators sometime early this year. The company said its chief compliance officer, Linus Nwaigwe, had already testified. Malin declined to comment on the investigation. Nwaigwe did not return a telephone call. Up until a year ago, Watley maintained a proprietary daytrading operation that 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. Authorities believe Watley and other daytrading firms struck deals with individual brokers to permit them to listen to communications being broadcast internally over a brokerage's squawk-box speaker system. Subscribers to Watley's better-known retail daytrading operation did not have access to the squawk box communications. 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. Sources say brokers allowed traders to listen in on these conversations, which can occur throughout the day, by simply leaving a telephone off the hook and placing the receiver next to the speaker. Bill Singer, a New York securities lawyer and former NASD enforcement attorney who has represented a number of large daytrading firms, said that two or three years ago it was not uncommon for daytrading operations to tout their access to brokerage squawk box calls as an inducement to sign up traders. Even today, it's not uncommon for many daytrading shops to broadcast live squawk box feeds coming from the trading floors of the commodity pits and exchanges that trade futures. In fact, the New York Mercantile Exchange, for a fee, will permit anyone to listen in to squawk box communications from the natural gas or crude oil trading pits. Traders say these squawk box communications can be helpful in picking up information about fast-changing trends in commodity prices. But getting a chance to listen into the squawk box communications of a major brokerage house is something completely different because most of the conversations are about stocks. It's not uncommon for specific information about large block trades to be broadcast across the network. Several Wall Street firms contacted by TheStreet.com said they weren't aware of the inquiry, according to the firms' spokespeople. But sources said a number of large firms have been contacted by the authorities over the past few months. An SEC spokesman declined to comment. Also not commenting was the spokesman for Roslynn Mauskopf, the U.S. attorney for the Eastern District of New York, which encompasses Brooklyn, Queens and Long Island. People familiar with the inquiry suggest that authorities may be close to bringing an enforcement action in the squawk box investigation. On Wednesday, federal prosecutors and the SEC filed criminal and civil charges against a former New York Stock Exchange floor clerk in a case that has many similarities to the ongoing squawk box investigation. In that case, federal prosecutors charged Frank Furino with facilitating an illegal "front-running" scheme by passing confidential trading information about stocks to a daytrader accomplice. The plot generated more than $300,000 in illegal profits from trades placed from August 2001 through December 2001. The 10-count indictment and SEC civil complaint charges that Furino provided information about "large orders to purchase and sell securities" to an unindicted co-conspirator with a brokerage account at Andover Brokerage, a daytrading firm that at one time was based in Great Neck, N.Y.
Yes, either nothing or everything. Why should I be afraid about buying 1-2k or some options on some info I have when these pigs are taking half mil blocks in a blatant manner without a worry in the world. Why can't a daytrading firm use the same strategies as floor traders and some of the best known & glamourized hedge funds (i.e Cramer & Cohen's funds)? No really, I would love to hear any justification on behalf of the SEC regarding these double standards. Cause it has become obvious to me that instead of protecting the investor, the SEC has actually hindered him/her. At least before these hypocritical insider trading rules, any Joe Shmoe could have went out and dug up some inside info. Now it's a federal crime, unless you're a big shot moving huge blocks or a bid hedge fund.