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other market makers questioning or complaining about the narrower spread. They demanded that the spread cutter widen the spread back out, asserting that the spread reducer was ruining the market or was unprofessional, unethical, embarrassing, or guilty of "making a Chinese market." |
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At times, a degree of imagination was applied to the harassing telephone calls. When Domestic narrowed the spread on certain occasions from a quarter to an eighth, it received anonymous telephone calls in which the caller, in a phony Chinese accent, ordered chop suey, moo goo gai pan, or other Chinese food, in an apparent allusion to the understanding among market makers not to make "Chinese markets." Spread-shortening market makers also reported to the SEC instances where other market makers expressed their displeasure by disseminating messages over the SelectNet system. In addition to delivering orders, SelectNet can be used to transmit short text messages. Examples of messages complaining about spreads included "Ridiculous," "Great Market,'' "Stop kidding," "How about 64s," and "Not Funny." |
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In addition, spread-narrowing makers who had the audacity to maintain a truly competitive market by violating the conventions encountered vicious refusals by other market makers to trade with them. It is difficult to make a living by trading if no one will trade with you. |
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While these examples of harassment and intimidation were documented by reporters or disclosed on the many hours of tapes reviewed by the SEC and the Department of Justice, the real situation was far more intense than the examples reported. Intimidation was a daily occurrence that eventually became comic relief at my office because we knew the perpetrators were no more than frustrated armchair warriors. Even though the threats didn't really phase me, the failure of market makers to observe their obligations and trade ethically and honorably was most disturbing. For alleged leaders in the financial community to act in such a juvenile and undignified manner was unbecoming. These actions diminished any remaining respect that I still might have had for the industry and further convinced me that my quest to initiate reform was correct. |
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