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Univ. of Toledo College of Law

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Thursday, October 16, 2008

SEC Administrative Orders On NYSE Specialist Interpositioning Cases

The SEC issued three separate Orders Making Findings and Imposing a Cease-and-Desist Order Pursuant to Section 21C Securities Exchange Act of 1934 as to Todd J. Christie, Kevin M. Fee, and Thomas J. Murphy, Jr., and an Order Dismissing Administrative and Cease-and-Desist Proceedings Instituted against P. Murphy Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 21C and 11(b) of the Securities Exchange Act of 1934 And Rule 11b-1 thereunder.  The four cases all involved NYSE specialists who allegedly engaged in interpositioning.

The Christie Order

The Christie Order finds that during the period from January 1, 1999 to approximately March 2003, Christie, a former specialist on the New York Stock Exchange and Chief Executive Officer, managing director, and partner at Spear Leeds & Kellog L.P., executed hundreds of trades that constituted interpositioning, which generated thousands of dollars in profit for his firm's proprietary account at the expense of customer orders, and hundreds of trades that constituted trading ahead, which generated thousands of dollars in customer harm, and, in doing so, violated Section 11(b) of the Exchange Act and Rule 11b-1 thereunder.

Based on the above, the Christie Order orders Christie to cease and desist from committing or causing any violations and any future violations of Section 11(b) of the Exchange Act and Rule 11b-1 thereunder.

The Fee Order

The Fee Order finds that during the period from at least 1999 through June 30, 2003, Fee, a former specialist on the New York Stock Exchange at Bear Wagner Specialists LLC and a predecessor firm, executed hundreds of trades that constituted interpositioning, which generated thousands of dollars in profit for his firm's proprietary account at the expense of customer orders, and hundreds of trades that constituted trading ahead, which generated thousands of dollars in customer harm, and, in doing so, violated Section 11(b) of the Exchange Act and Rule 11b-1 thereunder.

Based on the above, the Fee Order orders Fee to cease and desist from committing or causing any violations and any future violations of Section 11(b) of the Exchange Act and Rule 11b-1 thereunder.

The T. Murphy Order

The T. Murphy Order finds that during the period from at least 1999 through June 30, 2003, T. Murphy, a former specialist on the New York Stock Exchange at Fleet Specialist, Inc. (now known as Banc of America Specialist, Inc.) and a predecessor firm, executed hundreds of trades that constituted interpositioning, which generated thousands of dollars in profit for his firm's proprietary account at the expense of customer orders, and hundreds of trades that constituted trading ahead, which generated thousands of dollars in customer harm, and, in doing so, violated Section 11(b) of the Exchange Act and Rule 11b-1 thereunder.

Based on the above, the T. Murphy Order orders T. Murphy to cease and desist from committing or causing any violations and any future violations of Section 11(b) of the Exchange Act and Rule 11b-1 thereunder.

The P. Murphy Order

The P. Murphy Order finds that in light of the administrative record developed since the institution of the Administrative Proceeding against P. Murphy, a former NYSE specialist at Spear Leeds & Kellogg L.P, the Commission deems it appropriate and in the public interest to dismiss the Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 21C and 11(b) of the Securities Exchange Act of 1934 and Rule 11b-1 thereunder (OIP) against him.

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