NYSE special side deal with Morgan Stanley

NYSE is ‘freaking out’ looking for leakers after Post exposé

By Kevin Dugan

December 7, 2018 https://nypost.com/2018/12/07/nyse-is-freaking-out-looking-for-leakers-after-post-expose/

The New York Stock Exchange scrambled to contain the fallout from The Post’s exclusive Friday report that revealed a special side deal allowing Morgan Stanley to trade large blocks of stock after the closing bell.
Exchange officials were on a witch hunt for leakers who spilled the beans on how a broker was able to make trades on the Big Board even after the markets were closed, a source told The Post.

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NYSE is accused of letting Morgan Stanley make after-hours trade

“NYSE is freaking out,” said one source. “They are going crazy looking for who told.”

The side deal, which prevented Morgan Stanley from either risking a trade in an after-hours auction with less price discovery or waiting until Monday morning facing the uncertainty of holding the trade over the G-20 meeting weekend.
The trades prompted accusations of unfairness from Wall Street insiders, who said smaller brokers wouldn’t have gotten such treatment.
“If this has occurred recurrently, it is a BIG story because it suggests systematic favoritism,” said John C. Coffee Jr., a Columbia law school professor and former member of NYSE’s legal advisory board.

He added that the side deal with Morgan Stanley could be a “misdemeanor level in terms of securities violations” in isolation.
The NYSE’s internal regulators are looking into the incident, according to a source briefed on the investigation.

It’s unclear if federal regulators have started to probe the incident. Kristen Kaus, an NYSE spokeswoman, didn’t return a call seeking comment.
The incident, which occurred on Nov. 30, has brought up bad memories for Wall Street over recent allegedly unfair treatment by exchanges.
Earlier this year, the Securities and Exchange Commission fined NYSE $14 million for five separate investigations — including one around a secret electronic order that gave some investors data about what other traders were doing.

Investors said that exchanges bend or break rules to keep their largest clients happy — because they know that competition is fierce.
“If this exchange doesn’t do it, the exchange down the block will do it,” said Joe Saluzzi, co-founder and co-head of equity trading at Themis Trading.
“Are there other special deals? Based on history, I’d say so,” he added.