|
|
|
|
|
|
|
The Bear Stearns Meeting And Subsequent Narrowings |
|
|
|
|
|
|
|
|
In the spring of 1994, market makers began to narrow spreads in a number of high-profile stocks. Several events appear to have precipitated this development. |
|
|
|
|
|
|
|
|
On May 24, 1994, the Security Traders Association (the STA) sponsored a meeting to discuss the width of spreads at the Manhattan offices of Bear Stearns (this became known as the "Bear Stearns meeting"). The STA, a trade association composed of individuals in the securities industry, largely represents the interests of market makers. The meeting was attended by approximately one hundred traders from many of the major Nasdaq market-making firms, as well as senior officers of the STA and the NASD. The president of the STA began the meeting by urging traders to narrow spreads voluntarily or face regulations forcing a tightening of spreads. |
|
|
|
|
|
|
|
|
In his prepared remarks the STA president prophetically announced: |
|
|
|
 |
|
|
|
|
[L]et me suggest that if we do not voluntary (sic) close quotes, it will be done by regulation by the NASD, the SEC or Congress and in the meantime we will lose many companies to the exchange (NYSE) and receive much bad and distressing publicity. |
|
|
|
|
|
|
|
|
He also quoted from the Christie-Schultz study and from a letter from an issuer complaining about the Nasdaq spread. |
|
|
|
|
|
|
|
|
NASD senior officers then made a presentation showing that the spreads of top Nasdaq securities had widened and that in many stocks the displayed spread was substantially wider than the spread at which the stock actually could be traded. |
|
|
|
|
|
|
|
|
Publication Of The Christie-Schultz Study |
|
|
|
|
|
|
|
|
On May 26, 1994, several major newspapers reported that the Christie-Schultz study had concluded that market makers tacitly |
|
|
|
|
|