Newspaper article THE JOURNAL RECORD

Elite Breed of Bond Brokers under Scrutiny for Anti-Monopoly Violations

Newspaper article THE JOURNAL RECORD

Elite Breed of Bond Brokers under Scrutiny for Anti-Monopoly Violations

Article excerpt

NEW YORK - An elite breed of government bond brokers and dealers is under renewed scrutiny by federal investigators for possible violations of anti-monopoloy law.

The investigation centers on how billions of dollars worth of Treasury securities are traded each day.

The industry was aware for some time that the Justice Department was examining the issue, but recently investigators have intensified their efforts, Wall Street and government sources said this past week.

In Washington, Barry Grossman, chief of the communications and finance section of the Justice Department's antitrust division, declined to discuss the direction, scope or status of the investigation.

But other Justice Department sources, speaking on condition that they not be identified, said that major securities firms and the Public Securities Association were sent ``freeze file letters'' several weeks ago, ordering them to preserve documents and records about their businesses in connection with the investigation.

Caroline Benn, a spokeswoman for the New York-based Public Securities Association, confirmed receipt of such a letter.

Sources in the securities business said they expect the Justice Department to follow up soon with more formal demands.

``The next logical development in an investigation of this kind would be to send out CID letters,'' said one industry source familiar with the matter. CID letters, standing for civil investigatory demands, are subpoena-like demands for company memoranda, letters, minutes of meetings or other data.

The focus of the investigation is a long-standing arrangement between a restricted number of dealers and several brokerage houses through which a large share of government securities trading takes place.

Under study is the practice of limiting access to price information supplied by brokers on electronic screens, the sources said.

Most brokers make their screens available only to the 35 commercial banks and investment banks that the Federal Reserve Bank of New York has designated as ``primary dealers,'' and to a dozen or so other firms that are trying to become primany dealers. …

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