Hays Gorey, Jr.

(HG 1946)
United States Department of Justice
Antitrust Division
600 E Street, N.W., Room 9500
Washington D.C. 20530
(202) 307-6200
Attorney for Plaintiff United States of America

UNITED STATES DISTRICT COURT FOR

THE SOUTHERN DISTRICT OF NEW YORK
______________________________
)
UNITED STATES OF AMERICA, )
)
PLAINTIFF, )
)
v. ) Civil Action No.
ALEX. BROWN & SONS INC.; )
BEAR, STEARNS & CO. INC.; CS )
FIRST BOSTON CORP.; DEAN )
WITTER REYNOLDS INC.; )
DONALDSON, LUFKIN & JENRETTE )
SECURITIES CORP.; FURMAN SELZ )
LLC; GOLDMAN, SACHS & CO.; )
HAMBRECHT & QUIST LLC; HERZOG,)
HEINE, GEDULD, INC.; J.P. )
MORGAN SECURITIES, INC.; )
LEHMAN BROTHERS, INC.; MAYER )
& SCHWEITZER INC.; MERRILL )
LYNCH, PIERCE, FENNER & SMITH,)
INC.; MORGAN STANLEY & CO., )
INC.; NASH, WEISS & CO.; OLDE )
DISCOUNT CORP.; PAINEWEBBER )
INC.; PIPER JAFFRAY INC.; )
PRUDENTIAL SECURITIES INC.; )
SALOMON BROTHERS INC.; )
SHERWOOD SECURITIES CORP.; )
SMITH BARNEY INC.; SPEAR, )
LEEDS & KELLOGG, LP; and )
UBS SECURITIES, LLC. )
)
DEFENDANTS. )
______________________________)

COMPETITIVE IMPACT STATEMENT

Pursuant to Section 2(b) of the Antitrust Procedures and

Penalties Act ("APPA" or "Tunney Act"), 15 U.S.C. § 16(b)-(h),

the United States submits this Competitive Impact Statement

relating to the proposed Stipulation and Order submitted for

entry with the consent of defendants in this civil antitrust

proceeding.

I.

NATURE AND PURPOSE OF THE PROCEEDING

On July 17, 1996, the United States filed a Complaint

alleging that the defendants have engaged in price fixing in

violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. On the

same day, the United States and the defendants filed a

Stipulation and Order (“proposed Order”) to resolve the

allegations in the Complaint. Entry of the proposed Order is

subject to the APPA.

The defendants are all major "market makers" in over-the-

counter ("OTC") stocks quoted for public trading on the

computerized stock quotation system known as Nasdaq.1/ The

United States alleges in its Complaint that the defendants and

others adhered to and enforced a "quoting convention" that was

designed to and did deter price competition among the defendants

and other market makers in their trading of Nasdaq stocks with

1
The term "Nasdaq" was originally an acronym for the
"National Association of Securities Dealers Automated Quotation
System." The automated quotation system is now operated by The
Nasdaq Stock Market, Inc.

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the general public. The United States believes that investors

have incurred higher transaction costs for buying and selling

Nasdaq stocks than they would have incurred had the defendants

not restrained competition through their illegal agreement.

The proposed Order will eliminate the anticompetitive

conduct identified in the Complaint and establish procedures that

will ensure that such conduct does not recur. Specifically, the

proposed Order prevents the defendants from agreeing with other

market makers to adhere to the quoting convention, or to fix,

raise, lower, or maintain prices or quotes for Nasdaq securities.

The proposed Order also requires each defendant to adopt an

antitrust compliance program and designate an antitrust

compliance officer to ensure the firm’s future compliance with

the antitrust laws. To this end, the proposed Order requires the

compliance officer to (1) randomly monitor and tape record

telephone conversations between stock traders and (2) report any

violations of the proposed Order within ten business days to the

Antitrust Division of the Department of Justice (“the

Department”).

The proposed Order also requires that these tape recordings

be made available to the Department for its review. The proposed

Order gives the Department authority to receive complaints of

possible violations, to visit defendants’ offices unannounced to

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monitor trader conversations as they are ongoing, to direct

taping of particular suspected violators, and to request copies

of tapes as they are made. The Court may punish violations of

its proposed Order with civil or criminal contempt, including

fines and incarceration for willful flouting of the Court’s

order. See, e.g., United States v. Schine, 260 F.2d 552 (2d Cir.

1958), cert. denied, 358 U.S. 934 (1959), and 18 U.S.C. § 401.

The United States and the defendants have agreed that the

proposed Order may be entered after compliance with the APPA,

provided that the United States has not withdrawn its consent to

entry of the proposed Order. The proposed Order provides (as is

standard in the Department’s settlements) that its entry does not

constitute any evidence against or admission by any party with

respect to any issue of fact or law. Entry of the proposed Order

will terminate this civil action as to the defendants, except

that the Court will retain jurisdiction for further proceedings

that may be required to enforce or modify the order entered, or

to punish violations of any of its provisions.

II.

THE DEPARTMENT’S INVESTIGATION

The Complaint and proposed Order are the culmination of a

major, two-year investigation by the Department of the trading

activities of Nasdaq securities dealers. The Department’s

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investigation began in the summer of 1994, shortly after the

public disclosure of an economic study by Professors William

Christie of Vanderbilt University and Paul Schultz of Ohio State

University (the “Christie/Schultz study”). The Christie/Schultz

study suggested that securities dealers on Nasdaq may have

tacitly colluded to avoid odd-eighth price quotations on a

substantial number of Nasdaq stocks, including some of the best

known and most actively traded issues, such as Microsoft Corp.,

Amgen, Apple Computers, Inc., Intel Corp., and Cisco Systems,

Inc. After the Christie/Schultz study had received wide-spread

publicity, and shortly before the Department opened its

investigation, several class action lawsuits alleging antitrust

violations were filed against the defendants and other Nasdaq

market makers.2/

During the course of its investigation, the Department has

reviewed thousands of pages of documents that were produced by

the defendants and other market participants in response to over

350 Civil Investigative Demands (“CIDs”) issued by the

Department. The Department has reviewed hundreds of responses to

interrogatories that were submitted by the defendants (and

others). The Department has taken over 225 depositions of

2
All of the private cases have been consolidated and
assigned to Judge Robert W. Sweet in the Southern District of New
York, M.D.L. 1023.

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individuals with knowledge of the trading practices of Nasdaq

market makers, including current and former officers and

employees of the defendants and other Nasdaq market makers, as

well as officials and committee members of the National

Association of Securities Dealers, Inc. (“NASD”), the

organization responsible for oversight of the Nasdaq market.

The Department conducted numerous telephone and in-person

interviews of current and former Nasdaq stock traders, Nasdaq

investors, and others with relevant knowledge of the industry,

and listened to approximately 4500 hours of audio tapes of

telephone calls between stock traders employed by the defendants

and other Nasdaq market makers. These audio tapes had been

recorded by certain of the defendants (and other market makers)

in the ordinary course of their business and were produced to the

Department in response to its CIDs.

The Department has reviewed and analyzed substantial

quantities of market data produced in computer-readable format by

the NASD. These data include data showing all market maker quote

changes on Nasdaq during a twenty-month period between December

1993 and July 1995, and for selected months thereafter, including

March 1996. The Department also reviewed eighteen months of data

on trades in Nasdaq stocks. Finally, the Department reviewed

numerous transcripts of depositions taken by the Securities and

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Exchange Commission (“SEC”) in a concurrent inquiry into the

operations and activities of the NASD and the Nasdaq market since

the fall of 1994.

Based on the evidence uncovered during this substantial

investigative effort, the Department concluded that the

defendants and others had been engaged for a number of years in

anticompetitive conduct in violation of the Sherman Act, as is

now alleged in the Complaint. The next section of this Statement

will summarize the evidence that the United States believes

supports the specific allegations in its Complaint.

III.

SUMMARY OF EVIDENCE IN SUPPORT OF COMPLAINT

A. The Nasdaq Market

Nasdaq is a computerized public market in which investors

buy and sell OTC stocks. It is the second largest securities

market in the United States. Nasdaq is a “dealer market.” In a

dealer market, a number of securities dealers “make markets” in

the same stock. To “make a market,” securities dealers -- or

market makers as they are known -- quote a price at which they

are willing to buy a particular stock, and simultaneously quote

another higher price at which they are willing to sell that same

stock. The market makers on the Nasdaq "dealer market" are

supposed to provide the investing public with "immediacy" or

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"liquidity" in competition with each other.3/ Thus, in

principle, the orders of the investing public are supposed to be

able to find the best available prices to buy or sell from many

different market makers, who are supposed to be using their

competing prices to attract those orders. To the extent that

these market makers do not compete in this fashion, the investing

public is disadvantaged.4/

1. Dealer Quotes and the Dealer Spread.

Nasdaq market makers publicize the prices at which they are

willing to buy or sell a stock by entering those "quotes" for

display on the Nasdaq computerized quotation system. The price

at which a market maker is willing to buy a security is called

3
Various other forms of public stock markets have arisen
in the United States and elsewhere to provide the service of
bringing together investor orders to buy and sell. The most
commonly recognized form of organized stock market in the United
States is the so-called "auction market," such as the New York
Stock Exchange or the American Stock Exchange. The auction
market systems provide "immediacy" to the investing public by
bringing all of the buy and sell orders for the stocks together
on the "floor" of the exchange for execution. For each stock so
traded on an exchange, the exchange designates a "specialist."
The job of the specialist is to match the public’s buy and sell
orders, and to the extent that there is an imbalance in those
orders, the specialist is supposed to use his own capital to
ensure that the market clears in an "orderly" fashion. The
exchange specialist is by design a monopolist, and his role is
heavily regulated.
4
Not all market makers make markets in the same stocks.
There are currently over 4000 stocks in the Nasdaq National
Market System ("NMS"), and almost 2000 stocks in the Nasdaq Small
Cap Market. The defendants trade many of the larger Nasdaq
issues in common with one another.

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its "bid" or "bid price." The price at which a market maker is

willing to sell a security is called its "ask" or "ask price" (or

its "offer" or "offer price"). Each market maker must

simultaneously quote both a bid and an offer price. The

difference between an individual market maker’s bid price and its

offer price in a specific security is known as its "dealer

spread." Thus, for example, if a market maker’s bid price in a

stock (the price it is willing to pay to buy stock from a

customer or another market maker) is $20 and its offer price (the

price at which it is willing to sell stock to a customer or

another market maker) is $20-3/4, the market maker has a dealer

spread in that stock of 3/4 point (75 cents per share).

2. Inside Quotes and the Inside Spread.

In the case of each Nasdaq stock, there are at least two

market makers. On average, there are between ten and twelve

market makers in each Nasdaq NMS stock, although the number of

market makers in specific stocks varies widely. The Nasdaq

computer screen collects and displays the bid and offer prices of

all the market makers in each stock. The highest bid and the

lowest offer from among the quotes of all the market makers in a

stock are called the "inside bid" and the "inside ask," or the

"inside quotes." The difference between the inside bid and the

inside ask in a stock is called the "inside spread." Thus, for

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example, if there are three market makers in a stock displaying

the following bid and ask prices --

Bid Ask
Market Maker No. 1: 19-1/2 - 20-1/4
Market Maker No. 2: 19-3/4 - 20-1/2
Market Maker No. 3: 20 - 20-3/4

-- the inside spread in the stock would be 1/4 (25 cents), based

upon the difference between Market Maker No. 3's high bid of 20

and Market Maker No. 1's low offer of 20-1/4.

As a general rule, market makers at any given point in time

have a greater interest in buying than in selling a security, or

vice versa. Market makers may reflect that interest in the

quotes they post on Nasdaq. Market makers with a greater buying

interest may, and often do, display a higher bid; market makers

with a greater selling interest may, and often do, display a

lower offer. It is extremely unusual to see a single market

maker on both sides of the inside spread.5/

5
The inside spread in a stock is not always constant.
Instead, as market makers display different bid and ask quotes,
it may vary -- possibly, for example, beginning at 1/8, widening
to 1/4, then to 3/8, narrowing to 1/4 again and then back to 1/8.

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 3. The Importance of the Inside Spread.

Market makers trade as principals with other market makers

and also fill customer orders. Customer orders can be from

retail brokers who route orders from investors seeking to buy (or

sell) a small quantity of Nasdaq stock -- referred to as “retail

customers” -- or from a large institutional investor such as a

mutual or pension fund seeking to buy (or sell) many thousands of

shares of Nasdaq stock. If a customer does not limit or specify

the price it will pay to buy (or accept to sell) a stock, which

is the case of most orders received from retail customers, the

order is called a “market order.”

In executing a market order on behalf of a retail customer,

market makers historically bought from the customer at the inside

bid, and sold to the customer at the inside ask. This execution

by the market maker satisfied the retail broker’s obligation of

"best execution" for the retail customers. For retail customers,

the inside Nasdaq quote is the price at which most retail

transactions with market makers in fact occurred.

Market makers’ compensation is in large part derived from

the spread -- the difference between the price at which the

market makers can buy and, in turn, sell the stock in question.

Thus, when the inside spread is wider, the market maker receives

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more compensation, and the retail customer pays a higher price,

for the market maker’s services.

The width of the inside spread also affects institutional

trades. While large institutional customers may be able to

negotiate prices that are better than the inside spread, the

inside spread influences many of the negotiations between the

market maker and its institutional customers.

Market makers thus have a significant interest in each

others’ price quotes because those quotes can either set each

others’ actual transaction prices or significantly affect those

prices. This creates an incentive for market makers to

discourage bid and ask price competition that may have the effect

of narrowing the inside spread. The evidence obtained during the

Division’s investigation shows that the market makers have

discouraged competition, to great effect, through the adoption

and enforcement of the quoting convention, as is discussed below.

B. The Quoting Convention.

The Department’s investigation uncovered the existence of a

long-standing, essentially market-wide commitment among market

makers to adhere to a two-part “quoting convention” that dictates

the price increments a market maker can use to adjust or “update”

bid and ask price quotes on the Nasdaq system. Under the first

part of the quoting convention, if a market maker’s dealer spread

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in a stock is 3/4 point (75 cents) or wider, the market maker is

required to quote its bid and ask prices in even-eighth

increments (e.g., 1/4 (25 cents), 1/2 (50 cents), 3/4 (75 cents)

or 4/4 ($1).6/ This ensures that the inside spread in those

stocks is maintained at 1/4 point (25 cents), or greater.7/

Under the second part of the quoting convention, market

makers can quote bid and ask prices on Nasdaq in odd-eighth

increments, e.g., 1/8 (12.5 cents), 3/8 (37.5 cents), 5/8 (62.5

cents) or 7/8 (87.5 cents), only if they have a dealer spread of

less than 3/4 point. This requirement has deterred market makers

from quoting bid and ask prices in odd-eighth increments because

a narrower dealer spread is likely to create a greater economic

risk to the market maker in trading that stock. When the

difference between a market maker’s bid and ask quotes is 1/2

rather than 3/4, a market maker may be called upon to buy (or

sell) more stock than the trader wants, or buy stock when the

market maker wants to sell (or vice versa).

6
All Nasdaq stocks may be quoted in 1/8 point increments.
7
That the use of only even-eighths will result in a
minimum inside spread of no less than 1/4 point can be shown
simply. If market makers always move in quarter-point
increments, and all initiate their bid and ask quotes on even-
eighths, all odd-eighth quotes will have been eliminated from the
number set. The set of numbers remaining -- whole numbers, 1/4,
1/2, and 3/4 -- would be the only numbers on which market maker
quotes could fall. Hence, the difference between those even
numbers would also be an even number, meaning the inside spread
could not narrow to less than 1/4 point.

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 The fact that the quoting convention has existed for at

least three decades in the OTC and Nasdaq markets was well-known

throughout the industry, and fully described to the Department by

a number of traders at prominent firms during the Department’s

investigation. These traders testified that they were taught to

follow the convention, that they in fact followed it, and that

they understood and expected traders at other firms to follow it

as well. The following deposition excerpts are examples of the

testimony on this subject obtained by the Department and the SEC

during their investigations, from a variety of deponents. As one

trader testified:

Q. If -- if the firm spread in a particular stock

is three-quarter-point or greater, the -- when -- when the
firm moves its quote, it will move in increments of at least
a quarter; is that right?
A. That's correct; in quarters, plural. So either
one -- you either move it up a quarter or up a half. You
would not move it up three-eighths or five-eighths or
anything.
Q. Right. And that -- that's one convention.
A. That's correct.
Q. And another convention is that if the stock --
if the firm spread in a stock is one half or less, the --
the increment of movement of quotes would be in increments
of an eighth.
A. That's correct.
* * * * * * *
Q. -- generally speaking, these conventions have
been understood and followed by market makers in the Nasdaq
market; is that right?
A. Yes, to my knowledge.

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 Another trader described the convention as an "historical

relationship" between dealer spreads and the size of quote

increments:

Q Let's come back to that in a little while.

Is there a relationship between the width of the spread
and the increment by which quotes are made?
A Yes, there is a historical relationship. The
width of the spread of a dealer and how quotes are
made.
* * * * * * *
Q What's the historical relationship that you're
talking about?
A That dealer spreads of a half a point
historically trade in 1/8 of a point increment, and
dealer spreads of 3/4 of a point and higher
historically have traded for 1/4 of a point increment.

Another trader confirmed the operation of the quoting

convention and its lengthy duration:

Q And in terms of dealer spreads that were

three-quarters, when the dealer spread was three-
quarters, market makers moved in quarter point
increments for a large number of years. Is that
correct?
A Traditionally, if your spread was three-
quarters of a point or more, uh, you moved your market
in quarter point increments.
Q And that was because it was unprofessional to
move in eighths without closing the dealer spread to a
half; is that correct?
A Yes, ma'am.
* * * * * * *
[A] And if the stock trades with a . . . you
think you'll have to trade with a three-quarter point
spread. Then you should be moving your quotation in
quarter point increments. And it's one of those things
I can't really tell you why. It's something that I
think all of us have been doing for a gazillion, G-A-Z-
I-L-L-I-O-N years, certainly for 30 years, and it has

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 everything to do with the professional appearance of
that, that marketplace.

The evidence adduced by the Department does not disclose the

origin of the quoting convention. No deponent was found who

could testify as to how or precisely when the quoting convention

began, although numerous witnesses testified that the Nasdaq

market had operated under this "tradition," or "practice," or

"convention" for many years. There is no evidence that the

quoting convention was the result of an express agreement reached

among all of the market makers in a smoke-filled room.

Nevertheless, there is substantial evidence that this quoting

convention -- however it arose -- distilled or hardened over time

into the very type of “agreement” condemned by the Sherman Act --

a "conscious commitment to a common scheme designed to achieve an

unlawful objective,” which has restrained price competition among

the defendants and others in the Nasdaq market. See Monsanto Co.

v. Spray-Rite Serv. Corp. 465 U.S. 752, 764 (1984).

Additional evidence of agreement to adhere to the quoting

convention, alleged in the complaint and summarized briefly

below, includes: (1) market data demonstrating that defendants’

price quoting behavior was remarkably and unnaturally parallel,

and in conformance with the quoting convention; (2) evidence

showing that the quoting convention was vigorously enforced

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through industry-wide peer pressure, and intimidating telephone

calls to, and refusals to deal with, market makers who did not

quote bid and ask prices in conformance with the convention; (3)

evidence that it was not in the economic self-interest of market

makers to rigidly adhere to the quoting convention to the degree

they did, absent the understanding that all other market makers

would comply; (4) market data showing that market makers began to

change their price quoting practices when confronted by the

adverse publicity from the Christie/Schultz study and the

increasing pressures from the government investigations; and (5)

market data showing that market makers used an electronic trading

system known as Instinet on which to quote and trade, at odd-

eighth prices, the same Nasdaq stocks that they quoted only in

even-eighths on the Nasdaq system.

The evidence addressed in each of these points is of the

type that courts have found sufficient to establish an agreement

in violation of Section 1 of the Sherman Act, as is discussed

briefly below.

C. Defendants’ Adherence to the Convention is Confirmed by

Market Data.

Until confronted by the adverse publicity from the

Christie/Schultz study and the increasing pressure from

government investigations, the defendants routinely, and with

rare exceptions, adhered to the quoting convention. As a result,

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their price quoting behavior was remarkably and unnaturally

parallel. Despite the hundreds of thousands of bid and ask

prices that were quoted by the defendants (and other market

makers) on the Nasdaq system, very few odd-eighth prices were

entered in stocks in which defendants’ dealer spreads were 3/4

point or wider. When defendants entered odd-eighth quotes in

these stocks, those quotes were largely mistaken entries --

usually of short duration, and promptly corrected.

The market data analyzed by the Department during its

investigation show this adherence to the quoting convention. The

Department based its analysis on the NASD’s Market Maker Price

Movement Reports (“MMPMRs”), which contain detailed information

regarding the price quotes by market makers for all Nasdaq

stocks, and the NASD’s Equity Audit Trail Report, showing all

trades by all market makers in all stocks. The Department

received from the NASD monthly MMPMR data for the period December

1993 through July 1995, plus September and December 1995 and

March 1996. To create a manageable subset of these data, the

Department used the Equity Audit Trail to calculate the volume,

in dollar terms, for all Nasdaq stocks for the eighteen months

from February 1994 through July 1995. From these calculations,

the Department selected the 250 stocks with the largest dollar

volume of transactions for these eighteen months. Twenty-six

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stocks were excluded from this sample,8/ resulting in the final

data set of 224 of the top-dollar volume Nasdaq stocks during the

defined time period.

An analysis of quotes in the 224 stock sample shows the

dramatic extent to which the defendants avoided odd-eighth quotes

in Nasdaq stocks. As shown in Exhibit A, in early 1994, fully

65-70% of the sample, had virtually no odd-eighth bid and ask

price quotes.9/ Exhibit B illustrates that the defendants

achieved this unexpected result by systematically avoiding odd-

eighth quotes in stocks with dealer spreads of 3/4 point or more.

The remaining 30-35% of stocks in the sample generally had dealer

spreads less than 3/4 and were quoted in both even- and odd-

eighths. Thus, the sample reflects almost uniform adherence to

the convention.

By way of further illustration, Exhibit C demonstrates the

systematic avoidance of odd-eighth quotes in ten of the largest

volume stocks on Nasdaq. The fact that there are virtually no

odd-eighth bid and ask prices quoted in some of the most heavily

8
The twenty-six excluded stocks were all priced at less
than $10, and, as a result, could be quoted in "sixteenths" (1/16
point increments) on Nasdaq.
9
The Department’s findings, although covering a different
time period and a different sample of stocks, were consistent
with the Christie/Schultz study, which found virtually no odd-
eighth price quotes in approximately 70% of the stocks in their
sample.

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traded stocks on Nasdaq is remarkable, particularly when one

considers that each market maker is likely updating its price

quotes in these stocks numerous times each day. This unnatural

price parallelism provides some -- but not conclusive -- evidence

of an antitrust agreement in violation of Section l of the

Sherman Act. See, e.g., Theatre Enters., Inc. v. Paramount Film

Distrib. Corp., 346 U.S. 537, 540 (1954), and Apex Oil Co. v.

DiMauro, 822 F.2d 246, 258 (2d Cir. 1987).

D. The Evidence Shows That Defendants Enforced the Quoting

Convention Through Peer Pressure, Intimidation, and Refusals
to Deal.

The Department’s investigation has uncovered

substantial evidence that Nasdaq market makers have enforced the

quoting convention by reminding, pressuring, harassing, and

intimidating each other into conformity.10/ The quoting

convention protocol was elevated to the status of a

"professional" or "ethical" rule. The industry even coined a

derisive term -- "Chinese market" -- as a shorthand to describe a

market in which a trader has entered a quote inconsistent with

the established patterns. And the evidence indicates that market

10
The structure of the Nasdaq market facilitates detection
of deviations from the well-understood quoting convention. All
Nasdaq price quotes by all market makers are entered on the
Nasdaq computer system and are immediately known to those
interested. Thus, deviations are obvious, and can be responded
to immediately.

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makers have attempted to punish economically those market makers

who deviate from the agreed-upon pricing norms. Under Ambook

Enterprises v. Time, Inc., 612 F.2d 604 (2d Cir. 1979), cert.

dism’d, 448 U.S. 914 (1980), United States v. Foley, 598 F.2d

1323 (4th Cir. 1979) cert. denied, 444 U.S. 1043 (1980); In re

Nasdaq Market Makers Antitrust Litigation, 894 F.Supp. 703

(S.D.N.Y. 1995); and United States v. Paramount Pictures, Inc.,

334 U.S. 131, 161 (1948), the trier of fact may draw an inference

of an antitrust agreement, where coercion is proved in addition

to unnatural uniformity of pricing.

1. Violating the Quoting Convention Was Considered to Be

"Unprofessional" or "Unethical."

The Nasdaq market is highly interdependent, making it easy

to enforce compliance with "professional" quoting standards.

Market makers rely on each other to provide order flow,

information, and cooperation to help them trade positions

profitably. They actively work to develop and maintain friendly

relationships with traders from other firms. Traders do not want

other market makers to perceive them as being uncooperative,

"unethical," or "unprofessional" because that very perception may

result in their loss of access to the trader networks that

provide order flow, information, and cooperative trading

opportunities. Retaliatory actions -- even simply putting

offenders "last in line" when buying or selling stock -- serve to

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deter vigorous competition and punish market makers who violate

the unwritten "ethical" and "professional" requirements of the

Nasdaq market.

Over the years, it has become well-known throughout the

industry that violating the convention -- in the parlance of the

traders, "breaking the spread" -- is considered to be

"unprofessional" or "unethical" trading behavior. Market makers

who deviate from the convention are derisively said to be

creating a "Chinese market." Numerous witnesses testified to

this fact. One trader defined a "Chinese market" as follows:

Q Let me understand what you mean by a Chinese

market. What's the definition you're giving to the
term --
A That's when you have a 3/4 point spread and
you move in 1/8th of a point increments.

Another trader testified that market makers were trained not

to put in quotes that created Chinese markets, because they were

deemed "unprofessional":

[Q] And through the period December '93 through

December of '94, do you observe the market makers entered
very-relatively few odd-eighths. And by that, I mean with
perhaps one or two exceptions, under 10 percent of their
quotes were odd eighths in McCormick.
A Yes, ma'am.
Q And again, is that, in your professional
opinion, because those market makers had three-quarter
point dealer spreads and did not want to enter what
were termed "unprofessional markets"?
A Yes, ma'am.

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 Q How is it that all of the market makers knew
that entering an odd eighth quote could be
unprofessional?
* * * * * * *
A Young traders were trained over the years not
to put in unprofessional markets, "Chinese markets."...

* * * * * * *
This was part of the -- of the traditional and ethical
on-the-job training that all of us got, and it
encompasses not only that you don't put in
unprofessional-looking "Chinese markets," it . . . grew
out of a self-imposed industry standard of ethics and
conduct. So that's my answer as to why everybody seems
to be doing this, because most of the people were
trained the same way.

Another trader acknowledged that the term Chinese market

referred to what the industry considered "unethical" trading

practices:

Q Have you ever heard that people using the

term -- strike that.
Would somebody making a Chinese market cause another
market maker to be angered?
A I believe that’s possible.
Q Under what circumstances?
A I think that in -- like I said before, in
coming up, I think Chinese markets, as they’re called,
were looked down upon so are considered unethical. So
by making a Chinese market, you’re making yourself
unethical and, therefore, I guess upsetting other
market makers.

That it was deemed unethical to "make a Chinese market" was

even publicized in a newsletter published by the Security Traders

Association of New York ("STANY"), the largest regional affiliate

of the Security Traders Association ("STA"), the principal

national trade association for securities trading professionals.

- 23 -
STANY’s quarterly newsletter for the third quarter of 1989

reported on the presentations at an "Ethics Conference" held in

April 1989. The article misreported that a speaker had said that

"making a Chinese market" was "clearly ethical." To correct the

incorrect report, STANY published an "update," at the top of

which was printed, in large type, the following "Editor's Note":

In the recently issued STANY NEWSLETTER, we are

certain you will realize that * * * * was grossly
misquoted when a portion of his speech was extracted
for publication. A corrected copy is featured below.
As * * * and you are all aware, it is clearly
UNETHICAL to make a Chinese Market or to run ahead of
an order. (emphasis and caps in original of word
"unethical")

The evidence shows that peer pressure was used by market

makers to ensure that so-called "professional" and "ethical"

pricing standards were maintained. Trader testimony also

demonstrates that "peer pressure" was effective in keeping

spreads wide.

2. Phone Calls Were Used To Obtain Compliance.

Much of the business of Nasdaq traders is done on the

telephone. Thus, it is not surprising that phone calls were

employed market-wide to secure compliance with the quoting

convention. At times, all that was needed to correct a Nasdaq

trader’s nonconforming spread or quote was a simple "friendly"

- 24 -
inquiry, as illustrated by the following evidence. As one trader

testified:

Q Did you ever see other firms, when you were

watching trading on the NASDAQ screen, make Chinese markets?
A Uh-hum. Yes.
Q What was your reaction when you would see
that?
A Didn't like it.
Q What would you do?
A I'd call them up and say, would you please close
your spread? If you're going to bid that price, close your
spread.
Q Meaning what?
A If you're going to bid that -- you know, that
eighth, close your spread to a half a point.

In response to the Department’s interrogatories, another

firm stated:

[A trader] recalled that once, when she first started

trading (probably a year or two ago) she intended to
update her market in Chiron CP (CHIR) by moving from
the offer to the bid after her offer had been taken by
another trader, but she mistakenly moved up 1/8 instead
of 1/4. Subsequently, a [trader from another firm]
called and asked why she was quoting in 1/8s. [The
trader] checked her quotes, realized she had not fully
updated her market, and moved up an additional 1/8.

On other occasions, traders resorted to more intimidating

telephone calls to exact compliance with the quoting convention.

Some of the more dramatic examples of these were captured on the

audio tapes that were produced by the defendants, as the

following example illustrates:

Trader 1: Who trades CMCAF in your place without

yelling it out?
Trader 2: . . . Sammy

- 25 -
 Trader 1: Sammy who?
Trader 2: It may be the foreign department . . .
Trader 1: What?
Trader 2: The foreign didn’t realize they had to trade it.
Trader 1: Well, he’s trading it in an eighth and he’s
embarrassing...
Trader 2: . . . foreign department
Trader 1: He’s trading it in eighths and he’s
embarrassing your firm.
Trader 2: I understand.
Trader 1: You know. I would tell him to straighten up
his [expletive deleted] act and stop being a
moron.

The record of the investigation is replete with proof that

market makers used the telephone to secure compliance with their

understandings about "proper" quoting protocols.11/ Indeed, a

NASD employee responsible for interacting with the market making

community recognized that telephone calls, which he described on

one occasion as "price fixing calls," were frequently used to

enforce compliance with the quoting convention.

3. Refusals To Trade Were Used to Punish Maverick Market

Makers.

Firms that repeatedly entered quotations in violation of the

quoting convention were subject to other types of discipline,

with a more direct economic impact on their businesses. The most

effective such discipline was refusal to deal.

A refusal to deal in the context of the Nasdaq market has

far reaching consequences for a market maker. Market makers are

11
However, evidence of enforcement activity varies
significantly from firm to firm.

- 26 -
competitors to attract order flow, but they also frequently trade

with one another. When a market maker does not want to fill a

retail or institutional order from its own account, it must be

able to find other market makers willing to fill those orders;

otherwise, its retail and institutional clients will soon look

elsewhere for trading services. Similarly, a market maker must

be able to go to other market makers to lay off risk from long or

short positions.12/ Consequently, the mere threat that other

firms will not trade with them was often sufficient to discourage

market makers from violating the convention.

Maverick market makers that improved the best quote often

would not get an execution, even though other orders were being

filled at the maverick’s quoted price. This refusal to trade is

referred to in the industry as "trading around." The same

maverick firm would also frequently notice orders being filled at

inferior prices to the prices they had quoted on Nasdaq when

their quotes were inconsistent with the quoting convention. This

practice is known as being "traded through." The effect of being

"traded through" or "traded around" taught traders that there was

no benefit to improving the market by an odd-eighth in a stock

with a 3/4 point or wider dealer spread because their orders

12
A "short" position occurs when a trader sells stock that
he or she does not own. A "long" position occurs when a trader
owns stock that is not pledged for sale to a customer or another
market maker.

- 27 -
would not be filled, or would be filled only when the market

reversed directions.

Maverick firms were also subject to "backing away" and being

made "last call" by other firms. "Backing away" involves the

failure of one market maker to honor its posted quote to another

market maker, as required by SEC and NASD rules. Firms that

violated the quoting convention were more subject to "backing

away" by other firms. Being made "last call" involves only

trading with the maverick market maker when the market begins to

turn against the maverick, or when a firm has no other

alternative but to trade with the maverick. Mavericks also

observed that they were made "last call."

4. Market Makers Fully Understood the Significance of the

Quoting Convention and Its Enforcement in Maintaining
Wide Spreads on Nasdaq.

The effect of the quoting convention in maintaining wide

spreads on Nasdaq was known even to employees and members of the

industry’s self-regulatory organization, the NASD; moreover, the

NASD recognized the causal connection between widening spreads on

Nasdaq and "peer pressure" applied to keep spreads wide.

- 28 -
 The Department discovered during its investigation that, in

the spring of 1990, the NASD’s Trading Committee13/ began to

address "the problem of spreads." The issue became a matter of

concern because the New York Stock Exchange ("NYSE") had begun to

use the fact of wide spreads on Nasdaq to attract issuers to the

NYSE. In a meeting on June 27, 1990, Trading Committee members

discussed the widely understood effect of the quoting convention

and the notion of "Chinese markets" as contributing to wider

spreads. According to notes of the meeting, a member of the

committee -- representing a small market making firm -- indicated

that market makers got calls from big firms when they "broke

spreads" or made "Chinese markets." In his view, the problem was

the "arrogance of mandate" exercised by the larger firms.

In his testimony before the Department, this senior Trading

Committee member confirmed that traders from competing firms

discussed the quoting convention and Chinese markets at this

meeting. In addition, he testified:

A. I think the establishment of this acceptance of

spreads [sic]. And I think it went way back. My
opinion and what I was trying to get across, and maybe
didn't do, was that this was a historical thing. This

13
The Trading Committee, which consisted largely of market
makers, was one of the most powerful of the NASD’s "self-
regulatory" committees. It was the principal committee
responsible for recommending changes to the NASD Board of
Governors in the trading rules governing Nasdaq.

- 29 -
 is something that had evolved from trading in the '50s
and the '60s and the '70s and so forth. And that
everyone accepted this protocol, that a spread is a
spread is a spread. And it's not your place to change
it.
The spread is a result of almost a God given
natural phenomenon. That it is not some up-stark [sic]
traders place to change that. That was the accepted
protocol for years and years and years, to my
knowledge.
And so I was trying to get across that that's
where we have been. And to try to break that protocol
and change it would have gotten a call from some old --
somebody that had been around for a long time saying,
hey, don't break the spread. That shouldn't be
anymore.
My lesson, that I was trying to bring, is that
can't -- we can't be doing that in the 90's. No one
can be, no matter how arrogant they may think of
themselves, no matter who it is, whether it is the
biggest money firm on Wall Street or the person with
the biggest money commitment. No matter who they are,
they should not be allowed to intimidate you. If you
want to break a spread that is your prerogative.
* * * * * * *
Q. And is it your best interpretation of this
problem with arrogance and mandate, the fact that there
was certain arrogance in the industry about spreads and
that if you try and alter spreads, you get telephone
calls. Is that the general gist of that?
A. I think that the word arrogance would have
to do with a trader's -- either his impression of
himself or his firm, that he was big enough to
influence someone not to narrow spreads. But that is
the only way I can conceptualize how to use the word
arrogance, which was used.

Subsequent to this meeting, the Quality of Markets

Subcommittee of the Trading Committee was formed to examine two

issues, one of which was the "spreads problem." The Quality of

Markets Subcommittee was composed exclusively of representatives

of leading market-making firms; however, certain NASD staff

- 30 -
attended these meetings as well. At one such meeting, on

March 24, 1992, a NASD staff member took notes. These notes

indicate that the participants at the March 24 meeting discussed

the quoting convention, Chinese markets, and the fact that market

makers who tightened spreads were subjected to "intimidation"

from others. This meeting apparently led to the NASD’s hiring of

an industry consultant to help explain "Why does the ‘Chinese

market’ syndrome has [sic] such impact on NASDAQ while listed

markets seem to continuously quote in combinations of 1/8's,

1/4's."

On June 30, 1992, having completed his research into the

"spreads problem," an NASD employee wrote a memorandum entitled

simply "Spreads," and sent it to the NASD senior management

group. The memorandum stated, in pertinent part:

Spreads increased absolutely from the 1st Quarter of

1989 to May 1992 from .226 to .369. The % increase was
63%. Our method of calculating spreads i.e. volume
weighted, actually portrays the situation better than
it actually is. A stock by stock comparison would be
worse.
* * * * * * *
3. Unlike auction markets, dealers do not change
prices one side at a time and there is a stigmatism
[sic] associated with making so called "Chinese"
markets . . . [n]o one attempts to do just a "little"
better with their published quote change . . . .

* * * * * * *

. . . I understand that when attempts are made by individual

dealers to [narrow spreads], peer pressure is brought to
bear to reverse any narrowing of spreads. I have no hard

- 31 -
 evidence of this and the information is only anecdotal and
this was not described as happening in every case. However,
enough people have said it for me to believe it to be true.

Spreads became a more troubling topic for the NASD, as well

as the market-making community in general, following the

publication in August 1993 of a Forbes magazine article entitled

"Fun and Games on Nasdaq." The article alleged, among other

things, that market makers who narrowed spreads were harassed:

[N]ovice traders learn quickly that if they want to

keep their jobs on an OTC desk, they will do well not
to beat the price of fellow market makers. Breaking
the spread, as it is called, just isn't done. One
veteran who tried on occasion to narrow an OTC spread
told Forbes, "I used to get phone calls from people.
They'd scream, ‘Don't break the spread. You're ruining
it for everybody else.’"

Asked to give his input about these charges, a NASD employee

detailed, point by point, the merits of the claims. With respect

to the allegations of harassment, he wrote: "I believe this to be

true."

E. Adherence to the Convention Was Often Inconsistent With the

Market Makers’ Economic Self-Interest.

Under the law, if the behavior dictated by a hypothesized

antitrust conspiracy is economically “irrational,” or makes no

sense, or is contrary to independent self-interest unless the

conspiracy posited actually exists, a court may find an agreement

in violation of the antitrust laws. In other words, actions

against economic self-interest are a "plus factor" which would

- 32 -
support a judgment in favor of the United States in the case

filed:

“Plus factors” identified by courts, which, in

combination with parallel pricing, may support an
inference of conspiracy, include a common motive to
conspire, actions which were against their own
individual business interest absent an illicit
agreement, and evidence of coercion.

In re Nasdaq Market-Makers Antitrust Litigation, 894 F.Supp. at

713. See also Modern Home Ins. v. Hartford Acc. & Indem. Co.,

513 F.2d 102, 111 (2d Cir. 1975), Beech Cinema Inc. v. Twentieth

Century-Fox Film Corp., 622 F.2d 1106 (2d Cir. 1980), and Ambook

Enterprises v. Time Inc., supra.

The terms of the quoting convention contain a self-enforcing

mechanism designed to foster, support, and maintain wide inside

spreads. As noted, under the quoting convention, market makers

who wish to quote an even-eighth stock in odd-eighth increments

(thereby creating a powerful tendency toward a narrower, 1/8

inside spread) must first narrow their dealer spreads. Narrowing

one’s dealer spread imposes a "penalty" or cost on the use of

odd-eighth increments because a narrower dealer spread can

increase the financial risk to the market maker in trading that

stock, as was recognized by one trader in deposition testimony:

Q What would be the advantage to a market-maker

to have a greater dealer spread in a stock?
A Less apt to be hit or taken, therefore
putting in an unwanted position.

- 33 -
 Q That would be in response to a market move
they had not anticipated?
A That is correct.
Q Is there sort of a monitoring cost of the
stock that is reduced if you have a wider dealer
spread?
A I guess you could say that. It would be
easier to stay out of the way.
Q You can characterize it as either a greater
risk of being hit when you don’t want to be hit or a
greater burden of avoiding that result?
A Having a tighter spread?
Q Right.
A Correct.

Another trader also succinctly explained the risk imposed by

a narrower dealer spread:

[A] “What are the ramifications [of a narrower

dealer spread]? Yes, I may have been able to buy stock
at an eighth. But on the other hand . . . if you
shrink your dealer spread you are subject to more risk
in terms of being SOES’ed and everything else, there
was a penalty for me to increase my price [by an
eighth] and decrease my spread.”

Because of this increased risk, it is often against a market

maker’s economic self-interest to narrow its dealer spread simply

to quote in an odd-eighth increment. The requirement that a

market maker reduce its dealer spread when quoting in eighths had

the effect of discouraging use of odd-eighth increments; thus the

quoting convention kept spreads wider for longer than they would

have been in a competitive market.

There were and are numerous instances in which one would

have expected to see odd-eighth quotes in order to, for example,

seek to transact at a more favorable price than would be

- 34 -
generated by a quarter-point increase in a bid price or a quarter

point decrease in the ask price. Yet adherence to the quoting

convention kept market makers from acting in their economic self-

interest by entering odd-eighth quotes in such circumstances.

Traders acknowledged as much in their deposition testimony, as

noted by the following examples:

[Q] ... This is what’s giving me trouble. If you

can buy something at an eighth by only going up an
eighth, why bother to go up a quarter? I guess that’s
what confusing me.
A Well, that, I think, speaks to the professional
appearance concept and the tradition, if you will, concept,
that even if I’m not dealing for a client, I may be short
the stock. I am going to move that market at a quarter-
point increment; even though I would much rather buy it at
an eighth, I am not going to put a bad market or an
unprofessional-looking market in the screen.

Another trader testified:

Q In the absence of the convention, would there

have been circumstances that [you] wanted to quote in
odd eighth?
A Yes, probably.

Market makers understood they were giving up the opportunity

to quote stocks in odd-eighths in exchange for increased profits

for the market-making community as a whole, provided all market

makers adhered to the convention. This trade-off was

acknowledged in a tape-recorded telephone conversation in which

one trader’s assistant noted: “[A]t the same time . . . you

always wanted to wish you could always go offer it at 7/8ths,”

and the other trader’s assistant replied, “True," "but you’d give

- 35 -
that wish up in a second to keep the spread . . . keep that P&L

nice and lofty.”

F. Market Makers Began to Change Their Price Quoting Behavior

When Confronted with Charges of Collusion and the Government
Investigations.

Under established law, evidence of a significant change in

behavior of alleged conspirators is admissible to prove the

existence of a conspiracy. See United States v. Koppers Co., 652

F.2d 290 (2d Cir. 1981); Ohio Valley Elec. Corp. v. General Elec.

Co., 244 F.Supp. 914 (S.D.N.Y. 1965). The fact that market

makers for years used the quoting convention to maintain wide

inside spreads is further evidenced by the change in their price

quoting behavior once their anticompetitive conduct began to come

to light.

On May 24, 1994, the NASD, STA, and STANY convened a meeting

at the headquarters of Bear Stearns & Co. in New York that was

attended by over 100 market maker representatives. The principal

item on the agenda for that meeting was the issue of wide spreads

on Nasdaq. Three days later, after public disclosure of the

Christie/Schultz study by the Los Angeles Times and the Wall

Street Journal, dealer spreads of a number of major Nasdaq stocks

began to narrow. Within one week, the prevailing dealer spreads

of four of the most prominent Nasdaq stocks -- Microsoft, Apple,

Amgen, and Cisco -- had narrowed from 3/4 to 1/2 point, and

- 36 -
market makers accordingly began entering odd-eighth quotes in

those stocks.14/

Other events occurred throughout the remainder of 1994 that

effected changes in the market makers’ quoting and pricing

behavior. These included the filing of several class-action

lawsuits immediately after disclosure of the Christie/Schultz

study; the opening of the Department’s investigation in the

summer of 1994; the Los Angeles Times six-part series in October

1994 concerning allegations of collusion on Nasdaq; and the

public announcement of the SEC’s inquiry in November.

The Department’s analysis of market data, as discussed

below, shows that these events have caused changes in the Nasdaq

market: the percentage of stocks that previously avoided odd-

eighth quotes has fallen dramatically; average dealer spreads and

inside spreads have decreased; and the percentage of stocks that

have been quoted in violation of the convention -- i.e., using an

odd-eighth price with a dealer spread of 3/4 point or greater --

has risen substantially. These changes indicate that there was

no satisfactory economic reason for the extent of the wide

spreads that had prevailed so persistently in the previous years.

14
Attached as Exhibit D are charts that show the dramatic
changes in the quoting on these major stocks, going from
virtually no odd-eighth quotes to a substantial number almost
overnight.

- 37 -
 1. The Decline in the Avoidance of Odd-Eighth Price
Quotes.

Attached as Exhibit A is a chart that demonstrates

graphically the extent to which market makers have begun to use

odd-eighth price quotes in stocks where such quotes were

previously avoided. This chart is based on the Department’s data

set previously discussed -- 224 of the top-dollar volume Nasdaq

stocks. As the chart demonstrates, prior to disclosure of the

Christie/Schultz study, nearly 70% of the stocks from the sample

avoided odd-eighth price quotes at least 99% of the time; in

March of 1996, only approximately 15% of the sample avoided odd-

eighths to this extreme degree.

2. The Decline in the Average Inside Spread.

The striking decline in the avoidance of odd-eighths and

dealer spreads runs almost exactly parallel to a decline in the

average inside spread in Nasdaq stocks. The Department examined

the average quoted inside spread by month for the 224 stocks in

its sample. See Exhibit E. The peak month was December 1993,

when the average inside spread reached 44 cents (although April

1994 was nearly as high). Subsequently, from May 1994 through

March 1996, the average inside spread continued to fall steadily.

By March 1996, it had fallen to 32 cents, a decline of almost 28%

in approximately two years.

- 38 -
 The Department has also calculated the average percentage

value of the inside spread as a proportion of a stock’s price for

the same stocks in the same period. See Exhibit F. This

analysis reveals an even sharper decline, with this value

declining from as high as 1.6% to less than 1% in September of

1995, increasing slightly to 1.04% in March 1996.15/

3. The Decline in Adherence to the Quoting Convention.

The Department has also examined whether market makers, in

fact, adhered to, and whether they have continued to adhere to,

the quoting convention that prohibits the use of odd-eighths when

the dealer spread is 3/4 point or greater.

15
In the twelve months since public disclosure of the
Christie/Schultz study, the average inside spread for Nasdaq
National Market System stocks fell 15.6 percent from 34.6 cents
to 29.2 cents. (These data were obtained from the NASD’s
internal, monthly, "Stat Book," for December, 1994 and May, 1995,
obtained by the Department in discovery in this investigation.)
For the Department’s sample of 224 stocks, the average inside
spread fell 27.3 percent from 44 cents to 32 cents. Not all
investors pay the quoted spreads, but many -- especially small,
retail investors -- do.
Institutional investors also are affected by the quoted
inside spread on Nasdaq. The effect of the quoting convention on
institutional customers is demonstrated by the change in
effective spreads of transactions by firms that specialize in
institutional trading. The Department calculated the decline in
effective spreads for Apple Computers, Inc., from May to June
1994, for eight such firms. The average effective spread fell
from 18.8 cents to 11.4 cents when the inside spread on Apple
dropped from 1/4 to 1/8 in those months. The term "effective
spread," as used here, measures spread costs based on the
difference between actual transaction prices and the mid-point of
the inside spread. The effective spread in a security is an
accepted measure in financial economics to determine the spreads
actually paid by customers.

- 39 -
 The Department determined the percentage of the 224 stocks

that violated the quoting convention at least 1% of the time in

each month. See Exhibit G. In December 1993, only 5% of the 224

stocks traded had violations of the convention by the 1%

standard. By June 1994, following the Christie/Schultz

disclosure, this proportion jumped to 10%. The proportion of

stocks that violate the quoting convention has continued to

increase until March 1996, when fully 45% of all stocks from the

sample violated the convention at least 1% of the time. These

results are even more dramatic when it is recognized that use of

dealer spreads of 3/4 point or more has fallen significantly

during the same period, thereby reducing the number of situations

in which market makers could violate the convention by quoting

odd-eighths.

J. The Market Makers’ Pricing Behavior Was Different in a

Comparable Market.

Evidence of a conspiracy may be inferred from the difference

in competitive performance between two comparable markets.

Professor Areeda describes this type of evidence, and its value,

in his treatise:

If two markets are identical in every respect

(other than the possibility of conspiracy), then
substantially less competitive performance or behavior
in one of them must be attributable to a conspiracy.
The logic is unassailable. . . .

- 40 -
 Even without exact identity in every respect,
conditions preventing tacit price coordination in one
market should have the same effect in a substantially
similar market. Accordingly, if a given set of rivals
maintains relatively competitive prices in one of those
markets but not in the other, then an extra factor --
such as an explicit agreement -- must explain the
significantly less competitive prices in the other
market.

Areeda, Antitrust Law, ¶ 1421, 132 (1986)(emphasis added). See

also, Petruzzi’s IGA Supermarkets v. Darling-Delaware Co., Inc.,

998 F.2d 1224 (3d Cir. 1993).

Although the quoting convention prevented market makers from

quoting even-eighth stocks in odd-eighths on Nasdaq, it did not

constrain them from entering odd-eighth quotes for the same

stocks on Instinet. Instinet is an electronic market that

permits broker dealers and institutions to enter orders

anonymously to buy and sell and execute against those orders. In

many ways, it is comparable to the Nasdaq market. The same

stocks are traded by the same market makers at the same time.

The size of the trades and quotes on the two systems are very

similar as well.

Quotes on Instinet, however, are quite different. They are

much more likely to be at an odd-eighth, and are usually inside

the inside spread on Nasdaq. The Department examined the ten

largest trading volume stocks for which odd-eighth quotes rarely

appeared on the Nasdaq screen during the first 20 days of May,

- 41 -
1994. See Exhibit C. On Instinet, however, the defendants used

odd-eighth prices routinely, some 40% to 50% of the time. See

Exhibit H.

The substantial use of Instinet to quote and transact at

odd-eighths relates to the fact that (1) it is anonymous, which

allowed market makers to quote and transact at odd-eighths

without provoking a reaction from other market makers, and (2)

quotes entered on Instinet have historically been viewed as not

affecting their best execution obligation. A quote on Instinet,

then, would not require other marker makers to transact at that

price for other trades. In addition, Instinet is unavailable to

retail customers,16/ which allowed market makers to transact with

other market makers and institutions at better prices than those

on the Nasdaq screen at which retail customer trades were

executed.

IV.

EXPLANATION OF THE PROPOSED ORDER

Prohibited Conduct. The proposed Order will deter the

recurrence of conduct discovered by the Department in its

investigation that violates Section 1 of the Sherman Act and that

is plainly anticompetitive. Specifically, the proposed Order

16
Instinet is available to brokers, market makers, and
institutional investors.

- 42 -
bars each of the defendants, unless otherwise specifically

permitted, in connection with its market making activities in OTC

stocks, from agreeing with any other market maker:

(1) to fix, raise, lower, or maintain quotes or prices for

any Nasdaq security;

(2) to fix, increase, decrease, or maintain any dealer

spread, inside spread, or the size of any quote

increment (or any relationship between or among dealer

spreads, inside spreads, or the size of any quote

increment), for any Nasdaq security;

(3) to adhere to a quoting convention whereby Nasdaq

securities with a three-quarter (3/4) point or greater

dealer spread are quoted on Nasdaq in even-eighths and

are updated in quarter-point (even-eighth) quote

increments; and

(4) to adhere to any understanding or agreement (other than

an agreement on one or a series of related trades)

requiring a market maker to trade at its quotes on

Nasdaq in quantities of shares greater than either the

Nasdaq minimum or the size actually displayed or

otherwise communicated by that market;17/

17
The reference to agreements "other than an agreement on
one or a series of related trades" is intended to make clear that
a market maker is not prohibited from agreeing to buy or sell a
(continued...)

- 43 -
In addition, the proposed Order bars each of the defendants from

engaging in any harassment or intimidation of any other market

maker because such market maker:

(1) decreased its dealer spread or the inside spread in any

Nasdaq security;

(2) refused to trade at its quoted prices in quantities of

shares greater than either the Nasdaq minimum or the

size actually displayed or otherwise communicated by

that market maker; or

(3) displayed a quantity of shares on Nasdaq greater than

either the Nasdaq minimum or the size actually

displayed or otherwise communicated by that market

maker.

Finally, paragraph (8) Section IV of the proposed Order bars

the defendants from refusing, or threatening to refuse to trade

(or agreeing with or encouraging any other market maker to refuse

to trade) with any market maker at defendant’s published Nasdaq

quotes in amounts up to the published quotation size because such

market maker decreased its dealer spread, decreased the inside

spread in any Nasdaq security, or refused to trade at its quoted

(...continued)
specific quantity of stock, and that agreeing to buy or sell a
quantity of shares greater than the amount initially specified in
a series of related trades also does not violate the proposed
Order.

- 44 -
prices in a quantity of shares greater than either the Nasdaq

minimum or the size actually displayed or otherwise communicated

by that market maker.

Required Conduct. The proposed Order contains numerous

provisions designed to ensure compliance with its terms and with

the federal antitrust laws. Significantly, it requires that each

defendant initiate and maintain an antitrust compliance program.

Under the compliance program, an Antitrust Compliance Officer, to

be appointed by each defendant, is required to distribute copies

of the proposed Order to certain personnel, including members of

the defendant’s board of directors and its Nasdaq traders; to

brief traders semi-annually on the meaning and requirements of

both the federal antitrust laws and the proposed Order; and to

obtain from specified persons, including traders, certifications

that they have read and agree to abide by the terms of the

proposed Order, and that they have been advised and understand

that a violation of the proposed Order by them may result in

their being found in civil or criminal contempt of court.

The proposed Order also requires each defendant to undertake

a significant program of monitoring and recording trader

conversations so as to discourage conduct violative of the

proposed Order and the federal antitrust laws generally. Under

the proposed Order, each defendant will install taping systems

- 45 -
capable of monitoring and recording any conversation on the

telephones on its OTC desk that are used in market making. Not

less than 3.5% of all trader conversations will be monitored and

recorded, unless such percentage would exceed 70 hours per week.

Thus, 70 hours per week is the maximum amount of taping required

of any defendant. Between 35-40,000 hours of tape will be

required to be recorded annually to meet these requirements of

the proposed Order. The methodology proposed to be employed by

each defendant to conduct this monitoring and recording is

subject to Department approval. If the Antitrust Compliance

Officer discovers a conversation he/she believes may violate the

proposed Order, he/she is required to retain a recording of the

conversation, and, within ten business days, to furnish the tape,

along with any explanation of the conversation the defendant may

care to offer, to the Department. The Department estimates that

defendants will have to employ approximately thirty (30) persons

full time to fulfill the monitoring requirement of the proposed

Order.

Tapes made pursuant to the proposed Order are required to be

retained by each defendant for at least 30 days from the date of

recording. The tapes made pursuant to the proposed Order are not

subject to civil process except for process issued by the

Antitrust Division, the SEC, the NASD, or any other self-

- 46 -
regulatory organization. The proposed Order directs that such

tapes not be admissible in evidence in civil proceedings, except

in actions, proceedings, investigations, or examinations

commenced by the Antitrust Division, the SEC, the NASD, or any

other self-regulatory organization. The tapes will be subject to

process and use in criminal proceedings under the terms of the

proposed Order.

Section IV.C.(6) of the proposed Order, regarding

permissible uses of tape recordings made pursuant to the proposed

Order, does not affect the ability of a grand jury to obtain such

tapes. Nor does the provision affect the susceptibility of such

tapes to criminal process or their admissibility in evidence in

criminal proceedings.

The proposed Order grants the Department the right to visit

any defendant's place of business unannounced and to monitor

trader conversations as they are occurring. Upon request of the

Department, a defendant must identify all tape recordings made

pursuant to the proposed Order that are in its possession or

control, provide the Department with the opportunity to listen to

any tape recording made pursuant to the proposed Order, and

produce to the Department such tapes as the Department may

request. The Department may receive complaints or referrals

concerning asserted possible violations of the proposed Order and

- 47 -
may, based upon such complaints or referrals, or for the purpose

of monitoring or enforcing compliance with the proposed Order,

require the Antitrust Compliance Officer to tape the

conversations of particular traders, up to the limits previously

specified.

Additional Relief. Each Antitrust Compliance Officer is

required by the proposed Order to report quarterly to the

Antitrust Division concerning activities undertaken to ensure the

defendant's compliance with the proposed Order. Such reports

must detail the precise times when conversations were monitored

by the Antitrust Compliance Officer pursuant to the requirements

of the proposed Order and the name of each person employed by the

defendant whose conversations were recorded during such times.

The proposed Order also requires that each defendant certify the

designation of an Antitrust Compliance Officer and that the

defendant has complied with certain specified requirements of the

proposed Order.

The proposed Order gives the Department certain "visitation"

rights, including the right to demand copies of documents,

excluding individual customer records, which relate to compliance

with the proposed Order; and to interview officers, employees, or

agents of each defendant regarding compliance with the proposed

Order. In addition, upon written request of the Attorney General

- 48 -
or the Assistant Attorney General in charge of the Antitrust

Division, a defendant may be required to prepare and submit

written reports, under oath, relating to defendant’s compliance

with the proposed Order.

V.

REMEDIES AVAILABLE TO PRIVATE LITIGANTS

Section 4 of the Clayton Act, 15 U.S.C. § 15, provides that

any person who has been injured as a result of conduct prohibited

by the antitrust laws may bring suit in federal court to recover

three times the damages suffered, as well as costs and reasonable

attorneys' fees. Entry of the proposed Order will neither impair

nor assist the bringing of such actions. Under the provisions of

Section 5(a) of the Clayton Act, 15 U.S.C. § 16(a), the proposed

Order has no prima facie effect in any subsequent lawsuits that

may be brought against the defendants in this case.

VI.

PROCEDURES AVAILABLE FOR

MODIFICATION OF THE PROPOSED ORDER

As provided by the APPA, any person believing that the

proposed Order should be modified may submit written comments to

John F. Greaney, Chief, Computers and Finance Section, U.S.

Department of Justice, Antitrust Division, 600 E Street, N.W.,

Room 9300, Washington, D.C. 20530, within the 60-day period

- 49 -
provided by the Act. These comments, and the Department's

responses, will be filed with the Court and published in the

Federal Register. All comments will be given due consideration

by the Department, which remains free to rescind its agreement to

entry of the proposed Order at any time prior to actual entry by

the Court. The proposed Order provides that the Court retains

jurisdiction over this action, and the parties may apply to the

Court for any order necessary or appropriate for modification,

interpretation, or enforcement of the Order.

VII.

OTHER ANTICOMPETITIVE CONDUCT

REMEDIED BY THE PROPOSED ORDER

In addition to the quoting convention, the Department’s

investigation uncovered four types of other unlawful conduct

involving market makers which are not alleged in the Complaint,

but are fully remedied by the prohibitions in the proposed Order.

First, the investigation uncovered numerous examples of what are

often referred to as "moves on request." A "move on request"

occurs when trader A calls trader B and asks him to change the

price he is quoting for the purpose of affecting the market in

that stock.18/ When B complies, his move will generate a

18
Not all of the firms named in the Complaint engaged in
such conduct, and no inference of participation in this conduct
should be drawn from the fact that a firm has been charged as a
(continued...)

- 50 -
misimpression that there is an additional buying or selling

interest in the stock, from which A will possibly profit. Trader

B benefits because A will return the favor when B wants to

influence the market in a stock.

Second, the investigation uncovered instances of market

maker agreements on dealer spreads. Such agreements were

intended to widen or preserve the width of the inside spread and

to reduce the risk of unwanted executions. The purpose and

effect of these types of agreements is to increase trader profits

or reduce participants’ risk of loss from their trading

activities.19/

Third, the Department also investigated an apparent "size"

convention that may limit competition among Nasdaq market makers

by deterring them from improving the inside spread in a stock

(with a new bid or ask quote) on Nasdaq, unless they are prepared

to trade in quantities greater than their posted quote, typically

1,000 shares. With every posted bid and ask quote, a trader must

also quote a number of shares that he or she is willing to trade

at that price. Many traders admitted that this "good for size"

requirement was honored by most market makers, and admitted that

(...continued)
defendant herein.
19
A limited number of market-making firms were discovered
to have engaged in this conduct. There is no evidence that the
majority of firms engaged in this conduct.

- 51 -
they would complain to other market makers who cut spreads, only

to then engage in the NASD minimum size trade.

Fourth, the Department also discovered evidence that some

maverick firms that tried to attract larger orders by displaying

greater size than the NASD minimum received the same sort of

enforcement threats against this behavior that they had received

when they narrowed the inside spread.

Together, these latter two practices adversely affected

smaller market makers. Such firms could not take large positions

in a stock and then "advertise" their willingness to trade in

that size by posting a public quote for a larger than minimum

sized transaction. Nor could they compete on price unless they

were "implicitly" willing to be "good for size" at any improved

price.

The Department has elected not to pursue a civil case that

includes instances of any of the above-described conduct against

the defendants for the reason that the proposed Order affords the

Department and the public all the relief that could be obtained

if the Department charged them as violations and prevailed at

trial. Further, while unlawful and harmful to consumers, the

total impact on the amount of commerce affected by these alleged

violations is a fraction of that affected by the quoting

convention.

- 52 -
 VIII.

ALTERNATIVES TO THE PROPOSED ORDER

As an alternative to the proposed Order, the Department

considered litigation on the merits. The Department rejected

that alternative for two reasons. First, the Department is

satisfied that the various compliance procedures to which

defendants have agreed will ensure that the anticompetitive

practices alleged in the Complaint are unlikely to recur and if

they do recur will be punishable by civil or criminal contempt,

as appropriate. Second, a trial would involve substantial cost

both to the United States and to the defendants, and is not

warranted since the proposed Order provides all the relief the

Government would likely obtain following a successful trial.

IX.

ALTERNATIVE FORMS OF RELIEF CONSIDERED

In addition to the relief obtained in the Order, the

Department considered, as a condition of settlement, a term in

the proposed Order requiring the defendants to tape record and

preserve for up to six months all of the conversations of their

traders engaged in market making in Nasdaq stocks. At the time

consideration was given to such a requirement, the proposed

relief did not contain a term requiring that each defendant

- 53 -
appoint an Antitrust Compliance Officer to record and listen to

trader conversations.

Ultimately, instead of requiring defendants to tape and

preserve all trader conversations, without any oversight or

compliance efforts by defendants, the Department determined that

the identical remedial purpose could be served more efficiently

by requiring defendants to monitor and record a relatively small

percentage of such conversations, without informing traders when

their conversations would be recorded, and also by requiring that

such conversations as are recorded actually be reviewed promptly

for violations. Thus, traders at the twenty-four defendant firms

(and those who trade with them in the industry) will know that

some portion of their calls are being taped, but will have no way

of knowing which ones.

Further, under the proposed Order, the Department is given

the right to receive complaints of possible violations and to

direct future taping of possible violators without informing

traders that this particular taping is ongoing. This feature of

the proposed Order is of vital importance, for it allows ongoing

monitoring, if believed necessary, of traders about whom

complaints have been made. The Department believes that these

requirements to monitor and record, and to direct the monitoring

and recording, of trader conversations will provide substantial

- 54 -
opportunities for detection of violations of the proposed Order

as well as substantial incentives for the defendant firms and

individual traders to comply with the terms of the proposed

Order, and the antitrust laws.

The Department has calculated that, given the number of

defendants and the number of traders employed by these

defendants, the number of hours of trader conversations actually

to be monitored and recorded per year pursuant to the proposed

Order is likely to range between 35,000 and 40,000 hours.20/

Further, while the absolute number of hours of trader

conversations required to be monitored and recorded at any

individual firm (in relation to the number of traders and the

number of hours the market is operating) may be few, traders who

might be inclined to violate the proposed Order, in addition to

being subject to prosecution for criminal or civil contempt (and

under the antitrust laws), must also be concerned that their

conversations are being monitored and recorded by another of the

twenty-four firms subject to the proposed Order.

To the best of the Department’s knowledge, these provisions

are unprecedented in any court order resolving an antitrust

20
The Department has calculated that, if the proposed
Order is entered by the Court, the defendants will be required to
engage approximately thirty (30) full-time employees to monitor
compliance with the requirements of the proposed Order for up to
five years.

- 55 -
complaint filed by the United States. There is some precedent in

the securities field for directing taping as a remedial measure.

In two SEC cases involving firms alleged to have engaged in

serious and repeated violations of the securities laws, the firms

were required to tape their brokers. S.E.C. v. Stratton Oakmont

Inc., 878 F.Supp. 250 (D.D.C. 1995)(taping required by

independent consultant); In the Matter of A.R. Baron & Co., Inc.,

SEC News Digest 96-101, File No. 3-9010 (May 30, 1996). There is

also precedent for taping in the National Futures Association’s

imposition of taping for certain telemarketing activities.

National Futures Association Manual ¶9021 (Interpretive Notice,

"Compliance Rule 2-9; Supervision of Telemarketing Activity"

(Jan. 19, 1993)). Perhaps most importantly, the taping provision

finds precedent in the industry’s own practice of taping to

resolve disputes.

The Department’s investigation depended heavily on the

conversations discovered on tapes produced pursuant to process.

Fourteen firms making markets on Nasdaq, including some of the

largest, regularly taped all of their traders, all of the time.

The Department believes that the tapes made pursuant to the

proposed Order will both serve an important deterrent effect to

ensure compliance with the proposed Order, as well as provide the

- 56 -
best means of detecting, proving, and punishing violations of the

proposed Order, should they occur.

Second, the Department considered requiring, as a condition

of settlement, the appointment of a special master to monitor

compliance with the terms of the proposed Order. Under this

possible form of relief, the defendants would have been required

to fund the activities of the special master. The special master

and his staff would have undertaken the responsibilities that,

under the proposed Order, will be assumed by the Department.

These responsibilities include, for example, approving the taping

systems the defendants will be required to install, receiving the

reports required to be submitted by the defendants, receiving

complaints and directing the monitoring of the conversations of

particular traders.

Ultimately, because of difficulties in determining how the

costs of funding the special master would be shared equitably

among the defendants, and because of the concern of many of the

defendants that a special master would become yet a fourth agency

(in addition to the SEC, the NASD and the Antitrust Division)

with jurisdiction to monitor their activities, the Department

determined that it would not require the appointment of a special

master and that it could fulfill the responsibilities to monitor

imposed by the proposed Order.

- 57 -
 To implement its responsibilities under this portion of the

proposed Order, the Department has assigned an attorney in its

New York Field Office, Geoffrey Swaebe, Jr., to provide initial

oversight of the implementation of Sections IV.C.(2)-(10), V, and

VI of the proposed Order. Mr. Swaebe’s address is Antitrust

Division, New York Field Office, 26 Federal Plaza #3630, New

York, NY 10278-0140. Mr. Swaebe’s telephone number is (212) 264-

0652. The general number for the New York Field Office is (212)

264-0390.

The Department has also established a new telephone

"hotline" for traders, retail brokers, or members of the public

to report violations of the proposed Order or the federal

antitrust laws generally, in the securities or any other

industry. Anyone with information concerning such possible

violations may call the toll-free hotline, 1-888-7DOJATR (1-888-

736-5287).

Third, the Department considered but ultimately did not

require as a condition of settlement, that the defendants

implement certain quoting rules recently proposed by the SEC to

improve the handling and execution of customer orders (File No.

S7-30-95). The Department considered having the defendants

implement two of these proposed rules immediately. These two

proposed rules, which are still under consideration by the SEC,

- 58 -
include a "Limit Order" proposal requiring specialists and OTC

market makers to display customer limit orders priced better than

the specialist’s or OTC market maker’s quote; and an "Electronic

Communications Networks" proposal that would require exchange

specialists and OTC market makers to quote to the public any

better prices that they privately quote through certain

electronic communications networks, such as Instinet.

The Department submitted formal comments to the SEC strongly

supporting the adoption of the Limit Order proposal and

supporting the Electronic Communications Networks proposal on

January 26, 1996. In those comments, we noted that, "[i]n effect

the Limit Order proposal will allow customer limit order to

compete more effectively with market makers’ quotes, injecting

additional competition into the Nasdaq market." We identified

the "primary beneficiaries of this added competition . . . [as]

the investing public, in the form of narrower bid/ask spreads and

thus a reduced cost of trading." As to the Electronic

Communications Networks proposal, we stated that it "may reduce

the possibility of collusion and may also serve some of the

Commission’s other goals, such as promoting transparency and

reducing market fragmentation."

The Department did not negotiate to include either the Limit

Order or the Electronic Communications Networks proposals as part

- 59 -
of the relief because of the complexity involved in requiring

less than all industry participants to implement the rules,

because of fairness concerns, and because of the pendency of the

rules before the SEC.

X.

LEGAL STANDARD GOVERNING THE

COURT’S PUBLIC INTEREST DETERMINATION

In accordance with the APPA, this Court must determine

whether entry of the proposed Order "is in the public interest."

15 U.S.C. § 16(e). In undertaking this assessment, the D.C.

Circuit recently explained, "the court’s function is not to

determine whether the resulting array of rights and liabilities

is the one that will best serve society, but only to confirm that

the resulting settlement is within the reaches of the public

interest." United States v. Microsoft Corp., 56 F.3d 1448, 1460

(D.C. Cir. 1995) (emphasis in original) (internal quotations

omitted).21/

The Court’s role in passing on a proposed Order is limited

because a stipulation and order embodies a settlement, see United

States v. Armour & Co., 402 U.S. 673, 681 (1971), one reflecting

both the Department’s predictive judgment concerning the efficacy

21
Accord United States v. Bechtel Corp., 648 F.2d 660, 666
(9th Cir.), cert. denied, 454 U.S. 1083 (1981); United States v.
Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975).

- 60 -
of the proposed relief and the Department’s exercise of

prosecutorial discretion.22/ For a court to engage in "an

unrestricted evaluation of what relief would best serve the

public" might threaten these benefits of "antitrust enforcement

by consent decree," United States v. Bechtel Corp., 648 F.2d 660,

666 (9th Cir.), cert. denied, 454 U.S. 1083 (1981), and thereby

frustrate Congress’s intent to "retain the consent judgment as a

substantial antitrust enforcement tool," S. Rep. No. 298, 93d

Cong., 1st Sess. 7 (1973); H.R. Rep. No. 1463, 93 Cong., 2d Sess.

6 (1974), reprinted in 1974 U.S.C.C.A.N. 6535, 6538-39.

The Tunney Act authorizes a court to consider:

(1) the competitive impact of such judgment, including

termination of alleged violations, provisions for
enforcement and modification, duration or relief sought,
anticipated effects of alternative remedies actually
considered, and any other considerations bearing upon the
adequacy of such judgment;

(2) the impact of entry of such judgment upon the

public generally and individuals alleging specific injury
from the violations set forth in the complaint including
consideration of the public benefit, if any, to be derived
from a determination of the issue at trial.

Id. In applying these criteria, appropriate concern for

preservation of a stipulation and order as an effective

enforcement tool requires the Court to focus its inquiry

22
As the Ninth Circuit explained, "[t]he balance of the
competing social and political interests affected by a proposed
antitrust consent decree must be left, in the first instance, to
the discretion of the Attorney General." Bechtel, 648 F.2d at
666.

- 61 -
narrowly. See also United States v. American Cyanamid Co., 719

F.2d 558, 565 (2d Cir. 1983) (explaining that the "public

interest" standard should be "based on more than a broad and

undefined criteria"), cert. denied, 465 U.S. 1101 (1984). A

Tunney Act court properly may consider whether a proposed order

is ambiguous or contains inadequate compliance mechanisms, for

these shortcomings may hinder the decree’s successful

implementation. See Microsoft, 56 F.3d at 1461-62. The Court

may also ask if the proposed order potentially works "unexpected

harm" to third parties, id. at 1459, or impairs important public

policies other than competition policy, see United States v. BNS

Inc., 858 F.2d 456, 462-62 (9th Cir. 1988). The Court, however,

may not reject the proposed order merely because it fails to

secure for a third party benefits it seeks. See Microsoft, 56

F.3d at 1461 n.9.

The Court may also ask whether the relief embodied in the

proposed decree is "so inconsonant with the allegations charged

as to fall outside of the `reaches of the public interest.’" Id.

at 1461. The Department’s allegations cabin this inquiry; the

Court may not look beyond the Complaint "to evaluate claims that

the government did not make and to inquire as to why they were

not made." Id. (emphasis in original). And, in evaluating the

proposed order as a remedy for the particular violations alleged,

- 62 -
the Court must afford the Department even greater deference than

when the Court considers an uncontested decree modification -- a

context in which a court may reject the proposal only if "it has

exceptional confidence that adverse antitrust consequences will

result -- perhaps akin to the confidence that would justify a

court in overturning the predictive judgments of an

administrative agency.’" Id. at 1460 (quoting United States v.

Western Elec. Co., 993 F.2d 1572 (D.C. Cir.), cert. denied, 114

S. Ct. 487 (1993)).

Finally, the Court properly may make its public interest

determination on the basis of the Competitive Impact Statement

and Response to Comment filed pursuant to the APPA. The APPA

authorizes the use of additional procedures, see 15 U.S.C. §

16(f), but their employment is discretionary. If the

Department’s filings adequately ventilate the issues before the

Court, additional proceedings may deter settlements, and thus

improperly impair the consent judgment as a frequently used and

congressionally approved antitrust enforcement tool. See H.R.

Rep. No. 1463, supra, at 8, reprinted in 1974 U.S.C.C.A.N. 6535,

6538-39.; S. Rep. No. 298, supra, at 6-7.

- 63 -
 XI.

DETERMINATIVE MATERIALS/DOCUMENTS

No materials or documents of the type described in Section

2(b) of the APPA, 15 U.S.C. § 16(b), were considered in

formulating the proposed Order.

Dated: July 17, 1996 Respectfully submitted,

HAYS GOREY, JR. (HG 1946)

Attorney
U.S. Department of Justice
Antitrust Division
600 E Street, N.W.
Suite 9500
Washington, D.C. 20530
Tel: 202/307-6200
Fax: 202/616-8544

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