The Big Board notified the five trading firms of its intentions earlier this week. The action stems from a nine-month investigation into allegations that specialist firms, which drive trading in NYSE stocks, improperly made proprietary stock trades ahead of their customers' orders.

The enforcement action, which could include fines totaling tens of millions of dollars, comes at a time when the specialist system is under fire from critics that it's both archaic and inherently unfair to investors. The investigation covers trading activity over a three-year-period, beginning in 2000.

NYSE officials, speaking in conference call with reporters, declined to say how much each firm will be fined, or how much money they will be ordered to return to investors. The officials said it was premature to disclose those figures, although they have discussed some numbers with the specialists.

But one specialist firm, Van Der Moolen, said the NYSE has suggested that its allegedly improper trading activity cost customers up to $35 million. The Dutch-based firm disputed that figure and said it "questioned the accuracy of the NYSE's data."

The NYSE did not identify the specialist firms it intends to discipline. But there are only seven major specialist firms on the Big Board, and the identities of the firms under investigation has been known for some time.

Besides Van Der Moolen, the other specialists on the hot seat include LaBranche (LAB - commentary - Cramer's Take); a division of FleetBoston Financial (FBf - commentary - Cramer's Take); Goldman Sach's (GS - commentary - Cramer's Take) Speer Leeds & Kellogg; and Bear Wagner, which is partially owned by Bear Stearns (BSC - commentary - Cramer's Take).

In recent weeks, shares of LaBranche, the largest publicly traded specialist, have been slammed because of the investigation, a recent profit warning and the fallout from the controversy over Richard Grasso's $140 million pay package. Grasso, a big supporter of the specialist system, was forced to resign as NYSE chairman and chief executive over the pay scandal.

But critics have seized on the Grasso controversy to accuse the NYSE of being a weak regulator and protecting the specialists while blocking the advance of faster and more sophisticated electronic trading networks.

Shares of two stand-alone specialist firms took another beating in Thursday's trading following news of the fines, which the NYSE intends to discuss in more detail during an afternoon conference call with reporters. LaBranche was down $1.54, or 12%, to $11. Van Der Moolen's stock fell $1.77, or 16%, to $8.84.

Over the past three months, shares of LaBranche have fallen more than 40%, while Van Der Moolen's stock is off about 20%.

In April, the NYSE said its investigation was focused on whether specialists and their traders had violated the exchange's negative obligation rule requiring them to "stand out of the way" when a buyer and seller agree on a price. The exchange had said it was looking into a number of instances in which specialists might have violated that rule by stepping in and buying stock from a seller at one price and then reselling it to a buyer at slightly higher price.

The specialist firms, which earn a small commission from each trade they complete, are also permitted to make stock trades for their own account, but not at the expense of their customers.