If the

New York Stock Exchange's

latest probe of trading-impropriety allegations rings a bell with you, you're not alone.

It was just five years ago, after all, that the NYSE found itself wearing a black eye following a similar scandal. That one involved charges of wrongdoing on the part of some floor brokers -- the special traders who serve as intermediaries between buyers and sellers. Eventually, several floor brokers were convicted of manipulating trading in some stocks and of illegally splitting profits on those trades.

The current investigation, which the NYSE confirmed Thursday morning, involves allegations of specialist front-running -- claims that some of the workers charged with driving trading action may have improperly made trades ahead of their customers' orders. Early reports had the inquiry

focusing on actions at two firms, but some people on Wall Street say the probe's scope is expanding. That could soon mean another dark cloud during an already rainy season in the securities industry.

"This is not new," said Dominic Amorosa, a New York lawyer who defended some of the floor brokers in that earlier investigation. "You are going to find out that this is not unusual."

Expanding the Brief?

The Wall Street Journal

has reported that the investigation is focusing on specialists, the floor brokers who drive trading activity, at two firms:




FleetBoston Financial's

Fleet Specialist division. Fleet, according to the


, has suspended a floor specialist who handled trading in shares of

General Electric

(GE) - Get Report


Fleet could not be reached for comment. Michael LaBranche, chairman and chief executive of LaBranche, declined to comment.

But one Wall Street analyst says the NYSE investigation is wide-ranging and is examining the activities of all seven Big Board specialist firms. Others familiar with the investigation say it began several weeks ago and that NYSE investigators have been questioning a number of people.

"The investigation is of all specialists," said Richard Repetto, a Putnam Lovell brokerage analyst who follows LaBranche. "It could take a long time." Repetto added he has no reason to believe the NYSE is focusing on LaBranche more than any other firm.


If the investigation is as sweeping as Repetto claims, it could be particularly damaging to the NYSE's reputation, since specialists are the behind-the-scenes engine that powers the Big Board.

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That's because specialists are granted an exclusive franchise by the Big Board to oversee trading in some 2,800 listed stocks. Specialists play a big role in setting prices for stocks, because all buy and sell orders pass through them.

Specialists earn a commission from each trade they complete. They also make money from making their own stock trades. But specialists are not supposed to take advantage of their customers.

The other big specialist firms are

Goldman Sachs'

(GS) - Get Report

Spear Leeds & Kellogg,

Van Der Moolen Specialists



Bear Wagner


Performance Specialist Group


Susquehanna Specialists


Bear Stearns


is partner in Bear Wagner.


Allegations of front-running by specialists don't shock some who are familiar with the way Wall Street and the Big Board work.

Jonathan Kord Lagemann, a New York securities lawyer and a former general counsel for a small brokerage firm, said potential conflicts of interest are inherent in the entire specialist system, because a handful of firms control all the trading in some of the most sought-after stocks.

Economic pressures on Wall Street also may be tempting some specialists to engage in front running, as they seek to find ways to profit at the expense of their customers.

The bear market on Wall Street has cut deeply into the profit margins of all specialist firms. Goldman Sachs recently dismissed the chief executive of Spear Leeds because the firm was disappointed in the performance of its specialist division. Just this week, LaBranche reported that its first-quarter net income plunged 80% from a year ago.

Brad Hintz, a brokerage analyst with Bernstein & Co., said commissions on institutional trading are running roughly 30% lower this year.

One thing's for sure, the investigation isn't helping shares of LaBranche, which were down 28% this year before news of the investigation broke. In early afternoon trading Thursday, the stock fell another $1.15, or 6%, to $16.75.