New York Stock Exchange Regulation Tuesday issued charges against 17 former specialists for alleged securities fraud violations.

The charges, issued by the NYSE Regulation’s enforcement division, were the result of investigations conducted in conjunction with the U.S. Attorney’s Office and the Securities and Exchange Commission.

They allege that the 17 former specialists violated their fundamental obligation to prioritize public customers’ orders over the proprietary interests of the specialist firms for whom they were employed. The SEC also brought allegations against 20 individuals and settled proceedings against the NYSE, and the prosecutors filed charges against 15 individuals.

The NYSE also issued a statement in response to the SEC’s censure of the NYSE for failing to properly detect, investigate and discipline improper floor trading practices from 1999 to 2002.

“Major strides have been taken to enhance the exchange’s regulatory program and investor protection,” Richard Ketchum, chief regulatory officer of the NYSE, said in a statement. “Staff and technology resources have been increased. New heads of the Market Surveillance, Member Firm Regulation and Enforcement divisions were appointed. A new department within Market Surveillance was created to analyze surveillances and propose new or modified surveillances. New regulatory technology has been installed to establish better controls and accountability on the Floor. In particular, the ‘DOT Priority’ application prevents specialists from trading ahead of customers unless they provide an explanation that is reviewed by NYSE Regulation.”

“To further protect investors, we have proposed to the SEC that when a specialist has completed a trade with the crowd for his own account but not yet reported it and an incoming customer order appears, the specialist must yield to the customer order. And in creating the Hybrid MarketSM, NYSE Regulation is working hand-in-hand with the NYSE technology team to assure that they program in regulatory quality controls right along with trading functionality,” he added.

“Our new governance structure, approved by the SEC on December 17, 2003, provides numerous safeguards to ensure that NYSE Regulation is insulated from influence of Exchange members, member firms, and listed companies. We are independent from the business-side in our decision-making. This new structure is working,” Ketchum said.

“The New York Stock Exchange accepts and acknowledges the SEC’s criticisms. Our board and entire organization are committed to take whatever additional steps are necessary, including carrying out the undertakings contained in the settlement agreement, to meet our surveillance and enforcement obligations. Specialist firms have changed, as have we,” he noted

The NYSE’s new chair, Marshall Carter, said, “The Board of Directors is committed to provide the guidance and resources necessary to ensure that NYSE Regulation carries out its program with the highest standards of ethics and integrity. A vigorous and independent regulatory program is essential to the New York Stock Exchange. We are pleased with the progress that has been made so far and we will continue to enhance investor protection.”

“NYSE Regulation plays a critical role in monitoring and regulating the activities of its members, member firms and listed companies by enforcing compliance with NYSE rules and federal securities laws. We are passionate about protecting investors and ensuring the integrity of the NYSE. We pledge to continue working until we have completed every issue in the SEC Order,” Ketchum concluded.