By Hope Yen
The Associated Press

NEW YORK - The New York Stock Exchange will discipline and seek substantial fines against five floor-trading firms as part of a widening probe into improper trading that may have cost investors millions.

The world's largest stock exchange said Thursday that it will seek to compensate investors after the NYSE investigation, which found that the specialist firms ignored their primary duty to directly match buy and sell orders when possible and instead, intervened from their own account for a profit.

The exchange also said it would seek improvements in self-monitoring and implement surveillance software next week as a deterrent. The probe examined trades Jan. 1, 2000, through Dec. 31, 2002, and found suspect activity in about 2 billion shares, which is slightly more than a single day's volume.

The exchange refused to disclose the amount of the fines saying it was subject to change pending the conclusion of its investigation. Interim NYSE chairman John Reed said in testimony before Congress Thursday that reports the fines would total $150 million were "in the ballpark."

"We have told the companies the amount of money that we believe the customers have been disadvantaged," said Edward A. Kwalwasser, NYSE executive vice president for regulation.

The five firms being targeted are LaBranche & Co.; Goldman Sachs Group's Spear, Leeds & Kellogg; FleetBoston Financial Corp.'s Fleet Specialist unit; Van Der Moolen Holdings NV's Van Der Moolen Specialists USA unit; and Bear Wagner Specialists, which is minority-owned by Bear Stearns Cos.

Three of the five specialist firms reached Thursday said they wanted to see the stock exchange's records of the trades before deciding whether to appeal any fines. Bear Wagner and Fleet did not immediately return phone calls.