The Securities and Exchange Commission is poised to take the action against the nation's largest stock exchange, which would not be fined but would be compelled to bolster its oversight spending by as much as $50 million, two people said, confirming a report Thursday in The Wall Street Journal. They spoke on condition of anonymity. The exchange also would agree to be censured in the settlement with the SEC, which still must be formally approved by the agency's commissioners.

Spokesmen for the SEC and the NYSE declined comment.

The SEC last year levied millions of dollars in civil fines on all seven specialist firms that operate on the exchange floor, making a market in particular stocks by matching buyers and sellers, for allegedly reaping illegal profits by putting their own trades ahead of those of other investors.

On Wednesday, the NYSE said the former chief executive of the specialist firm Spear, Leeds and Kellogg Specialists had been permanently barred from the exchange and its member firms for failing to cooperate with the investigation into specialist stock trades.

The exchange made a sweeping overhaul of its governance in late 2003 following a scandal over the $188 million pay package of its former chairman, separating its self-regulation from its commercial operations.

The pay scandal and revelations of allegedly widespread abuses by the specialists called into question the long-established system of self-regulation by the U.S. stock exchanges, under which they are responsible for policing their traders and the SEC oversees the exchanges themselves. In November, the SEC proposed a plan in which all the exchanges would be forced to tighten their governance and move toward separating their self-policing function from their business operations.

The agency also has raised the question of whether a new single regulator should be created to replace all the exchanges' self-policing organizations.

In addition to the NYSE, the SEC is expected to sanction three other exchanges for allowing trading firms to cheat investors by allegedly failing to fully enforce their own rules. The agency is said to be negotiating settlements with the three - the American Stock Exchange in New York, the National Stock Exchange in Chicago and the Philadelphia Stock Exchange - and pressuring them to investigate and possibly punish the trading firms involved.

The SEC moves could come within the next two months, according to The Journal.

The Justice Department and the SEC in 2000 sanctioned the American Stock Exchange, the Philadelphia exchange, the Chicago Board Options Exchange and the Pacific Exchange for allegedly not enforcing their options-trading rules, among other things.

-- Marcy Gordon