A former floor broker filed suit today against the New York Stock Exchange, Chairman Richard Grasso and two other top executives, claiming that they had sanctioned the trading practices that led to his arrest last year, aborting his thriving career and costing him his seat on the Big Board.

John R. D'Alessio filed the $22.25 million suit in New York County Supreme Court, days after charges were dropped against him, absolving his role in a broad scandal involving the way some brokers used their ringside seats on the floor to profit for themselves. The suit also names Edward A. Kwalwasser, a group vice president of the exchange, and Robert J. McSweeney, a senior vice president.

"He's suing because he was misled by Mr. Grasso and Mr. Kwalwasser and Mr. McSweeney and by the New York Stock Exchange into believing that certain conduct that he engaged in was legal and proper when it was not legal and proper," said his attorney, Dominic F. Amorosa.

NYSE officials would not comment. Spokesman Ray Pellecchia said the defendants could not comment on pending litigation.

D'Alessio was one of 10 brokers who were arrested last year and charged with breaking exchange rules and securities laws barring them from personally profiting from information they obtain on the trading floor. The laws, designed to keep them on a level playing field with investors who don't have such a bird's-eye view of trades, also require floor brokers to trade on command from customers (generally institutional investors)--not at their own discretion.

The scandal centered around a deal that several brokers had with a now-defunct brokerage firm called Oakford Corp. The brokers agreed to make trades under Oakford's name and keep between 70 percent and 90 percent of the profits, making $11.1 million, according to federal prosecutors.

U.S. District Judge Jed S. Rakoff on Monday ruled that nine of the brokers "knowingly and willfully" broke the law and said they would be sentenced to six months to a year in prison on Jan. 7. The sentence would have been harsher, he said, had the NYSE made it more clear to the individuals that they were breaking the law. Last week, D'Alessio's charges were dismissed, making him the only defendant to escape conviction.

This type of practice has been rampant at the NYSE, according to the Securities and Exchange Commission. In late June, the SEC settled an unusual administrative complaint against the Big Board, saying that it "failed to detect and halt illegal schemes" through which more than 64 brokers made millions of dollars illegally trading stocks.

The exchange neither admitted nor denied wrongdoing but agreed to overhaul the regulatory practices covering floor brokers.

But the move, Amorosa said, comes too late for D'Alessio. He has been forced to sell his house and his seat and move his family to Florida. The suit says he spent $250,000 in legal expenses and lost $1 million in income and another $1 million when he sold his seat. His complaint also seeks $20 million in punitive damages.

The suit alleges that the defendants "conspired to violate federal securities laws by encouraging hundreds of floor brokers to trade illegally for years." This was highly profitable for the exchange, according to the suit, because brokers pay the exchange a percentage of commissions they get from customers.

The complaint also accuses the defendants of falsely denying knowledge of the Oakford arrangement to federal prosectors who began investigating in 1997.

CAPTION: John R. D'Alessio: His suit says stock exchange officials misled him.