Hayward, 57, and Stern, 55, who had worked for Van der Moolen Specialists USA LLC, were the only specialists still facing prison time after convictions at trial. They had been accused of stealing $1 million apiece by skimming small amounts of money from stocks they oversaw.
The ruling all but ended a prosecution in which the government accused the powerful floor supervisors of using their inside positions to earn an estimated $20 million illegally for themselves and their firms.
Specialists play the crucial role of matching buyers and sellers in individual stocks, though their numbers have declined as computers have taken a larger role in the trading of securities.
Prosecutors targeted the specialists after concluding that they sometimes pocketed pennies for themselves or their firms from each trade by purchasing a stock and quickly flipping it for a slightly higher price.
Defense lawyers had argued that it would be absurd for highly paid specialists - many of them have seven-figure incomes - to try to make minuscule amounts of money each day in such a way. Instead, they said, prosecutors were highlighting innocent mistakes made on fewer than 1 percent of trades each specialist handled.
"Mike Hayward is very happy to have been vindicated," said his lawyer, Jonathan Paul Bach.
"We are thrilled with the result and pleased that the Court of Appeals agreed that Mr. Stern should be cleared of all charges," said Stern's lawyer, David Meister.
Prosecutors declined to comment.
In February 2007, Judge Denny Chin in Manhattan reversed a jury verdict convicting David A. Finnerty, another specialist, of securities fraud.
Chin's decision was later upheld by the appeals court, which agreed that the government had failed to prove that Finnerty acted deceptively.
In tossing out the two convictions Wednesday, the appeals court noted that lawyers on both sides had conceded that the evidence used to convict Finnerty was largely indistinguishable from the proof used to convict Hayward and Stern.
Earlier, the government had dropped charges against seven of the 15 floor supervisors. Two others were acquitted, two had pleaded guilty and one defendant remains at large.
