finra

FINRA

For Release:
Contacts:

May 2, 2014
George Smaragdis (202) 728-8988
Nancy Condon (202) 728-8379

 

 

FINRA Rule Change to Limit Self-Trading Approved

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) is pleased to announce the SEC's recent approval of a FINRA rule change to limit self-trading. This change to FINRA Rule 5210 requires firms to have policies and procedures in place that are reasonably designed to review their trading activity for, and prevent, a pattern or practice of self-trades resulting from orders originating from a single algorithm or trading desk, or related algorithms or trading desks.

 

Self-trades are "[t]ransactions in a security resulting from the unintentional interaction of orders originating from the same firm that involve no change in the beneficial ownership of the security." Self-trades by single or related algorithms or trading desks raise heightened concerns because this type of trading may not reflect genuine trading interest, particularly if there is a pattern or practice of such trades.

 

"FINRA's cross-market surveillance program canvasses 90 percent of the listed equities market, and this important new rule change will significantly increase FINRA's ability to deter self-trading that, while not involving fraudulent or manipulative intent, is disruptive to the marketplace," said Thomas Gira, FINRA Executive Vice President, Market Regulation.

 

FINRA will announce an effective date for this change to FINRA Rule 5210 in a Regulatory Notice to be published in the near future.

 

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.