FINRA Signs Regulatory Services Agreement with CBOE and C2
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) today announced that it has signed an agreement with the Chicago Board Options Exchange® (CBOE®) and C2 Options Exchange (C2) to provide market surveillance, financial surveillance, examinations, investigations, and disciplinary services to CBOE and C2, in addition to other regulatory services. FINRA, the independent, non-governmental regulator for all securities firms doing business with the public in the United States, will begin to perform these services on January 1, 2015.
"We are pleased to work with CBOE and C2 to protect the investing public. With this agreement, FINRA will be in a position to conduct cross-market surveillance on approximately 60 percent of the options market. FINRA looks forward to working with CBOE to detect and deter manipulative and abusive trading, and ensure the integrity of our markets," said FINRA Chairman and CEO Richard Ketchum.
Through comprehensive cross-market surveillance, FINRA is able to identify instances where a market participant engages in potentially abusive conduct on two or more markets in an attempt to avoid detection.
FINRA's cross-market surveillance patterns currently canvass over 99 percent of the listed equities market, and with the agreement announced today, FINRA will also be uniquely positioned to detect cross-product (equity and options) manipulation.
Additionally, FINRA will be taking over responsibility for the Options Regulatory Surveillance Authority (ORSA) industry options insider trading program, a change which was recently approved by the ORSA participants that represent all 12 options markets. FINRA plans to integrate the options insider trading program with FINRA's current equity insider trading program. As a result, FINRA will conduct surveillance for insider trading for all equities and options trading in the United States.
The vast majority of CBOE's and C2's Regulatory Services Division staff, ORSA staff, and Systems Development Department staff who support options regulation – about 125 employees in total – have accepted positions with FINRA.
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, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.