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MRTS 2.0: A Redesign for a Rapidly Evolving Market

March 19, 2024

U.S. financial markets today are not what they were ten years ago, five years ago, or even just a couple of years ago. Over the years, FINRA's Market Regulation and Transparency Services (MRTS) team successfully grew and evolved to meet the changing demands of the markets they oversaw. But recently, the group took time to ask, how would we build this team if we were starting from scratch? And the answer to that question involved redesigning the group structure around specific functions, rather than around specific rules or products. 

On this episode, we hear from Feral Talib, Executive Vice President of Surveillance and Market Intelligence, Jackie Perrell, a Senior Vice President and Chief of Staff for MRTS, and Steve Price, Senior Vice President of Market Investigations to learn how the MRTS team has realigned itself, allowing it to be more nimble in addressing and anticipating risks, to better leverage its data and more.

Resources mentioned in this episode:

2024 FINRA Annual Regulatory Oversight Report

Feral Talib Named Executive Vice President and Head of Surveillance & Market Intelligence

Episode 60: Greg Ruppert and the National Cause and Financial Crimes Detection Programs


Listen and subscribe to our podcast on Apple PodcastsGoogle PodcastsSpotify or wherever you listen to your podcasts. Below is a transcript of the episode. Transcripts are generated using a combination of speech recognition software and human editors and may contain errors. Please check the corresponding audio before quoting in print. 



00:00 - 00:45

Kaitlyn Kiernan: U.S. financial markets today are not what they were ten years ago, five years ago, or even just a couple of years ago. Over the years, FINRA's Market Regulation and Transparency Services team successfully grew and evolved to meet the changing demands of the markets they oversaw. But recently, the group took time to ask, how would we build this team if we were starting from scratch? And the answer to that question involved redesigning the group structure around specific functions, rather than around specific rules or products. On this episode, we hear from three of the group's senior leaders to learn how the Market Regulation and Transparency Services team has realigned itself, allowing it to be more nimble in addressing and anticipating risks, to better leverage its data and more. 


00:45 – 00:54

Intro Music


00:54 - 01:28

Kaitlyn Kiernan: Welcome to FINRA Unscripted. I'm your host, Kaitlyn Kiernan. I'm excited to welcome three new guests to the podcast today to talk about recent efforts to improve the efficiency and effectiveness of FINRA's Market Regulation and Transparency Services team. Joining us today for the first time are Feral Talib, Executive Vice President of Surveillance and Market Intelligence, Jackie Perrell, a Senior Vice President and Chief of Staff for Market Regulation and Transparency Services, and Steve Price, Senior Vice President of Market Investigations. Steve, Jackie and Feral, thanks for joining me. 


01:28 - 01:29

Jackie Perrell: Thanks for having us here. 


01:30 - 01:39

Kaitlyn Kiernan: So, can you start off by introducing yourselves? Feral, since you are the newest to FINRA, let's start with you. What's your background? What did you do prior to joining FINRA? 


01:39 - 02:53

Feral Talib: Sure, Kaitlyn. I'm Feral Talib. I'm the new Head of Surveillance and Market Intelligence, which is a new position created after the surveillance consolidation that was part of MRTS 2.0. I joined at the beginning of the year, about two months ago now, to lead the new SMI department, and I came from the industry. I started my career in the nineties as an equities trader and shifted into surveillance in the aughts, first as an investigator and later as a manager and a strategic leader through a handful of broker-dealers and investment banks. And my last role before joining FINRA was as the global head of surveillance for BNP Paribas Group, where I was for the last about eight years and where, among other things, I was responsible for building and managing a global framework that encompassed a large variety of surveillance operations, which had grown organically across the global entity, based on need and opportunity. 

This is not too different from the circumstances FINRA found itself in as it was heading into MRTS 2.0. Surveillance operations had an asset-based focus growing across different areas and naturally under somewhat different conditions, which led to some different rules and approaches. I don't want to skip too much ahead, so I'll stop there, but I just want to point out that the operational environment I find myself in, and the task ahead is a familiar one. 


02:53 - 03:07

Kaitlyn Kiernan: Thanks for sharing your background. Steve, let's go to you next. You are the most recent to join, or I should say rejoin, the FINRA team. What's your background and what did you do prior to becoming head of Market Investigations? 


03:08 - 05:01

Steve Price: I had a little bit of a winding path back and forth between the regulatory world and the industry. I actually started my career as a litigator, doing completely unrelated work, and then eventually found myself on the floor of the Cboe, trading as a market maker through the internet bubble, up, down, kind of sideways during that timeframe. I followed that with a stint working both for NASD enforcement in the early 2000s and then also enforcement work for a state securities regulator in Colorado. So, that was really my first taste of moving into the regulatory space. I did that for several years and then went to industry, where I was CCO and also oversaw risk management for a multifaceted financial services firm based in Denver, mostly built around the ecosystem of mutual funds and ETFs. 


Spent 12 years there working in a variety of different capacities, working with different asset managers, different representatives from different organizations. What it really did was it enabled me to see what regulators could do to be more effective and helpful for those in the industry trying to maintain well designed compliance programs, and some of the challenges we had in the industry, trying to read the regulatory tea leaves. So, coming eventually back to FINRA, I came back with the idea of what we can do not just as an organization, but to help partner with the industry so they can be more effective in running their own programs. So, back in 2020, I rejoined FINRA, helped lead and launch the National Cause program, which had been put together at the tail end of Member Supervision's transformation here. We built that up, reorganized it along the way, and then last year moved over to market regulation to help launch and oversee the new Market Investigations program. So, it's been about a year in that role now. And a lot of what we had done on the other side of Member Supervision really did have a lot of best practices that we took over to this side in terms of building the programs we have today.


05:01 - 05:08

Kaitlyn Kiernan: Great. Thanks, Steve. So, you must be well spoken at the dying art of the hand signals from the floor trading. 


05:08 - 05:14

Steve Price: It has been a while. The papers, the hand signals, a lot of the yelling and screaming is all done now, electronically.


05:16 - 05:22

Kaitlyn Kiernan: Jackie, you are our FINRA veteran. So, let's wrap up with you. Can you tell us a bit about yourself and your background? 


05:22 - 06:40

Jackie Perrell: Sure, thanks, Kaitlyn. Thanks for having me here today. I came over to FINRA in 2011. Prior to my time at FINRA, I was in private practice, and I also was a staff attorney in the SEC's Office of Compliance, Inspections and Examinations. When I came over to FINRA in 2011, I started my career here as an enforcement attorney, and then I moved into what was formerly known as the Office of Fraud Detection Market Intelligence. I was a manager in OFDMI, in the office of the whistleblower group, and then I moved into a deputy director role, reporting up to the EVP for OFDMI. OFDMI, during the transformation that Steve was talking about, was folded into Member Supervision. So, I also held a couple of different positions, some management and senior advisor roles in Member Supervision, and one of those management roles was the head of the Market Fraud Investigations team that was in Member Supervision at the time in the National Cause and Financial Crimes Detection Programs area. I was asked to come over to MRTS and help with the MRTS 2.0 reorg, and I did that, and then I transitioned into the chief of staff role in MRTS last year in May. 


06:40 - 07:04

Kaitlyn Kiernan: Great. So, you have a lot of experience with helping different parts of FINRA optimize for their future. So, Market Regulation and Transparency Services, or MRTS for short, recently underwent a significant change, as you all hinted at, and we'll get into some of the changes in a moment. But, Jackie, what prompted this transformation? 


07:05 - 09:45

Jackie Perrell: MRTS has always been a leader in market surveillance, from migrating to the cloud to adopting AI and our deep learning models, and more recently, integrating CAT data into our surveillances. We want to continue to position ourselves to be that leader and an innovator in market surveillance. And really, what that meant was that we have to continue to grow and adapt to the changes in the markets and in the financial industry. I think we can all agree that over the last couple of years, we've seen a lot of changes in the markets that present new challenges and potential new harms to investors that are increasingly becoming more cross market and cross product focused. The way that MRTS was organized historically, which is by products, meaning equities, options and fixed incomes, that made sense at the time, and it served the department well. 


But it's important for us to continue to evolve as the industry and the markets evolve and to be able to adapt to those changes so we're able to meet those challenges ahead, which is why we embarked on this journey to redesign our organization, which we called MRTS 2.0. And what MRTS 2.0 essentially did was moved the organizational structure from one that was built around specific products and rule sets to one that is more horizontally focused and built around the department's key functions of surveillance, market investigations, and data and data analytics, with all of the products viewed together through those functional lenses. So, effectively and practically, what does all of that mean? It means that we now have a functional area with cross product teams that are dedicated to our surveillance work. We have a separate functional area with cross product teams that are dedicated to our market investigations work. And I also want to note that we, of course, will continue to maintain our product and rule set expertise within those functional areas. But we also then in this new structure, have a dedicated trading and markets data analytics team that's really focused on supporting our surveillance and market investigations work. 


And then of course there's Transparency Services, which is the "TS" in MRTS. And that's the group that operates various reporting facilities that collect and disseminate real time and historical market information across multiple and different products. That group is another critical functional area, but that group really remained largely the same. They were not re-orged like the Market Regulation side of the department was reorganized. 


09:46 - 09:55

Kaitlyn Kiernan: Great. Thank you, Jackie. So, I'd love to hear more about each of the functional groups. Feral, maybe we can start with the new Surveillance and Market Intelligence group?


09:56 - 11:03

Feral Talib: Sure. The new Surveillance Market Intelligence group, SMI, brings together various surveillance functions across FINRA under one roof, within Market Regulation and Transparency Services. As noted before, this consolidation involved both moving some existing teams under new leadership, but also the creation of some new teams. So, without going into too much detail, I can tell you that SMI contains market abuse, manipulation, market fraud and insider trading teams, as well as custom order handling, prohibited trading, short sale restrictions, various trade reporting and disclosure surveillances, as well as oversight on CAT reporting. The short story is if there's a market-based surveillance being conducted by FINRA, it is under SMI. We've also added a new team, Surveillance, Optimization and Innovation, which will help focus our development and fine-tuning efforts across the department. And as all of these operations are brought together under a functional umbrella, we're now faced with the task of establishing the framework by which the groups will move forward and take advantage of natural synergies and efficiencies, and act as a single entity. I should add that I have an experienced management team in place, and we are looking forward to the challenge. 


11:04 - 11:11

Kaitlyn Kiernan: Great. Thanks, Feral. Steve, what can you tell us about the Market Investigations team? What's new with this group? 


11:12 - 13:16

Steve Price: So, within Market Investigations, where we are now broken into four primary verticals, one of them is in market abuse, which covers fraud, manipulation, insider trading and some other areas. We have a customer order handling group, headliners would be best execution, trading ahead, fair pricing. We have a market compliance group that looks at Reg SHO, Reg ATS, market access and a variety of other trading compliance rules. And then similar to what Feral mentioned, which is a reporting and disclosure group that looks at a number of different reporting disclosure obligations. One of the big ones is, of course, CAT compliance. One of the advantages of the way we have reorganized as we took an investigation staff that previously was performing multiple functions, so they did surveillance work, they did initial investigations, and then also the deeper dive into a broader investigation and allowed them to focus primarily just on those broader, deeper dive investigations as they move from Feral's group into market investigations. While most of what we are seeing in our group comes from Surveillance, we also work with our exchange partners on referrals they bring us, as well as referrals from other departments at FINRA, whether that's NCFC or the exam program. 


Also, things can come into the investigations door in a variety of ways, even though the majority is coming from Surveillance. And while we grouped those staff in broader categories now, it really does give them a broader view of firms and activities across markets, so it enables us to both see the market more holistically as well as communicate better with the organization, both internally as well as industry and other regulators. We have one voice coming in and sharing information across a wide department. It really does give you the ability to synthesize information more broadly and then reflect back what we're seeing, and also in a more consolidated fashion back to the different constituencies. So, right now, we still are split up a little bit in terms of how we do product sets. But in our future state, we really will have all staff looking at all different types of products. 


13:16 - 13:23

Kaitlyn Kiernan: Great. Thanks, Steve. And, Jackie, can you round us out with more info on the other functional groups? 


13:24 - 15:24

Jackie Perrell: In addition to the key operating functional areas that Feral and Steve spoke about, there are a few new functional groups that came about under the new structure. First, there's the new Regulatory Services Management group, and that group is led by Gene DeMaio. We centralized the management of our regulatory services relationships, meaning our RSA exchange client work, under this new group. And while the underlying regulatory work will continue to be performed by the various regulatory operations departments, this team will serve as the centralized point of contact for our RSA exchange clients. Second, we have several essential support functions under the new structure to support the core operational functions. I'll start first with the Trading and Market Data Analytics group that's led by Holly Lokken. That group provides critical market analytic support to our Surveillance and Market Investigations teams. 


And then we also have a new group called Strategic Regulatory Engagement. That group is led by Alex Ellenberg. That team has an outward facing focus that's centered on keeping up with external regulatory developments that could have a potential impact on the department, as well as internal facing focus centered on the department's engagement with FINRA stakeholders on regulatory issues or market events that could impact the department. And then lastly, there is the Office of Chief of Staff, which I lead. The various teams under the Office of Chief of Staff are responsible for managing a wide variety of core business support functions. And some of those core business support functions include strategic initiatives, training and development, business operations, metrics and reporting, and regulatory compliance. So, that is a very high-level description of some of the other functional groups that are new to the new structure. 


15:25 - 15:32

Kaitlyn Kiernan: Thanks, Jackie. And what do you see as the biggest benefits coming out of this transition? 


15:33 - 17:17

Jackie Perrell: With regard to trading and market data analytics, we have a dedicated market analytics team that will support more than two things, but I just want to focus on two things. They'll support our larger, more complex investigations that Steve's team and Market Investigations are conducting, as well as supporting our surveillance pattern work under Feral's groups. By having a centralized market analytics team supporting our core functions, we expect to be able to deliver more impactful regulatory actions, and we expect to build more analytics into our staff's daily operations. We really see the Surveillance and Investigations teams benefiting from this team's work around onboarding new data to support surveillance reviews and investigations and working on optimizing the use of our existing data for both regulatory and market intelligence purposes. 

The department will also benefit by having the new group, the Strategic Regulatory Engagement group. Again, they're focused externally but focused really on the department's relationships to the markets and with market participants, and as well as focusing on external market events and how they may affect the department. So, having that type of work centralized in one group is really a benefit. And that group will also work with the core business groups when there is an external market event or when there is a regulatory development that impacts the department. And then there's the Office of the Chief of Staff. There are some natural synergies and operational efficiencies to be gained when you centralize those types of business operations teams under one group. 


17:18 - 17:31

Kaitlyn Kiernan: Thanks, Jackie. And Steve, you mentioned that in the past, the same people doing surveillance also did investigations. But now a lot of that comes from Feral's team and they hand it off to your team. What's the benefit of splitting those up? 


17:32 - 19:22

Steve Price: There is a lot of communication between surveillance and market investigations. We speak on a daily basis. We speak in larger groups, weekly, monthly. So, the feedback loop very much still exists on what we're seeing in investigations, but it also enables us to reach out to other departments. So, for example, we are doing investigations that touch on Member Supervision. We're regularly communicating with Enforcement. And that really does help us see broadly certain issues and then consolidate those issues across the organization as we talk about feedback between the different departments. So, in terms of moving them from one area to another, the ability to dig into an investigation, why you don't have also triaging of surveillance alerts and doing those initial stages of investigation really allows for focus by an investigator on fewer matters where they're digging deeper without distraction. I think some of the other benefits of the current structure is because we are seeing more broadly, we are able to expand our view of a certain issue. 


So, for example, if we see a lack of controls or a weakness in controls at a certain firm, they may have implications in other areas. So, in the previous world, we may have had to refer that to another department or maybe just narrow that investigation to that area. It does allow us to look more broadly at what the implications of what we're seeing in one area might have on another. It also allows us to identify issues that maybe would be beneficial for the industry to hear about. Not every firm, of course, understands what's going on at other firms. And as we can see with a broader lens, that helps us feed into the communications we're making out to investors and to other firms. The broader lens also enables us to better identify cross market activity and feed that back into surveillance, as well as our investigations take us into different corners of the industry. 


19:23 - 19:41

Kaitlyn Kiernan: The 2024 Regulatory Oversight Report had three new sections touching on market regulation. So, it seems like that ties in with what you're saying about feeding more information back to the industry. And Feral, how about you? What's the benefit of having your brand-new Surveillance team? 


19:42 - 20:10

Feral Talib: As Steve mentioned, our analysts were previously juggling various and sometimes conflicting priorities and timelines involving surveillance investigations, model development, various internal tracking and oversight measures. We now have clear areas of responsibility, and with the proper governance, I expect us to be able to focus on cutting down our target timelines and speeding up our processes so the work should be fluid, quicker and allow us to prioritize our risk in a better way. 


20:11 - 20:31

Kaitlyn Kiernan: Now that we have looked back at all the work that's been done with this transformation, I want to take a moment to look forward. I'd love to hear each of your perspectives of some of the top priorities for Market Reg and Transparency Services in the year or two ahead. So, Feral, to start with you, what opportunities do you see for your new team in the next couple of years? 


20:32 - 21:22

Feral Talib: SMI has great opportunities to find and create efficiencies in the new structure, we'll be able to observe our market-based risks holistically, again, as Steve mentioned, and be able to direct our technology development and our staffing resources in a more strategic fashion with a consolidated view on our long-term path. We'll also be focusing on developing common tools and practices among the different groups and align our risk tolerances, so we will be able to see a bigger and more accurate picture when it comes to building towards investigations and potential escalations. Last but not least, I'm focused on identifying our high performers and providing our staff with increased opportunities across the department to develop new skills and expand their knowledge base, as they will have visibility into an interconnected process and be presented with a wide variety of career opportunities that may have been more compartmentalized in the past. 


21:23 - 21:31

Kaitlyn Kiernan: And Steve, what stands out on the Market Investigations side? Are there any new trends or issues that will be in the spotlight for you in the next couple of years? 


21:33 - 22:45

Steve Price: There are a few trends that we've been aware of for a couple of years that we'll have an ability to spend a little more time on in a more focused manner. So, first, top of mind is there's been a big increase in self-directed market activity over the last several years. And I think there's a lot of novice traders now that are in the market that may not fully understand what's going on from an order flow perspective. So, I think transparency in how firms are sharing, how those orders are being routed and what some of the risks are around those routing practices is important. I also think we have a lot more investors getting into more complex products, specifically options, where they may be more susceptible to manipulative activities with the increased in retail activity in that space. That's another area that I think we'll be spending some time in. 

And then third, we've seen the proliferation of CAT reporting obligations or gaps in some of the quality of the data that's being reported out of certain firms. So, that generally falls into a couple of different categories. Either firms are not necessarily testing the output of the systems they are putting in place to report CAT data, or they're writing their written supervisory procedures so broadly that they don't contain enough detail for their staff to follow, and how they're supposed to execute on the mission of ensuring their data integrity. 


22:47 - 22:56

Kaitlyn Kiernan: Thanks, Steve. And Jackie, let's wrap up with you from the rest of the groups in MRTS. What are some of the priorities and areas of focus? 


22:57 - 23:37

Jackie Perrell: I'd want to just give some love to Transparency Services and throw out there something that they are focused on in 2024, and that is developing and building out a securities lending reporting facility to support reporting and disseminating transaction data from securities lenders and then certainly subsequently down the road, looking to leverage that data to be able to develop and implement a surveillance program for securities lending. You've got to crawl before you can walk. So, we have to build the facility first, and then certainly we're hoping to leverage that data in connection with our regulatory work. 


23:38 - 24:18

Kaitlyn Kiernan: Great. That is a big one coming in the year ahead. That's it for today's episode of FINRA Unscripted. Thank you, Jackie, Steve and Feral for joining me to talk about all the exciting things going on within MRTS. I'm sure we'll have lots of opportunities to talk going forward. But listeners, if you don't already, you can subscribe to FINRA Unscripted wherever you listen to podcasts to stay up to date on all of our latest episodes. And if you have any ideas for future episodes with this group or any feedback on today's episode, you can email us at [email protected]. Today's episode was produced by me, Kaitlyn Kiernan, coordinated by Hannah Krobock and edited and engineered by John Williams. Until next time. 


24:18 – 24:23

Outro Music


24:23 - 24:51

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