Finra Takes On Options Surveillance

Terry Flanagan

The Financial Industry Regulatory Authority has signed an agreement with the Chicago Board Options Exchange and C2 Options Exchange 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, was scheduled to perform these services beginning on January 1, 2015.

“We are pleased to work with CBOE and C2 to protect the investing public,” said Finra chairman and CEO Richard Ketchum, in a statement. “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.”

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, according to a release.

Finra’s cross-market surveillance patterns currently canvass over 99 percent of the listed equities market, and with the agreement, Finra will be positioned to detect cross-product (equity and options) manipulation.

Additionally, Finra will be taking over responsibility for the Options Regulatory Surveillance Authority 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.

Related articles

  1. Fixed income ETFs had $31.2bn in net inflows in July.

  2. EMSAC Looks to Reduce Trading Halts

    The digital asset fund manager is committed to listing in the US.

  3. From The Markets

    Crypto ETF, ETP Inflows Fall

    Net inflows to July were $727m, versus $4.1bn gathered at the same point last year

  4. Deutsche Borse-LSE Merger in Focus

    Archax is the UK’s first regulated digital securities exchange.

  5. Investors can take into account firms' impact on nature in addition to traditional ESG metrics,