In a recent speech FINRA Chairman and CEO, Richard Ketchum, discussed the steps FINRA is taking to protect the U.S. securities markets. He provided an overview of the protections that FINRA is implementing following the 2010 flash crash, including single stock circuit breakers and the limit up-limit down mechanism that prevents trades when prices move outside certain ranges. He highlighted several market abuses that are regulatory priorities for FINRA, including momentum ignition strategies where market participants attempt to induce others to trade at artificially high or low prices, layering and spoofing strategies which involve market participants placing non-bona fide orders on one side of the market to bait other market participants to react with an order on the other side of the market, and market participants entering non-bona fide orders or aggressive trading activity near the open or close of the market.
Chairman Ketchum emphasized the importance of information to detect market abuses. He discussed newly available aggregate data across markets allow FINRA to see trading patterns that couldn’t be detected in the past. (See the February 20 Forum News Feed post for more on FINRA's data collection efforts.) Like SEC Commissioner Stein, Chairman Ketchum also advocated for the development of a consolidated audit trail that would collect and accurately identify and link to customers every order, cancellation, modification, and trade execution across different types of products in the U.S. securities markets. He also discussed the FINRA concept proposal for the Comprehensive Automated Risk Data System that would allow FINRA to collect information and run analytics designed to detect sales practice misconduct.