May 22, 2013

FINRA Inks Deal With Direct Edge, Gains Oversight of 90% of Equity Trading Volume

Deal will allow FINRA to ‘better pursue potential cross-market abuses and more quickly identify new threats,’ says CEO Ketchum

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The Financial Industry Regulatory Authority announced Wednesday that Direct Edge, the third largest stock exchange operator in the U.S., has agreed with FINRA to provide market surveillance services on behalf of Direct Edge's two licensed stock exchanges.

Under the agreement, FINRA says that it will have “surveillance oversight of more than 90% of U.S. equities trading volume.” With a “nearly complete view of market activity,” FINRA says it will be able to “expand its role as an investor guardian by identifying abusive activity across multiple markets.”

Richard KetchumRichard Ketchum (right), FINRA’s CEO, said in a statement, “Our comprehensive cross-market surveillance patterns will soon cover over 90% of the listed equities market and allow FINRA to better pursue potential cross-market abuses and more quickly identify new threats to the fairness and integrity of our markets.”

Allowing for necessary technical and operational configuration changes, Direct Edge said in the statement that it expected the new arrangement to become effective in the fourth quarter. Currently, FINRA performs examination and disciplinary services on behalf of Direct Edge. With this agreement, all of Direct Edge's third-party regulatory services will be consolidated with FINRA.

“The stock market ecosystem is tightly interconnected, and its surveillance is well-served by FINRA’s holistic view of the market," said William O'Brien, Direct Edge’s CEO. “Detecting trading patterns spanning multiple exchanges and other market centers will enhance market integrity and, in turn, boost investor confidence that improper conduct and bad actors can be detected and punished.”

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Read FINRA’s Ketchum to SEC: Act Now on Fiduciary, or We’ll Make Our Own Disclosure Rules on AdvisorOne.

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