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May 02, 2016 at 09:04 AM
The Financial Industry Regulatory Authority sent to member firms Thursday its first monthly report card aimed at helping firms identify and halt market manipulation tactics such as spoofing and layering.
FINRA also sent the same day to the Securities and Exchange Commission a proposed rule to add another public member to its National Adjudicatory Council, increasing the NAC’s total membership from 14 to 15.
The new report cards, part of an ongoing monthly report on cross-market equities supervision, identify potential spoofing or layering by the firm or entities to which the firm is providing market access.
The reports, which provide a summary of the identified market activity, detailed information about the exceptions, and trends in such trading over the preceding six months, do not reflect conclusions that violations have occurred but indicate potential problems that need to be reviewed, FINRA says.
The report cards are “posted to firms at which [FINRA has] seen exceptional trading activity that may indicate potential spoofing or layering,” a FINRA spokesperson told ThinkAdvisor.
As FINRA explains, layering refers to entering limit orders with the intended effect of moving the market to obtain a beneficial execution on the other side of the market, while spoofing refers to entering orders to entice other participants to join on the same side of the market at a price at which they would not ordinarily trade, and then trading against the other market participants’ orders.
