In a bid to bolster investor confidence amid fears about the impact of high-frequency trading (HFT) on market quality, U.S. securities regulators are proposing a series of reforms, including that the algorithm architects be required to register.
The U.S. Financial Industry Regulatory Authority (FINRA) says its board of governors approved a series of proposed rule changes Friday regarding high-speed and algorithmic trading; along with several other initiatives aimed at enhancing transparency and execution quality in fixed income markets.
FINRA’s board authorized the issuance of a series of regulatory notices, including a proposal to establish a registration requirement for people that are responsible for the design and development of an algorithmic strategy, and those responsible for supervising them.
It also approved publishing a notice reminding firms of their supervisory obligations in connection with algo trading strategies. And, it also intends to solicit comment on proposals: to improve the transparency of equity volume executed over-the-counter (OTC); and, to require that firms synchronize their computer system clocks within 50 to 200 milliseconds.
The board also authorized requesting comment on a proposal to require firms to provide greater disclosure of fixed-income pricing; and, a proposed requirement that ATSs report information concerning the quotations they display for certain fixed income securities to FINRA.
Finally, it will publish a notice soliciting comment on a proposal that would require firms that recruit reps to provide a FINRA-created educational communication to retail customers who are considering following their rep to the new firm.
“FINRA’s board has acted in response to [U.S. Securities and Exchange Commission chair, Mary Jo White’s] call to action in her two landmark speeches earlier this year. The initiatives we have announced today will boost investor confidence in the fairness and transparency of both the equity and fixed income markets,” said FINRA chairman and CEO Richard Ketchum.