NYSE Regulation is planning to hand off its market oversight duties to the U.S. Financial Industry Regulatory Authority.

NYSE Euronext and FINRA announced Tuesday that they have agreed that FINRA will assume responsibility for the market surveillance and enforcement functions currently conducted by NYSE Regulation.

Under their agreement, which is subject to review by the U.S. Securities and Exchange Commission, FINRA would provide regulatory oversight for NYSE Euronext’s U.S. equities and options markets — the New York Stock Exchange, NYSE Arca and NYSE Amex. FINRA already oversees NASDAQ’s various markets, the BATS Exchange and the International Securities Exchange.

FINRA was created back in 2007 by merging the NYSE’s member regulation role with the dealer self-regulatory organization, NASD, but the NYSE retained market oversight functions. Now it is offloading that role, along with 225 staff, most of whom will join FINRA.

NYSE Regulation will remain ultimately responsible for overseeing FINRA’s regulatory performance for the NYSE markets, and it will retain regulatory staff to deal with rule interpretations, and oversight of listed issuers’ compliance with the NYSE markets’ financial and corporate governance standards. The final agreement between the organizations is expected to be completed in the next several weeks, with an effective date anticipated to be at or before the end of June.

“This agreement will improve investor protection by establishing a unified approach to market oversight,” said FINRA chairman and CEO, Richard Ketchum. “It allows FINRA to have a more holistic, cross-market approach to regulation that addresses the realities of today’s trading environment, which is characterized by fragmented markets, aggressive competition and complex trading strategies. This unified view will better enable regulators to detect problematic activity across multiple markets and financial products, and ensures that audit trail data needed for effective regulation is complete, consistently presented and transparent.”

“This agreement will strengthen market regulation by consolidating surveillance and enforcement responsibilities across multiple markets into one regulator,” said NYSE Euronext chief operating officer, Lawrence Leibowitz. “Today, trading is dispersed among numerous venues, and no single regulator has responsibility for monitoring data and pursuing activity across markets. Aggregating our surveillance and enforcement functions with those already performed by FINRA for other markets is an important step on the road to creating a consistent and completely integrated approach to regulation.”

IE