SEC Chairman Mary Schapiro: “[A]n unprecedented ability to effectively oversee the markets we regulate”

That was one of  the pronouncements coming this week from SEC commissioners when the Securities and Exchange Commission approved a new rule  requiring national securities exchanges and the Financial Industry Regulatory Authority (FINRA) to establish a market-wide consolidated audit trail.  The aim is to increase, significantly, regulators’ ability to monitor and analyze trading activity.

While exchanges use their own separate audit trail system to track information relating to orders in their respective markets,  currently no single database of comprehensive and readily accessible data regarding orders and executions exists for regulators to monitor.  Now, the exchanges and FINRA must jointly submit a comprehensive plan detailing how they would develop, implement, and maintain a consolidated audit trail that would “collect and accurately identify every order, cancellation, modification, and trade execution for all exchange-listed equities and equity options across all U.S. markets.”

The new rule will become effective 60 days after its publication in the Federal Register.  Self Regulatory Organizations are required to submit the NMS plan to the Commission within 270 days of the rule’s publication in the Federal Register.

Author: Dexter Johnson

The author is a an attorney who for the past 14 years has concentrated his practice in representing, successfully, investment advisers, broker-dealers, corporations and individuals who are subject to SEC, FINRA, State or other regulations and who may be the subject of regulatory examination, review or investigation. He formerly worked at the SEC. His regulatory and litigation experience has encompassed virtually every type of securities issue in the industry. He has also negotiated favorable outcomes in many of these matters for his clients.