The Financial Industry Regulatory Authority, Inc. announced on September 19 that the FINRA Board of Governors (Board) approved several new rule initiatives. Among the initiatives, FINRA will seek comment from members on a rule proposal that would require registration of associated persons of member firms involved in the preparation of algorithmic strategies and those responsible for supervising such persons. The Board also authorized FINRA to issue a Regulatory Notice reminding firms of their existing supervisory obligations with regard to the development and deployment of algorithmic trading strategies.Another rulemaking initiative approved by the Board involved rules to increase transparency for over-the-counter (OTC) transactions in equity securities. The proposal would expand FINRA’s recent rules that disclose alternative trading system (ATS) volume. FINRA will propose to publish each market participant’s non-ATS OTC volume reported to FINRA’s equity trade reporting facility. Volume information would be published on the FINRA website on a two- or four- week delayed basis in accordance with the time frames specified for ATS volume publication. The Board also authorized FINRA to solicit comments on a proposal to identify OTC trades in National Market System stocks reported more than two seconds following trade execution as “out of sequence” and not “last sale” eligible. 

Among the other equity trading initiatives were the following: 

  1. a proposal to decrease the allowable drift from synchronization of member clocks with the National Institute of Standards and Technology atomic clock;
  2. a proposal to require ATSs to report order book information via the Order Audit Trail System;
  3. a proposal to require members to report the identity of non-member broker-dealers after receiving orders from them; and
  4. a proposal to adopt new registration categories for securities trader and securities trader principal registration to replace the equity trader classification.

Among the fixed income initiatives were the following:  

  1. a proposal that ATSs report fixed income quotation information;
  2. a proposal that members provide confirmation disclosure of pricing for same-day principal fixed income trades of retail size; and
  3. a proposal to require members to identify transactions with affiliated entities in FINRA’s Trade Reporting and Compliance Engine.

Finally, the Board authorized FINRA to seek comment from members on a proposal that would require a recruiting firm to provide a FINRA-created education communication to former retail customers of a transferring representative who are considering transferring assets to that firm.     

The FINRA announcement is available here.