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September 10, 2007

NYSE Reg Reorganizes Trading Groups

By Peter Chapman

NYSE Regulation, after losing nearly two-thirds of its staff to the newly created Financial Industry Regulatory Authority (FINRA), is reorganizing its departments that watch traders.

The regulator, a not-for-profit subsidiary of NYSE Euronext, has moved its head of market surveillance over to enforcement. At the same time, it has tapped a senior market surveillance executive to run that group.

It made no changes at the top of its listed company compliance division, but, at the behest of chief executive Rick Ketchum, is creating a new risk department.

The group will "track external trading developments that require regulatory responses, as well as internal areas of risk," according to a spokesperson. Most of market surveillance's planning and assessment department will transfer to the new risk department.

The moves became necessary after NYSE Reg's member regulation, risk assessment, arbitration and related enforcement operations were merged with the NASD to form FINRA in July. About 470 NYSE Reg staffers joined FINRA. The carve-out leaves NYSE Reg with about 260 employees.

Robert Marchman, formerly in charge of market surveillance at NYSE Reg, now oversees enforcement and the new risk department. He replaces Susan Merrill. She moved to FINRA as head of enforcement. Marchman's enforcement group will now focus exclusively on trading rules. Previously, NYSE Reg policed all brokerage activities of its member firms if it was appointed the "designated examining authority."

John Malitzis, an executive with NYSE Reg's market surveillance division since 2004, will now lead that group. Malitzis was already responsible for specialist surveillance, floor broker surveillance, rules interpretations, and member education. He adds insider trading, market manipulation and NYSE upstairs rules compliance to his responsibilities. NYSE Reg's market surveillance unit watches trading on the NYSE floor and the members' upstairs trading rooms. It also does enforcement for NYSE Arca.