The Financial Industry Regulatory Authority reached an agreement with Direct Edge to monitor its two stock exchanges, EDGX and EDGA, for trading abuses.
The agreement gives FINRA oversight of more than 90 percent of all U.S. equities trading volume. That allows the regulator to “expand its role as an investor guardian by identifying abusive activity across multiple markets,” it said in a statement.
It also leaves BATS Global Markets as the only major exchange operator to conduct its own surveillance. In the past, BATS has argued against the idea of a single exchange regulator, preferring competition.
Bill O’Brien, Direct Edge’s chief executive officer, in a statement, took the opposite view. “The stock market ecosystem is tightly interconnected and its surveillance is well-served by FINRA’s holistic view of the market,” he said. “Detecting trading patterns spanning multiple exchanges and other market centers will enhance market integrity and, in turn, boost investor confidence that improper conduct and bad actors can be detected and punished.”
Currently, FINRA performs examination and disciplinary services on behalf of Direct Edge. With this agreement, all of Direct Edge’s third-party regulatory services will be consolidated with FINRA. The arrangement with FINRA becomes operative in the fourth quarter.
