IPO market also to receive close monitoring by financial industry regulator
The US Financial Industry Regulatory Authority (FINRA), the self-regulatory body of the country’s financial sector, will focus on high frequency trading (HFT) as one of its priorities for 2014.
‘In recent years, there have been a number of algorithmic trading malfunctions that caused substantial market disruptions,’ FINRA says in a report on its 2014 priorities. ‘These malfunctions raise concern about firms’ ability to develop, implement and effectively supervise these systems.’
The authority says it will ‘continue to assess whether firms’ testing and controls related to high frequency trading and other algorithmic trading strategies and trading systems are adequate in light of the Market Access Rule and firms’ other supervisory obligations. This assessment may take the form of examinations and targeted investigations.’
The focus by FINRA follows moves by regulators such as the SEC to increase monitoring of HFT strategies and firms. Mary Jo White, who took over as SEC chairman in 2013, has pledged to boost staff devoted to controlling HFT and the commission has recently contracted an HFT platform to monitor trading in real time.
FINRA will also focus this year on insider trading, risk control, conflicts of interest, cyber security and crowdfunding, according to the 2014 overview document that highlights ‘significant risks and issues that could adversely affect investors and market integrity in the coming year.’
An increase in IPOs in 2013, and an expected further rise in 2014, will ensure that FINRA pays particular attention to the IPO market. ‘There is risk that bad actors will be drawn to the IPO market as has happened in the past,’ FINRA says.
