FINRA rolls out spoofing and layering report cards

Report cards are preventative measure to help firms spot “potential problems that need to be reviewed", FINRA said.

The Financial industry Regulatory Authority (FINRA) has begun rolling out report cards designed to help firms identify and stop spoofing and layering.

The first monthly cross-market equities supervision report cards are forwarded to firms where FINRA spots potential spoofing or layering activity.

Firms will be able to see a summary of identified market activity and trends in trading over the last 6 months.

Although not conclusive of violations, the reports “indicate potential problems that need to be reviewed,” FINRA said.

Executive vice president of market regulation at FINRA, Tom Gira, explained the reports are a preventative compliance measure, which will operate alongside FINRA’s current surveillance process.

Gira said: “Most firms attempt to surveil and review for manipulation, but bad actors look to mask their activity by trading across multiple markets or firms, which for any individual firm may be hard to detect."

Spoofing and layering were made illegal following the ‘flash crash’ in 2010 and subsequent Dodd-Frank regulations.

FINRA has said that, where appropriate, enforcement action will be taken to prevent spoofing and layering, or will refer the activity to the Securities and Exchange Commission.