FINRA seeks further authority to stamp out spoofing and layering

FINRA looks to SEC for more authority to stop spoofing and layering quickly.

The Financial Industry Regulatory Authority (FINRA) has sought the authority to stamp out spoofing and layering on US markets more quickly.

A regulatory filing to the Securities and Exchange Commission (SEC) revealed FINRA’s unease at the time it takes the authority to stop market manipulation behaviour.

FINRA explained in the filing that the current process - which involves an in-depth investigation into the alleged activity - can often take several years to complete.

The authority has proposed it gains more authority to initiate an immediate proceeding to stop traders if there are clear signs of disruptive quoting or manipulative behaviour.

The filing said: “There are certain clear cases of disruptive and manipulative behaviour…  that FINRA should have the authority to initiate an expedited proceeding to stop the behaviour from continuing.”

As part of the proposal, only FINRA’s chief executive officer would have the authority to immediately stop the suspected trading activity.

FINRA added the proposed rule, “mirrors the framework that Bats Global Markets and Nasdaq have recently adopted.”

In July this year, Bats launched its community policing programme following the SEC’s approval of its client suspension rule, which allows ‘swift action’ if spoofing or layer occurs.

The programme is used for US equities and options markets and allows Bats to “proactively” engage with traders to identify inappropriate behaviour.