SEC tightens rules to stamp out spoofing

The US Securities Exchange Commission (SEC) has rubber-stamped a change to clock synchronisation standards to stamp out market abuse and spoofing.

The US Securities Exchange Commission (SEC) has rubber-stamped a change to clock synchronisation standards to stamp out market abuse and spoofing.

In a statement released to market late on Friday, the US regulator approved a new clock synchronisation standard of 50 milliseconds – down from the previous requirement of one second – to record events in a trading life cycle.

The proposal to make the change was originally proposed in April of this year by the Financial Industry Regulatory Authority (FINRA), who explained to the SEC the current one second tolerance is no longer appropriate, given the increasing speed of trading in today’s automated markets. 

Clocks that are used to record events for shares regulated by the US National Market System and OTC equities must now be synchronised to within 50 milliseconds of the National Institute of Standards and Technology (NIST) atomic clock.

Global regulators are looking to reduce “clock drift” with the newly approved 50-millisecond standard, which occurs when time keeping at a broker firm is out of sync with regulators’ clocks.

Synchronisation has been a major issue for regulators, who say it’s difficult to police spoofing and market abuse without an industry standard. 

FINRA said firms must implement the 50-millisecond standard by 20 February 2017, though firms that do not capture time in milliseconds have until February 2018.

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