Two self-regulatory organisations for the US securities industry, NYSE Regulation and the Financial Industry Regulation Authority (FINRA), have announced an agreement with 10 US exchanges to protect investors against insider trading.
The deal has been designed to strengthen investor protection by consolidating the surveillance, investigation and enforcement of insider trading in equities.
Under the agreement, the exchanges will hand over the responsibility for the detection of insider trading to NYSE Regulation for NYSE- and NYSE Arca-listed securities, and to FINRA for Amex- and NASDAQ-listed securities, no matter where trading occurs in the United States.
Market centres participating in the agreement, which has been filed with the Securities and Exchange Commission, are the American Stock Exchange, Boston Stock Exchange, CBOE Stock Exchange, Chicago Stock Exchange, International Securities Exchange, NASDAQ, National Stock Exchange, New York Stock Exchange, NYSE Arca and Philadelphia Stock Exchange.
“This breakthrough agreement will allow NYSE Regulation and FINRA to implement their insider trading surveillance and investigation programmes across markets for all listed securities in the United States,” said Richard G. Ketchum, CEO, NYSE Regulation and FINRA chairman, in a statement. “A focused, consolidated review strengthens our ability to prevent anyone from profiting from insider information.”
Currently, each exchange conducts its own regulatory insider trading programme and relies upon cooperation with other exchanges when potential insider trading is detected. Under the new agreement, when suspect trading activity is identified, regulatory staff will conduct an in-depth review using advanced analytical tools, news reports, and other sources of information.
“While US equity markets have always coordinated very well with each other to detect and investigate insider trading, this agreement takes insider trading surveillance to a new level because it consolidates within FINRA and NYSE Regulation what used to be eleven discreet programmes at each market centre,” added FINRA senior executive vice president Stephen Luparello. “As a result, potential insider traders, whether acting alone or in concert with others, and regardless of where they trade in the US, will be more readily identified in this new, more unified structure.”