What is FINRA’s Role in Regulating Market Activity and Trading?

By Alisa Radut, Fall 2017 IAC Student Intern

In order to maintain market integrity, protect investors, and mitigate risks to prevent damage to the financial marketplace, FINRA has implemented the Market Regulation Department to monitor 99% of the equities market and 70% of the options market. The Market Regulation department monitors trading activity and provides regulatory services to options markets such as NASDAQ and The New York Stock Exchange.  To accomplish this, the department sets up programs that oversee how firms take orders, maintain sensitive client information, and the monitor the quality of execution.  The department also examines how firms comply with rules and trading regulations, and assesses firms’ financial and operational health.  The department has an examination unit that goes onsite to review whether firms have complied with FINRA rules and securities laws.

When a firm is not a FINRA member the department alerts the Securities and Exchange commission.  Furthermore, the department is in charge of equity and options surveillance programs that collect and examine trading information, allowing broad access to the market as a whole, and analyzing more than 37 billion daily market events.  This automated, sophisticated technology helps track orders and detects unusual and abusive activity.  The Market Regulation department tracks activity in different types of securities and bonds to ensure investors receive fair prices.  The activities of FINRA’s Market Regulation department are published in its Annual Regulatory and Examination Priorities Letter, which provides information about what FINRA intends to review, its regulatory observations, and input from different regulators.  These publications assist firms in ensuring their compliance regulations issues are addressed.