| NEW YORK
NEW YORK Nov 22 Wall Street's industry-funded
watchdog took steps to crack down more quickly on manipulative
trading practices in the securities markets but needs more
authority, according to a regulatory filing.
The Financial Industry Regulatory Authority (FINRA) is
concerned that it has no quick means to stop disruptive trading
activity after it has been identified without resorting to
proceedings that can take years to complete, according to a
filing on Monday with the U.S. Securities and Exchange
"FINRA believes that there are certain clear cases of
disruptive and manipulative behavior, or cases where the
potential harm to investors is so large, that FINRA should have
the authority to initiate an expedited proceeding to stop the
behavior from continuing," it said.
FINRA has proposed rules that take aim at practices known as
"spoofing" and "layering," in which one or more traders move the
price of a security by placing bogus orders and then modifying
or canceling them so that they never become actual trades. Once
there is an appearance of interest in the security, the trader
can then buy or sell on the other side at better prices.
Earlier this month, a London-based day trader pled guilty to
U.S. federal charges of contributing to the May 2010 "flash
crash" by spoofing futures on CME Group's Chicago
FINRA would be better able to protect investors and market
integrity if it had the ability to issue cease-and-desist orders
more quickly to stop obvious disruptive and manipulative
trading, the regulator said.
There also have been numerous cases in which manipulative
trading originating from overseas, where FINRA has no direct
jurisdiction, has been allowed to continue throughout lengthy
investigation and enforcement procedures, FINRA said.
Under current rules, FINRA can initiate temporary
cease-and-desist orders to alleged manipulators but they only
remain in effect until the underlying disciplinary proceedings
The proposed rules, which would require approval from the
SEC, would allow FINRA to issue permanent cease-and-desist
orders regardless of whether underlying disciplinary proceedings
were taking place.
Only FINRA's chief executive officer or a senior officer
designated by the CEO, could initiate permanent cease-and-desist
order proceedings, and only after other attempts to resolve the
conduct had been attempted, FINRA said.
The proposed changes are similar to rules adopted in
February by exchange operator Bats Global Markets.
FINRA polices all registered U.S. broker dealers and stock
and options exchanges. It conducts cross-market surveillance and
has surveillance agreements with 18 exchanges.
(Reporting by John McCrank; Editing by Bill Trott)