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ARTICLE · 07 MARCH 2016

REGULATORS, QUANT UP! New Rules From FINRA, SEC And CFTC Target Automated Algorithmic Trading

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On February 11, 2016, the Financial Industry Regulatory Authority ("FINRA") filed a proposed rule with the Securities and Exchange Commission...

United StatesFinance and Banking
Sarah Aberg
Sarah Aberg
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On February 11, 2016, the Financial Industry Regulatory Authority ("FINRA") filed a proposed rule with the Securities and Exchange Commission ("SEC") that would require individuals who "design, develop or significantly modify algorithmic trading strategies" (or "ATS") as well as individuals responsible for the "day-to-day supervision or direction of the development process," to pass a qualification exam and register with FINRA as securities traders. During the comment period, FINRA clarified that the rule would not apply to every person who touches or is otherwise involved in the design of a trading system, but that it would be up to each firm to determine who is primarily responsible for the design of the ATS system.  The rule defines ATS as "any program that generates and routes (or sends for routing) orders (and order-related messages, such as cancellations) in securities on an automated basis" and identifies eight typical programs that it would consider an ATS. 

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