The Financial Industry Regulatory Authority (FINRA) has signed an agreement with the Chicago Board Options Exchange (CBOE) and C2 Options Exchange (C2) under which it will provide market surveillance, financial surveillance, examinations, investigations, and disciplinary services to CBOE and C2, in addition to other regulatory services, effective January 1, 2015.
Both CBOE and C2 are subsidiaries of CBOE Holdings, Inc.
Through cross-market surveillance that currently canvasses more than 99 percent of the listed equities market, FINRA “is able to identify instances where a market participant engages in potentially abusive conduct on two or more markets in an attempt to avoid detection,” according to a statement, which notes also that FINRA is “uniquely positioned to detect cross-product (equity and options) manipulation” as well.
“Additionally, FINRA will be taking over responsibility for the Options Regulatory Surveillance Authority (ORSA) industry options insider trading program, a change which was recently approved by the ORSA participants that represent all 12 options markets,” according to the statement. “FINRA plans to integrate the options insider trading program with FINRA’s current equity insider trading program. As a result, FINRA will conduct surveillance for insider trading for all equities and options trading in the United States.”
The agreement allows FINRA to be “in a position to conduct cross-market surveillance on approximately 60 percent of the options market,” FINRA Chairman and CEO Richard Ketchum says in the statement.
The “vast majority” of regulatory staff at CBOE and C2, approximately 125 employees in all, “have accepted positions” with FINRA, which describes itself as the “largest independent regulator for all securities firms doing business in the United States.”
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