FINRA’s board on Friday made several proposals to improve transparency in alternative trading systems in dark pools, both for the equity and fixed-income markets.
For equity venues, proposals by the Financial Industry Regularity Authority board include providing more order book information and creating a special indicator for over-the-counter trades reported more than two seconds after execution.
Also, ATS operators would be required to disclose the names of developers of their algorithmic trading strategies, and FINRA is seeking more required oversight of the development and deployment of algorithmic strategies “to monitor for and prevent potential adverse impacts on the market,” according to the proposals.
FINRA’s board also proposed that alternative trading systems in fixed income disclose to FINRA quotation information for corporate bonds and agency debt securities, and the board will consider whether to publicly disclose that data. It also proposed that member firms identify all transactions with non-member affiliates through reports filed in TRACE — the agency’s mandatory reporting system for the OTC secondary fixed-income market.
The changes are in response to a call in June by SEC Chairwoman Mary Jo White to increase transparency, said Richard Ketchum, FINRA chairman and CEO, in a statement on FINRA’s website. “The initiatives we have announced today will boost investor confidence in the fairness and transparency of both the equity and fixed-income markets,” Mr. Ketchum said.
The SEC is also looking at requiring more disclosure of institutional trades made through dark pools and other alternative trading systems, and possibly ordering high-frequency traders to register as broker-dealers. The SEC is expected to release its proposals later this year.
The FINRA proposals were approved at a meeting of the self-regulator’s board in Washington. All will be put out for industry comment over the next several weeks. A date for a decision on the proposals has not been set.
Details on the recommendations are on FINRA’s website.