Nasdaq to take on greater policing role on its stock exchange

Tue Aug 13, 2013 1:36pm EDT
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By John McCrank

NEW YORK (Reuters) - Nasdaq OMX Group Inc plans to assume a greater role in the policing of its U.S. stock exchange, according to a regulatory filing, in a move that follows calls by Wall Street for an end to the self-regulatory status of exchanges.

As self-regulatory organizations (SROs), exchanges are responsible for monitoring and enforcing their members' compliance with securities laws and exchange rules.

Nasdaq has outsourced most if its equity market regulatory duties to the Financial Industry Regulatory Authority (FINRA) since it received approval from the U.S. Securities and Exchange Commission (SEC) to operate as a securities exchange in 2006.

The Securities Industry and Financial Markets Association (SIFMA), which represents Wall Street, had been pushing for FINRA, or some other independent agency, to take over full supervision of exchanges to prevent conflicts of interest.

New York-based Nasdaq said in a SEC filing, dated August 12, it plans to take over the surveillance of trading on its exchange. The exchange is also responsible for member examinations and investigation and prosecution of suspicious activity, but will continue to outsource those duties to FINRA.

Nasdaq said it would also continue to use FINRA for cross-market surveillance, which incorporates data from exchanges run by Big Board operator NYSE Euronext.

The transition of the duties could be as soon as 45 days after the filing.

Nasdaq has been in discussions with FINRA over the past nine months on the transition plan. The filing comes less than two weeks after SIFMA, the largest U.S. securities trade group, asked the SEC to end the self-regulatory status of stock exchanges.   Continued...

Commuters pass by the NASDAQ Marketsite in New York, May 21, 2012. REUTERS/Brendan McDermid