FINRA Chairman Ketchum Speaks on Improving Technology in Equities Markets

Before an audience at the National Association of College and University Business Officers, FINRA CEO and Chairman Richard Ketchum delivered a speech on how to maintain the integrity of equities markets through technological developments.

Ketchum explained that, because FINRA monitors 90 percent of all trading in U.S.-listed equities markets, it is important for the agency to implement programs to minimize the impact of technological failure and reduce potential trading abuses. Ketchum stated that FINRA has "implemented a safety net" by putting in place multiple programs to prevent market disruption, including single-stock circuit breakers, in addition to the first phase of an SEC-approved limit up-limit down plan to address the volatility of the markets.

Additionally, Ketchum noted that FINRA is working to stop potential trading abuses such as "momentum ignition strategies," in which a market participant attempts to induce others to trade at artificially high or low prices, and spoofing strategies related to the open or close of regular market hours. Ketchum explained that new advances in technology have allowed FINRA to aggregate data, leading to a cross-market data model which tracks around 20 billion events a day and detects a variety of trading abuses. Since the model was introduced FINRA found that about 44 percent of the manipulation-based alerts involved two or more market participants, Ketchum stated.

Continuing its efforts to promote market integrity, Ketchum said, FINRA is working with the exchanges to create and develop the Consolidated Audit Trail ("CAT"), and issued a concept proposal for the Comprehensive Automated Risk Data System ("CARDS").

See: Chairman Ketchum's Remarks.