Thursday, October 29, 2009

FINRA Calls for Surveillance by “Unified Single Regulator” & Studying Facebook

Rick Ketchum, FINRA chairman and CEO called for the creation of a single repository of data on all trades on all markets so that the financial industry could be “surveilled by a unified single regulator.” A single regulator can “bring the best technology, the best people, and a unified set of rules” to bear on markets. He called his proposal “somewhat daunting” but “a significant undertaking and a baby step” at the same time.

Sure as with other updated and proposed Reguatory matters the primary goal is enhanced Regulation - but SRO mergers like any other will produce headcount reduction to achieve resultant cost-cutting.

Ketchum said FINRA “would do a good job” at creating and surveilling a single data base. But there are alternatives, he told Securities Industry News.

“If you don’t, things will fall through” the cracks, he said in comments delivered at SIFMA's annual meeting. The problem that the single database and the single “surveilling” body would respond to is increasing “fragmentation we see in the markets and the increasing number of genuine liquidity centers, and what these do to the ability of regulators to oversee the markets,’’ said Ketchum. Ketchum is a former regulator of multiple markets at NYSE Regulation. A decade ago, a single market – the NYSE – dominated trading and that made surveillance relatively easy. But, in 2009, the majority of trading is occurring on electronic networks and dark pools. The exchanges have been empowered to police trading and activities, but that is getting more difficult, Ketchum said, as market activity disperses.

In another regulatory news, FINRA has set up a task force of to explore how regulation can embrace technology advancements to improve the flow of information between firms and customers without compromising investor protection. Bankers and analysts increasingly want to use social networking to connect and interact with customers. Ketchum said Social networking sites like Facebook and LinkedIn raise "serious new challenges."

Most firms prohibit their employees from using sites like Facebook for business, partly because of the difficulties they pose for firms' ability to meet supervision and record-keeping requirements. Ketchum said "Nevertheless, interest in these sites is inevitable and will not go unabated," he said.

Mark Zuckerberg (pictured) founder and CEO of Facebook, delivers a keynote address at the company's annual conference on July 23, 2008.

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