Regulators eye systems to better monitor off-exchange trades


It's fair to say that regulators have lagged behind the market when it comes to technology.

While exchanges and Wall Street firms pushed the envelope in terms of raw speed, with a blinding array of ever-faster technologies, the regulatory effort to keep up faltered badly. We're now seeing an attempt to catch on several fronts. The SEC is moving forward with setting up a Consolidated Audit Trail, which in theory will be to track trades through the market, not matter how convoluted the path. 

I've noted the main developments before. As of late, the process seems to be delayed a bit. At the same time, the SEC is also moving forward on a system called Midas, which will represent the fruit of an agreement the commission inked with Tradeworx. The online monitoring system should be up and running much faster than the CAT.

Without question, the regulators at the SEC and Finra could use some monitoring help when it comes to dark pools, the object of lots of controversy last year. Finra has recently said it will step up its scrutiny of dark pools this year, which is hardly surprising.

Some experts are convinced that some sort of definitive market structure regulatory action is likely in 2013. If so, dark pools will likely be addressed. But before that can happen, the SEC and Finra need a granular grasp of activity. Brokers that run dark pulls can't stick their heads in the sand on this issue. Now is the time to engage regulators and perhaps put forward some voluntary best practices that might make overt regulation less likely.

For more:
- here's a look at Finra's plans for 2013 from FOX Business

Related articles:
Dangers and benefits of too much dark liquidity

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