Recommendations Focus on Oversight of Market Operations and Trading Venue
ISE calls for creation of a new Financial Markets Commission (FMC) to oversee all U.S. financial markets and trading platforms.
Regulatory regime should create a level playing field for all trading venues, regardless of exchange status.
Regulation should be risk-based with a results-oriented focus on compliance to ensure comprehensiveness and promote efficiency.
The International Securities Exchange (ISE), the world’s largest equity options exchange, today announced that it has published a proposal outlining its recommendations for reforming the regulation of U.S. financial markets. As one of only seven U.S. securities exchange operators, ISE brings a unique perspective to the current public debate and has set forth recommendations that specifically focus on the oversight of market operations and trading venues. In the proposal, ISE details a risk-based regulatory framework built on clearly legislated regulatory objectives and designed to proactively maintain an orderly and efficient marketplace for all participants. This approach promotes comprehensive, consistent and ongoing oversight for all types of trading venues while addressing the global nature of the markets and promoting the innovative and competitive edge of the U.S. financial industry.
"In addition to joining others in identifying the need for a systemic risk regulator, ISE’s proposal outlines our views on the most effective approach to overseeing the proper functioning of the financial markets and trading platforms – an equally vital, yet often overlooked, aspect of the current regulatory discussion," said Gary Katz, ISE’s president and chief executive officer. "We believe that all trading venues that execute orders from public customers should be subject to consistent oversight and high standards for setting and enforcing trading rules in the marketplaces they operate. At the same time, there needs to be a rationalization in the oversight of self-regulatory organizations (SROs) that oversee trading venues in order to encourage competitiveness and to bring more products into a transparent market environment that is overseen by a proactive, risk-based regulatory framework."
ISE proposes a new regulatory structure that reallocates responsibilities by function among three aspects of financial regulation: (i) financial systemic risk (covering financial and capital matters involving commercial and investment banks, futures commission merchants, investment companies and hedge funds); (ii) disclosure (overseeing disclosure/risk analysis for investors and encompassing corporate issuers, investment companies and product-specific risk); and (iii) financial industry operations (covering the operation of financial markets, trading platforms and financial service providers, including but not limited to the services traditionally provided by broker-dealers, investment advisors, hedge funds and futures commission merchants). ISE’s specific recommendations focus on developing a risk-based framework for regulating financial industry operations that addresses the regulatory gaps and inconsistencies that exist today under the bifurcated regulatory structure in the U.S. financial markets. ISE’s proposal is available online at: www.ise.com/regulatoryreform.