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ISE Proposes Regulatory Reforms

Recommends risk-based regulatory framework to address regulatory gaps.

The International Securities Exchange is calling for creation of a new Financial Markets Commission (FMC) to oversee all U.S. financial markets and trading platforms, according to an announcement yesterday.

The equity options exchange yesterday said it published a proposal outlining its recommendations for reforming the regulation of U.S. financial markets. In the release, ISE is recommending that the regulatory regime create a level playing field for all trading venues, regardless of exchange status. In the proposal, ISE recommends regulation should be risk-based with a results-oriented focus on compliance to ensure comprehensiveness and promote efficiency.

ISE’s specific proposals focus on developing a risk-based framework for regulating financial industry operations to address the regulatory gaps and inconsistencies that exist today under the bifurcated regulatory structure in the U.S. financial markets.

“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 financiall markets and trading platforms—an equally vital, yet often overlooked, aspect of the current regulatory discussion,” stated Gary Katz, ISE’s president and CEO in the release. Katz also stated that 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. An overhaul of self-regulatory organizations (SROs) that oversee trading venues to promote competitiveness and to bring more products into a transparent market environment, was also cited by Katz.

ISE proposes a new regulatory structure that reallocates responsibilities by function among three aspects of financial regulation: 1) financial systemic risk (covering financial and capital matters involving commercial and investment banks, futures commission merchants, investment companies and hedge funds); (2) disclosure (overseeing disclosure/risk analysis for investors and encompassing corporate issuers, investment companies and product specific risk); and 3) financial industry operations (covering the operation of financial markets, trading platforms and financial service providers including but not limited to services traditionally provided by broker-dealers, investment advisors, hedge funds and FCMs).

To access the full ISE Proposal click here.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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