On May 1, the Securities and Exchange Commission approved a change to Financial Industry Regulatory Authority, Inc. Rule 5210 regarding limits on self-trading. The amendments require FINRA member firms to establish policies and procedures reasonably designed to review their trading activity for, and to prevent, a pattern or practice of self-trades arising from a single algorithm or trading desk or related algorithms or trading desks. Self-trades are trades that do not involve a change in a security’s beneficial ownership and that may be bona fide and unintentional. FINRA stated that the rule change would support its efforts to deter self-trading, which disrupts the marketplace, although such activity may not involve fraudulent or manipulative intent.
The order approving the rule change is available here.