On Monday, November 2, 2015, Andrew Ceresney, Director of the SEC’s Division of Enforcement, gave a speech at the SIFMA Compliance & Legal Society New York Regional Seminar in which he sought to address what he views as the future of SEC enforcement and the existing risks created by technology and innovation in equity markets. Mr. Ceresney highlighted that, “[w]ith the passage of Regulation NMS in 2007, the increase in the number of exchanges and other trading venues, the automation of nearly all equity trading, and the emergence of high frequency and algorithmic trading, market structure issues—especially technology-related issues—have taken on increased prominence.”

Gone are the days when the majority of trading was done on the New York Stock Exchange trading floor, and when the handful of exchanges and markets each were self-regulatory organizations themselves or had a SRO affiliate. Today’s modern markets employ technology to effectuate trades in microseconds. The automation of trading has led to faster trades, fewer shares per trade, and increased diversity in trading venues. “Competition for order flow among these trading venues is intense. Venues strive to show that they offer low-costs, liquidity, price improvement, and speed of execution. Much of that order flow now comes from high frequency trading firms. Typical estimates are that high frequency trading represents 50% or more of total market volume.” And most self-regulation is now out-sourced to FINRA, which can leverage its multiple-market regulatory experience.