Wall Street regulator backs registration for high-speed traders
By Suzanne Barlyn and Sarah N. Lynch WASHINGTON (Reuters) - High-frequency trading firms should be required to register with U.S. securities regulators, the head of Wall Street's industry-funded regulator said on Tuesday. "I think it would be a great thing for the (U.S. Securities and Exchange Commission) to focus on whether there should be registration requirements for active high-frequency traders," Richard Ketchum, chief executive of the Financial Industry Regulatory Authority, said at FINRA's annual conference. Such a requirement would create a separate licensing category for firms that are primarily engaged in high-frequency trading. Ketchum's comments come as regulators have renewed their focus on high-speed trading and whether it puts certain investors at a disadvantage. The issue was recently highlighted in a book by bestselling author Michael Lewis, in which he alleged the markets are rigged. The book has since prompted the FBI, the SEC, the U.S. Attorney General and the New York State Attorney General to reveal they are all investigating high-speed trading. A "significant percentage" of high-frequency trading activity is conducted through a few firms that register with FINRA as broker-dealers, Ketchum said. Nonetheless, problem activity often occurs through firms that are not registered, and many of those entities do not have a U.S. location, he said. The vast majority of enforcement complaints that FINRA files against brokerages concern their failure to supervise high- frequency trades their clients conduct, Ketchum said. FINRA is cracking down on abusive high-frequency trades, which are made on the basis of mathematical algorithms, Ketchum said on Monday. The regulator currently has some 170 ongoing investigations on the subject, he said. The SEC has been looking into the issue of a possible registration requirement for high-frequency traders since at least February, when an agency official publicly discussed the possibility. An SEC spokeswoman declined on Tuesday to comment on the SEC's progress or Ketchum's remarks.
