Industry self-regulation may be due for an overhaul, according to the SIA.
A January white paper issued by an SIA ad hoc committee says SROs have too many conflicts of interest when they act as market overseers as well as competitors to alternative trading systems like ECNs. The exchange demutualization trend as well as overlapping regulatory authority also creates a need to re-examine how regulation works, the report says.
The committee is floating six different regulatory models:
1) Maintain the status quo of multiple SROs;
2) Have multiple SROs with separate regulatory arms like the NASDR;
3) Make firms report to a single, assigned SRO from among multiple SROs;
4) Have one SRO for firm oversight, but have markets regulate their own trading;
5) Create one all-purpose SRO; and
6) End self-regulation and turn the reins over to the SEC.
The white paper also calls for a single, independent arbitration forum. SIA officials conceded in a conference call with reporters that there is skepticism about the fairness of the industry running its own arbitration program.
The full report is available at www.sia.com.
