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FINRA Starts Examining Options Desks
TMMS exams are coming to options desks.The Financial Industry Regulatory Authority has started a new trading examinations program aimed at options trading desks that will look at all aspects of trading and order handling.
The exams are modeled on the “Trading and Market Making Surveillance,” or TMMS (pronounced “TAMS”) program that targets cash equities desks. This program was instituted under the NASD and focuses on broker-dealer compliance with such rules as best execution, limit order protection, limit order display, front-running and short sales.
“This is new,” Gene DeMaio, a senior vice president in FINRA’s market regulation department, told an industry crowd recently. “Some firms have already started getting letters. Some of the onsites have already started. But certainly you will be hearing a lot more about this in the coming weeks and months.” DeMaio was speaking at last week’s FIA/OIC options industry conference in New York.
DeMaio stressed that the reviews are not merely WSP, or Written Supervisory Procedures, checklists, but full-blown trading exams where FINRA staffers will visit desks and gather information.
Because there is no OATS, or Order Audit Trail System, for options, as there is with cash equities, FINRA plans to gather information from traders’ electronic correspondence such as IM, text messages and email, DeMaio said.
Taken from Traders Magazine.com. Written by Peter Chapman.