Finra Eyes New Surveillance System

Finra is calling the new program the Comprehensive Automated Risk Data System (Cards), which will allow it to automate the collection of standardized information relating to account activity and security, particularly related to charges levied by member firms on their clients. Its goal is to enable analytics to be performed on this data, which will be submitted regularly by member firms in designated formats, and to allow the regulator to identify issues before examining a firm's records on site.

"The information collected through Cards will allow Finra to run analytics that identify potential 'red flags' of sales practice misconduct and help us identify potential business conduct problems with firms, branches and registered representatives," says Susan Axelrod, EVP of regulatory operations at Finra.

This proposal by Finra is the latest example of regulatory bodies getting to grips with data and analytics, in order to gain better oversight over their markets. The US Securities and Exchange Commission, which oversees Finra, recently contracted Tradeworx to provide a market data system named Midas, so as to cope with the volume of data produced by algorithmic and high-frequency trading, and is staffing up on data analyst roles. The US Commodity Futures Trading Commission, too, has extended its collection of data pertaining to trades, particularly data for swap transactions with the advent of swap execution facilities and central clearing, with reporting to swap data repositories.

Finra's regulatory notice seeking comment on the proposal can be found here.