×

NYSE's Insider Trading Surveillance Agreement: Why Now?

The NYSEis announcing an agreement with nine U.S. exchanges to consolidate the surveillance and investigation of insider trading.

The agreement gives the NYSE the responsibility for investigating all insider trading in NYSE and Arca-listed stocks. A separate regulatory agency, the Financial Industry Regulatory Authority or FINRA, will be charged with all investigations of insider trading at the AmEx and the NASDAQ.

Why now? In the old days most of the trading in NYSE listed stocks was done at the NYSE, so surveillance was easy. That has changed. The proliferation of electronic trading has allowed more trading in NYSE-listed stocks outside the NYSE. That has made it easier for those seeking to circumvent insider trading laws, because trading done on many different exchanges has created gaps in the ability of the exchanges to monitor insider trading.

Is more insider trading occurring? Insider trading referrals from the NYSE to the SEC have jumped this year: if current levels continue, the NYSE will refer 180 cases to the SEC, a nearly 25 percent increase from 2007. 2007 also saw a nearly 25 percent increase in referrals from the previous year.

The exchanges participating are the AmEx, CBOE, Chicago Stock Exchange, International Securities Exchange, NASDAQ, National Stock Exchange, NYSE, NYSE Arca, and the Philadelphia Stock Exchange.

We'll have an exclusive interview with Rick Ketchum, head of NYSE Regulation, Inc, on The Call.


Questions? Comments? tradertalk@cnbc.com