Exchanges and Self-Regulatory Organizations

Demutualization, intense merger and acquisition activity, and increased regulatory scrutiny are dramatically changing the operating environment for securities and futures exchanges.  Promontory’s Securities Practice Group is well-versed in the significant business, operational, and regulatory challenges facing national securities exchanges and designated contract markets. 

Our knowledge and expertise stems from our senior-level experience as executives and advisers to exchanges as well as regulators overseeing exchanges.  We have extensive experience effectively interacting with the SEC and CFTC and are keenly aware of their expectations.  We assist exchanges with matters such as:

• Drafting comment letters, rule filings, and member notices and other materials;
• Assessing market-maker quoting and other obligations;
• Developing and refining robust audit trails;
• Developing and refining order-handling, front-running, and other trade practice surveillance processes and systems;
• Assessing obligations under, and surveillance and examination programs and processes related to, Regulation SHO and Regulation NMS; and
• Assessing data and document retention systems and capabilities against current regulatory requirements.

Representative Assignments

• For a national securities exchange with an affiliated designated contract market, Promontory assisted in drafting and updating trading rules and related member materials to govern trading on a new futures trading system.  Promontory assisted and advised the client throughout the rule development and approval process with the CFTC.

• Promontory advised a national securities exchange on the effectiveness and comprehensiveness of its regulatory program.  Among other things, Promontory reviewed the surveillances and examination approaches and methodologies of the regulatory program in light of current regulatory requirements and expectations as well as industry best practices.  We also assisted in drafting materials describing the regulatory program for submission to the SEC.

• A Promontory professional assisted a national securities exchange in analyzing the implications of proposed Regulation NMS, drafting the exchange’s comment letter, and preparing the written testimony of exchange officers for hearings before the SEC and the U.S. Senate Committee on Banking, Housing, and Urban Affairs.

• A Promontory professional provided regulatory, compliance, and technology advice to a national securities exchange for its equity and derivatives trading, after conducting a comprehensive review of the relevant regulatory programs, processes, and market surveillances.

• For a national securities exchange, Promontory drafted policies and procedures for compliance with Regulation NMS Rule 610(d), related to the locking and crossing of protected quotations, and Regulation NMS Rule 611, which prohibits market centers from trading through better prices at away markets except when relying on a specified exception to the rule.

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For more information regarding the Promontory Securities Practice Group, please contact Kathleen Hamm, Managing Director, at (202) 384-1022 or khamm@promontory.com