Who Regulates the New York Stock Exchange?

by Vicki A. Benge

Since its inception in 1792, the New York Stock Exchange has been a global leader in securities trading. The company claims that the shortened form of its name, NYSE, is "one of the best-known financial industry brands in the world." The New York Stock Exchange is what is known in the securities industry as an SRO, an acronym for "self-regulatory organization," meaning it is subject to its own rules and regulations. This does not mean the NYSE can enact arbitrary or selective rules for its own benefit.

Self-Regulatory Guidelines

According to the NYSE, the organization must uphold its own body of rules, which ensure fair trading for investors and the publicly owned companies whose stocks are bought and sold. The regulations promote sound business practices and preserve authority so that members who violate the regulations can be disciplined. Whenever the NYSE adopts a new regulation or amends an existing one, the changes must be submitted to the U.S. Securities and Exchange Commission (SEC) for approval before the regulation becomes effective.

Federal Supervision

The SEC is the federal government's oversight agency for regulating securities trading in the United States. The agency not only supervises U.S. financial markets, including SROs such as the NYSE, but it also supervises brokerage firms and transfer agents who facilitate securities transactions for buyers and sellers. In addition, the SEC requires publicly owned companies to adhere to policies of full disclosure concerning internal financial matters.

Independent Regulators

Companies registered with the NYSE must abide by all regulations adopted by the exchange, in addition to adhering to SEC guidelines. NYSE Regulation Inc., an independent, nonprofit subsidiary of NYSE Euronext, Inc., enacts and enforces exchange rules and federal laws and guidelines for all the member organizations and personnel who trade through its platforms. The stock exchange uses the services of the Financial Industry Regulatory Authority (FINRA) to oversee the representatives of U.S. registered securities, including brokerage firms that trade on the exchange.

Continuous Monitoring

Through the services of FINRA, the markets of the NYSE, including the electronic NYSE Arca that operates worldwide, are monitored to ensure fair and equitable trading practices by all participants. FINRA enforces its own regulations as well as federal law as required by the SEC. According to a guide published by the NYSE, the regulatory subsidiary of the exchange conducts an annual evaluation on each member organization that transacts business with the public to ensure that all organizational regulations and federal laws are being followed.

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