The U.S. securities and futures markets are regulated through a combination of self-regulation by self-regulatory organizations (SROs) and direct federal regulation. SROs in U.S. securities and futures markets are subject to federal regulation. Securities and futures laws authorize the SEC, which regulates the U.S. securities industry, and the Commodity Futures Trading Commission (CFTC), which has authority over U.S. futures markets, to delegate authority to and oversee SROs, empowering authorized SROs to regulate the markets in which securities and futures are traded.
There are several SROs in U.S. securities and futures markets, including:
• The national exchanges: The national exchanges that operate the markets where securities and futures are traded (e.g., the New York Stock Exchange, American Stock Exchange, and the Chicago Board Options Exchange) are SROs.
• The Financial Industry Regulatory Authority (FINRA): FINRA, which is overseen by the SEC, regulates all firms selling securities in the United States.
• The Municipal Securities Rulemaking Board (MSRB): The MSRB, which is overseen by the SEC, regulates the U.S. municipal bond market.
• The National Futures Association (NFA): The NFA, which is overseen by the CFTC, regulates the commodities and futures industry.
Generally, SROs in U.S. securities and futures markets perform various regulatory responsibilities, but in basic terms, SROs oversee the markets in which they operate and police the members and member firms participating in those markets.
More specifically, the regulatory responsibilities of SROs include matters such as:
• Creating rules to protect the integrity of the market in which they operate (e.g., rules that govern market conduct and that regulate exchange trading)
• Establishing the standards and rules under which their members operate (e.g., regulating their members' trading practices, member qualifications, and how members should relate to their clients)
• Offering professional training, testing, and licensing to individuals in their industry
• Monitoring compliance with and enforcing the rules of the markets in which they operate through market surveillance programs, trading analysis, and examinations of member firms' trading operations