The Financial Industry Regulatory Authority released Regulatory Notice 15-09 to provide guidance to member firms and market participants on effective supervision and control practices with respect to algorithmic trading strategies. This notice is one of seven FINRA initiatives related to equity market structure and automated trading activities. These initiatives are designed to increase the amount of information that FINRA receives and to provide more transparency to investors.

Algorithmic strategies account for a substantial portion of activity on US securities markets, and the potential for such strategies to have an adverse impact on the market and firm stability is considerable. As a result of the large impact that algorithmic strategies have on the market, member firms that engage in such strategies are already subject to many Securities and Exchange Commission and FINRA rules.

The suggested effective practices for firms engaging in algorithmic strategies include general risk assessment and response, software/code development and implementation, software testing and system validation, trading systems, and compliance.

FINRA Regulatory Notice 15-09 is available here.