Call to review for-profit exchanges rules Legal provisions that protect for-profit US stock exchanges and allow them to write their own rules are outdated and need to be reviewed, a leading regulator told an industry conference in New York. The call on Thursday from Daniel Gallagher, commissioner at the Securities and Exchanges Commission, echoes concerns raised by brokers who are seeking to recoup estimated losses of $500m from the glitch-ridden debut of Facebook on Nasdaq in May. IN Markets Regulation The confrontation comes as brokers and exchanges increasingly compete for business amid declining volumes. "The SRO [self-regulatory organisation] framework was developed in the context of private, mutualised exchange, a context that no longer exists," Mr Gallagher said in prepared remarks given to a Securities Industry and Financial Markets Association conference. At present, exchanges pass on a majority of their regulatory responsibilities to the Financial Industry Regulatory Authority, an SRO that acts as the regulator for exchanges and brokers. Mr Gallagher said that agreements like that inherently create a risk that Finra becomes a "selectively regulatory organisation." "If self-regulation is to continue to play a central role in securities regulation, SROs must be committed to ensuring that the rules they send to the SEC for approval are the result of the same degree of rigorous analysis as the SEC applies to its own rules," he said. Matt Lavicka, managing director at Goldman Sachs, said on a panel at the conference: "You need self regulation, but also SEC oversight." Some on Wall Street have alleged that exchanges such as NYSE Euronext, Nasdaq and BATS use their self-regulatory status to write rules that allow them to find new sources of income or skirt legal challenges. Others, including those running alternative trading platforms such as dark pools, have said that they want also to benefit from the regulatory status enjoyed by exchanges. In August, Sifma questioned Nasdaq's claims to regulatory immunity after brokers sought to recoup hundreds of millions in losses after the Facebook debacle. Sifma said that because Nasdaq was acting as a for-profit market participant, it should not be able to claim immunity. Nasdaq has stood by its claims to regulatory immunity and has offered a $62m voluntary compensation plan for brokers that faced losses from opening-day trading of Facebook on its exchange. In response to Sifma, Nasdaq said that an unbroken line of cases has recognised the applicability of immunity to exchanges since 1975, citing amendments to the Exchange Act passed in that year. Nasdaq, NYSE Euronext and BATS declined to comment.