Self-Regulatory Organization (SRO)

A self-regulatory organization (SRO) is a non-governmental organization that oversees and regulates a particular industry or sector. SROs are typically created by industry participants themselves, and they are responsible for setting and enforcing rules and standards for their members. In the United States, SROs are often recognized by the Securities and Exchange Commission (SEC) as having the authority to regulate their respective industries.

There are a number of different types of SROs, each with its own specific focus. Some of the most common types of SROs include:

• • Stock exchanges: Stock exchanges are SROs that oversee the trading of stocks and other securities. The New York Stock Exchange (NYSE) and the Nasdaq Stock Market are two of the most well-known stock exchanges in the world.
• • Futures exchanges: Futures exchanges are SROs that oversee the trading of futures contracts. Futures contracts are agreements to buy or sell a particular commodity or financial instrument at a specific price on a specific date in the future.
• • Options exchanges: Options exchanges are SROs that oversee the trading of options contracts. Options contracts give the holder the right, but not the obligation, to buy or sell a particular commodity or financial instrument at a specific price on a specific date in the future.
• • Securities firms: Securities firms are SROs that oversee the activities of securities firms. Securities firms are financial institutions that provide investment services to clients, such as buying and selling stocks, bonds, and other securities.
• • Investment advisers: Investment advisers are SROs that oversee the activities of investment advisers. Investment advisers are individuals or firms that provide investment advice to clients, such as on how to invest their money.

SROs play an important role in the financial system by helping to ensure that the markets are fair, orderly, and transparent. SROs set and enforce rules and standards for their members, and they investigate and punish violations of those rules and standards. SROs also provide education and training to their members, and they help to promote investor protection.

The SEC has a number of requirements that SROs must meet in order to be recognized by the Commission. These requirements include:

• The SRO must be a non-profit organization.
• The SRO must have a board of directors that is composed of members of the industry that the SRO regulates.
• The SRO must have a written constitution and bylaws.
• The SRO must have a system for registering and disciplining its members.
• The SRO must have a system for enforcing its rules and standards.

SROs are an important part of the financial system, and they play a vital role in protecting investors and ensuring the integrity of the markets.