What are regulatory trading fees?

The Regulatory Transaction Fee, or RTF, is a crucial aspect of the financial regulatory landscape in the United States. This fee is levied by the Financial Industry Regulatory Authority, commonly known as FINRA, as a means to recoup expenses.

Specifically, the RTF is intended to cover the quarterly payments that FINRA makes to the U.S. Securities and Exchange Commission, or SEC. These payments are mandated by Section 31 of the Securities Exchange Act of 1934, a cornerstone of American securities law.

The Act, enacted during the Great Depression, aimed to restore investor confidence in the wake of widespread market manipulation and fraud. It established the SEC as a watchdog agency to oversee the securities markets and protect investors.

Section 31, in particular, outlines the SEC's authority to collect fees from various market participants, including self-regulatory organizations like FINRA. These fees fund the SEC's operations, enabling it to carry out its mission of ensuring fair and orderly markets.

FINRA, as a self-regulatory organization, plays a vital role in this system. It oversees the conduct of broker-dealers and other financial professionals, enforcing rules and regulations designed to protect investors.