Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, April 14, 2010

SEC Proposes A Large Trader Reporting System

The SEC today voted to issue a proposal to establish a large trader reporting system, and separately proposed to put in place two investor protection measures in options markets that currently exist in stock markets.  In her opening statement, Chair Schapiro described the large trader reporting system proposal as follows:

The Commission’s need to better monitor these entities is heightened by the fact that large traders, including high-frequency traders, appear to be playing an increasingly prominent role in the securities markets.

To enhance the Commission’s ability to identify large traders and collect information on their trading activity, the Commission will now consider whether to propose a new Rule under Section 13(h) of the Securities Exchange Act. The rule would allow the Commission to exercise its authority to establish a large trader reporting system.

Traders who engage in substantial levels of trading activity would be required to identify themselves to the SEC through a filing with the Commission. It is proposed that a “large trader” would generally be defined as a person, including a firm or individual, whose transactions in exchange-listed securities equal or exceed (i) two million shares or $20 million during any calendar day, or (ii) 20 million shares or $200 million during any calendar month.

By providing the Commission with prompt access to information about large traders and their trading activity, the proposed rule is intended to help the Commission reconstruct market activity, analyze trading data, and investigate potentially manipulative, abusive, or otherwise-illegal trading activity.

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