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SEC Proposes Large Trader Reporting Rule


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Could this, between-the-lines, suggest that the SEC actually thinks there -might- be a "Sith Lord" after all?




SEC Proposes Large Trader Reporting Rule

April 20, 2010


The SEC has proposed a new rule that would help it identify market participants who trade large blocks of stock and more promptly track and analyze the market effect of these transactions.


The proposed rule under Section 13(h) of the Securities Exchange Act of 1934, if adopted, would require traders with substantial levels of trading activity to identify themselves to the SEC.  The proposed rule would define large traders as those whose trades in exchange-listed securities equal or exceed two million shares or $20 million during any day, or 20 million shares or $200 million during any calendar month.  The SEC believes that the proposed rule could apply to the largest 400 market participants.


The SEC would assign each large trader a unique large trader identification number (LTID), allowing the SEC to track and analyze its trading activities.  The proposed rule also would require large traders to provide their LTIDs to their broker-dealers.


The rule contemplates that, in addition to their present data maintenance and reporting requirements, broker-dealers will be required to maintain and report large traders’ LTIDs and the execution times of their transactions to the SEC.  The rule also would require broker-dealers to monitor their customers’ compliance with the proposed rule.


Data that broker-dealers collect in connection with large trader transactions must be made available to the SEC upon request the morning after the day on which a transaction was effected.  Data reported to the SEC would not be publicly available.


This proposal is a part of the SEC’s broader effort to monitor automated trading activity, which it views as playing an increasingly prominent role in the securities markets.  The SEC also hopes its ability to monitor next-day transaction data will assist it to stem manipulative, abusive or otherwise illegal trading activity.



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