Thu, 15/04/2010 - 14:06
The Securities and Exchange Commission has proposed rules that would impose reporting requirements on traders whose trading activities exceed certain thresholds.
The SEC says there is increasing prominence of large traders in securities markets and it needs to effectively identify, monitor and analyse the activities of such traders.
The proposed rules require:
• Filing a form: large traders would be required to identify themselves by filing a form with the SEC. 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 USD20m during any calendar day, or (ii) 20 million shares or USD200m during any calendar month.
• Getting an identification number: the SEC would assign each large trader a unique large trader identification number. A large trader would be required to disclose to its broker-dealers its LTID and identify all accounts held by that broker-dealer through which the large trader trades.
• Recordkeeping and reporting: the proposed rule would require broker-dealers to maintain and report data that is largely similar to the information covered by the SEC’s Electronic Blue Sheets system, as well as the LTID and the time of transactions.
• Ready access to data: the proposed rule would require transaction data to be available to the SEC upon request the morning after the day on which the transactions were effected.
In order to allow investors to achieve best execution and better understand the costs of executing a transaction, the SEC has proposed additional protections for investors in options markets.
These include extending standards for indirect access. Rule 610 of Regulation NMS currently prohibits exchanges from imposing unfairly discriminatory terms that prevent or inhibit any person from obtaining efficient access to quotations through an exchange. The proposed changes would extend the application of this prohibition to listed options.
In addition, there would be limits on access fees. Several options exchanges have introduced a “Make or Take” fee model for certain classes of options. Under this model, a market participant who displays a quotation on an exchange is entitled to receive a rebate from the exchange if someone chooses to buy or sell at the quoted price. At the same time, under this model, the exchange can charge a Take fee to the individual who executes against such displayed quotations. This access fee is not a part of the displayed quotation so investors are not able to determine the actual cost of conducting the transaction. The proposed rules would prohibit a securities exchange from imposing, or permitting to be imposed, any access fees that exceed USD0.30 per contract for the execution of an order.
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