SEC Adopts Large Trader Reporting Regime


Advisers

On July 26, 2011, the SEC adopted Final Rule 13h-1 to implement a reporting system designed to identify large traders. The Large Trader Reporting System will allow the SEC to easily access information to oversee high-volume traders. The SEC hopes the information will help identify who or what causes events like the flash crash that occurred in May 2010.

A large trader is defined as any person that directly or indirectly exercises investment discretion over one or more accounts, and whose transactions in exchange-listed securities equal or exceed:

  • 2 million shares or $20 million on any calendar day; or
  • 20 million shares or $200 million during any calendar month
Large traders will naturally include investment advisers. If you transact exchange-listed securities at the levels above (potentially including exchange traded funds), you are required to file Form 13H, which identifies, among other things, the registered broker-dealers with which you transact. After filing Form 13H, the SEC will assign a large trader ID, which you must provide to your registered broker-dealers. Broker-dealers are then subject to new recordkeeping and reporting rules.

There is no prohibition on registration, so traders who have not yet reached the activity levels may voluntarily file Form 13H. This voluntary registration allows an adviser to dispense with monitoring its trading volume without risking non-compliance. All large traders must also submit an annual filing within 45 days of the calendar year end.

All rule provisions were effective October 3, 2011. Large traders have until December 1, 2011, to file Form 13H. The compliance date for broker-dealers to maintain records is April 30, 2012.

As of now, the industry is still weighing how large traders will provide their large trader ID to broker-dealers, though industry best practices will likely develop as the compliance dates approach. Please contact Vista360 or your consultant if you have any questions.

 

 

 

 

 

 

 

   
 
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