SEC’s Large Trader Reporting System Proposal Would Affect Large-Volume, High-Frequency Traders and Their Broker-Dealers

On April 14, the Securities and Exchange Commission (SEC) issued a release (Release) proposing that certain large-volume, high-frequency traders (classified as "large traders") be required to self-identify to the SEC, and that broker-dealers that effect transactions for "large trader" customers maintain and produce records of these customers' trades to the SEC.¹ Proposed Rule 13h-1 under the Securities Exchange Act of 1934 (Rule) is intended to bolster the SEC's regulatory and enforcement capabilities by increasing its ability to obtain information about the activities of large-volume, high-frequency traders. If adopted, the Rule will require such "Large Traders" of exchange-listed stocks and options to self-report to the SEC and will impose recordkeeping, reporting, and monitoring requirements upon registered broker-dealers' transactions with "large trader" customers for production to the SEC upon request. Comments on the Rule are due by June 22, 2010.