New Government Attempt To Control Markets and Traders

Discussion in 'Trading' started by salen2, Apr 16, 2010.

  1. salen2


    This is a big issue for any trader who makes their living from the markets. 10mil/side is not that large.

    " Date: April 14, 2010

    SEC Proposes Large Trader Reporting System, Options Investor Protections
    Large Trader Reporting System

    **Citing the increasing prominence of large traders in securities markets, and the SEC's need to effectively identify, monitor and analyze the activities of such traders, ***

    the SEC today proposed rules that would impose reporting requirements on traders whose trading activities exceed certain thresholds. The proposed rules require:

    o 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 $20 million during any calendar day, or (ii) 20 million shares or $200 million during any calendar month.

    o Getting an Identification Number: The SEC would assign each large trader a unique large trader identification number (“LTID”). 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.

    o 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.

    o 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 affected.

    This has huge ramification for people who make their living trading. For these reasons:

    1. This would allow the government to know exactly at all times how much money is required to control the markets. This was probably why the PPT failed to contain the 08 selloff. This is the biggest step to permanent manipulation by the US government taken to date. It gives those who control the government and their cronies the ability to control the market without public awareness or access to the same information they have.

    2. The government (and the people in the position to get access to that the very wealthy with connections to government officials) would have at all times a complete snapshot of who could move the market and what their positions are, and how they trade. Reverse engineering systems and would be a breeze. Why should traders have to reveal proprietary info about how they make money when other businesses don't have to? Trading strategies are highly proprietary and with this info can be easily reverse engineered. If you're worried about your broker watching your account(s), just wait until you get flagged with an LTID!!

    3. The bureaucracy of success. There would be a cap on how large you can trade before additional paperwork and reporting requirements kick in. Once you reach that threshold, you have no idea how government monitoring of your positions will affect your success.

    4. The government can and would trade against large players. If the government needs cash guess where they go? They have unlimited funds no one else does. How easy would it be to write a computer program to steal money from people who have it? For those who write code...not that hard.

    5. Moral issue. Should any one person or group of people government or not, have access to how private citizens are deploying capital in the markets? Should they (and individuals in power) have information like this that no one else does? Even if you break your accounts up into smaller chunks the government wants to know about all of them and track every move the day after. Is this fair? Do you believe that this information cannot and would not be seriously abused?

    The bottom line is that this is about most Orwellian maneuver the Obama administration has proposed in the aftermath of the subprime crash. It allows the government to track every move, monitor and analyze every traders position of reasonable size and decide who lives and who dies. 10mil a day for a day trader esp. a prop trader is not that large esp. as stocks get more expensive and lose volatility. The govnmnt wants to make it sound like this legislation is reserved for banks and hedge funds when really it can affect successful day traders too.

    Individuals run the government and the government is not immune to corruption and abuse. This kind of information would ABSOLUTELY trickle down to the darker cracks of the government and the, shall we say, ethically challenged that lurk in those shadows waiting to prey on whatever falls to them. If you don't believe this can happen, all you have to do is look at the allegations of insider trading info passing at GS. To think with this kind of information amassed in one place wouldn't be used to trade by somebody is I think a bit naive and ignoring human nature. If you're a government and you need cash, where are you going to go? They've already done it once...the public markets...this just makes it easier and legal. To groups or individuals with connections to the government officials this information this has the potential to be the holy grail of making money.

    Moreover, this does nothing to solve the real problem---mismanagement and complete and utter failure by politicians to steward the economy. If Bernanke had done his job better in 07, we could have avoided much of the subprime fallout in the markets. As an excuse to get this passed, the government is already lying when they say more big traders are entering the markets...who are these large traders on declining volume and anemic volatility?

    Trying to over-micromanage the markets is not the answer to avoiding another subprime mess but it sure makes it easy for the government to get any information on what traders are doing, how well they are doing (who is winning and making money) and what they need to do control US markets (and those individuals) and how they can take money from people unknowingly.

    Is this the kind of stock market you want? Would you like a market that runs more on political agendas and manipulation rather than the realities of business and human emotion? If you believe the markets didn't work well before Obama then perhaps you should support this legislation. If you're tired of the government using subprime to take more and more of your freedom then perhaps you should be concerned about this. Either way, you should let your local government official know how you feel because this little piece of legislation has the power to change the US markets forever and make it more difficult to succeed.