SEC Proposes to Out Large Equities Traders

http://www.hedgefund.net/publicnews/default.aspx?story=11166
SEC Proposes to Out Large Equities Traders
by Paula Schaap ,Senior Reporter , April 15, 2010

The Securities and Exchange Commission proposed new rule that would help the agency identify the largest market traders.

The new rule would also help the SEC uncover potential securities violations, like insider trading, the agency said in its rule-making proposal.

What the SEC is calling a “large trader” is a person whose equities transactions equal or exceed two million shares or $20 million during any calendar day or 20 million shares or $200 million during any calendar month.

The SEC is particularly concerned about technological advances that allow large market participants to trade huge volumes of shares electronically in a matter of seconds.

The rules are now open to public comment before the SEC takes action.

The biggest hedge fund firms often own millions of equities worth in the billions, although how much they might trade on any given day or month depends on their strategy and the markets.

Quantitative firm Renaissance Technologies, for example, held positions in more than 3,000 equities as of Dec. 31 with a total value of more than $26 billion, according to a regulatory filing.

On the other hand, Paulson & Co., the firm that made a mint on the subprime mortgage crisis, held position in about 55 positions as of Dec. 31, with a total value of more than $19 billion, according to a regulatory filing.

Under the proposed SEC rule, large traders would be required to identify themselves to the agency. They would then be issued a unique identification number, which, in turn would be provided to the trader’s broker-dealer.

The broker-dealer would be charged with keeping transaction records and report back to the SEC on the agency’s request.

Since the market turmoil that started with Lehman’s Bros. bankruptcy in September 2008 and continued into early 2009, Congress has been calling on the nation’s securities watchdog to do something about market volatility.

In the Fall of 2008, the SEC put a temporary ban against short selling in most financial sector securities.

In February the SEC voted to bring back a version of the uptick rule. The rule calls for brakes on short selling when a stock drops by a set percent within a certain time period.