The Securities and Exchange Commission on Wednesday proposed tracking large blocks of trades by mutual funds, hedge funds, private-equity firms and other large institutional investors. The SEC defines a large trader as those that trade $20 million or more in securities in a day, or 20 million shares or $200 million during any calendar month.
The reporting system would work by assigning a unique identification number to large traders that would be available to their broker/dealers, who in turn would report trading information to the SEC upon request as early as the morning of the first business day after a trade is made.
“This rule would give us prompt access to trading information from large traders so we can better analyze the data and investigate potentially illegal trading activity,” said SEC Chairman Mary Schapiro.
In light of trades now transacting in milliseconds among multiple trading centers, innovative new trading strategies and products, and high frequency trading, the SEC is also considering establishing a large trader reporting system under its authority in Section 13(h) of the Securities Exchange Act of 1934. The SEC said it wants to “ensure that the markets are fair, transparent and efficient.”
Edward L. Pittman, counsel with Dechert, said the new reporting system will now allow the SEC to know which firms are placing each trade.
