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SEC Votes Unanimously To Tag HFT Traders
The SEC has finally acknowledged it is hopeless at regulating the latest generation of market forntrunning specialists, in the form of various iterations of High Frequency Traders. We are happy that one year after starting our campaign against the complete travesty to market efficiency that is HFT (yes, they frontrun and scalp and subpenny and generate artificial momentum, but they bring liquidity!.... in five bankrupt stocks while raising slippage costs everywhere else) the SEC has realized that there is so much more than meets the eye, and that no matter how many conflicted Op-Eds are publish in Advanced Trader, that will not change the nature of what HFT is. At a meeting today, the Securities and
Exchange Commission voted unanimously for a plan to tag high-frequency
traders with ID numbers and give the SEC access to information on their
trades. Branding sure is an appropriate act for all these parasitic market participants. Hopefully the SEC will tear itself away from the terabytes of kiddie and tranny porn available on the internet to actually analyze and compile the data it receives (we realize that releasing it to the public would be far too much in keeping with Obama's initial and soon forgotten promise of unprecedented transparency), instead of just dumping it in the shredder as it has done in the past with Madoff, with Greenspan, and with other masters of the ponzimonium.
From Reuters:
The SEC is already examining whether additional rules are needed to curb fast traders, or firms that use sophisticated algorithms to buy and sell stock in a fraction of a second.
The rapid trading is estimated to account for some 60 percent of all U.S. equity trading. The proposed rules would apply to 400 of the largest traders operating in the U.S. equity markets. Traders would be tagged if they trade at least 2 million shares or $20 million during a day.
"To better oversee the U.S. securities markets, the commission must be able to readily identify large traders operating in the ... markets, and obtain basic identifying information on each large trader, its accounts, and its affiliates," SEC Chairman Mary Schapiro said.
At the same meeting, the SEC will consider proposals to ensure investors have fair access to the options markets. Currently there are eight U.S. options exchanges that charge investors different fees to access their markets.
The SEC is considering capping the fee at 30 cents per contract.
Here is the full SEC press release:
Speech by SEC Chairman: Opening Statement at the SEC Open Meeting — Large Trader Reporting System
by
Chairman Mary L. Schapiro
U.S. Securities and Exchange Commission
Washington, D.C.
April 14, 2010
Good Morning. This is an open meeting of the U.S. Securities and Exchange Commission on April 14, 2010.
Today, the Commission will consider proposals designed to strengthen
our oversight of the markets and promote greater fairness and
efficiency.
First, we will consider whether to propose a rule that would
establish a large trader reporting system, which will allow the
Commission to readily identify market participants engaged in
substantial trading activity.
Later, we will consider whether to propose a rule to prohibit an
exchange from imposing unfairly discriminatory terms that inhibit
efficient access to quotations in listed options and a rule to limit
access fees in the options markets.
Today’s actions are part of our ongoing effort intended to promote
fairness and efficiency in our markets. The Commission already has
proposed a series of other rules designed to increase fairness and
efficiency, including a proposal to ban marketable flash orders, a
proposal to bring greater transparency to dark pools of liquidity and a
proposal to prohibit unfiltered access to markets.
Evolving Markets
Today’s proposed rules are necessary to keep pace with our
ever-changing securities markets – markets that have undergone dynamic
transformation in recent years.
The fact is that rapid technological advances have had an impact on
trading strategies and on the ways in which some broker-dealers carry
out their trades.
Today, trades are transacted in milliseconds and dispersed among
many trading centers. This allows large market participants to employ
sophisticated trading methods to trade electronically in substantial
volumes with blazing speed in multiple venues.
To better oversee the U.S. securities markets, the Commission must
be able to readily identify large traders operating in the U.S.
securities markets, and obtain basic identifying information on each
large trader, its accounts, and its affiliates. In addition, to support
its regulatory and enforcement activities, the Commission should have a
mechanism to efficiently track and promptly obtain trading records
concerning large traders.
While the Commission collects transaction data from registered
broker-dealers through the Electronic Blue Sheets system, the EBS
system is generally utilized in more narrowly-focused investigations
involving trading in particular securities. It is not generally
conducive to larger-scale market reconstructions and analyses involving
numerous stocks during periods of peak trading volume.
Large Trader Reporting System
The Commission’s need to better monitor these entities is heightened
by the fact that large traders, including high-frequency traders,
appear to be playing an increasingly prominent role in the securities
markets.
To enhance the Commission’s ability to identify large traders and
collect information on their trading activity, the Commission will now
consider whether to propose a new Rule under Section 13(h) of the
Securities Exchange Act. The rule would allow the Commission to
exercise its authority to establish a large trader reporting system.
Traders who engage in substantial levels of trading activity would
be required to identify themselves to the SEC through a filing with the
Commission. It is proposed that 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.
By providing the Commission with prompt access to information about
large traders and their trading activity, the proposed rule is intended
to help the Commission reconstruct market activity, analyze trading
data, and investigate potentially manipulative, abusive, or
otherwise-illegal trading activity.
Before I turn this over to Robert Cook, Director of the Division of
Trading and Markets, I would like to thank Robert, Jamie Brigagliano,
David Shillman, Richard Holley, Chris Chow, and Gary Rubin from the
Division of Trading and Markets for your work on the recommendations.
Thank you as well to David Becker, Meridith Mitchell, Lori Price,
Deborah Flynn, and Janice Mitnick from the Office of the General
Counsel; Henry Hu, Jennifer Marietta-Westburg, George Aragon, Charles
Dale, and Adam Glass from the Division of Risk, Strategy, and Financial
Innovation; John Polise from the Division of Enforcement; Mark Donohue
and Bernard Denis from the Office of Compliance Inspections and
Examinations; Douglas Scheidt and David Vaughan from the Division of
Investment Management; and Elizabeth Jacobs and Gloria Dalton from the
Office of International Affairs for their contributions and
collaborative efforts. Finally, I would like to thank the other
Commissioners and all of our counsels for their work and comments on
the proposed rule.
Now I'll turn to Robert Cook to hear more about the Division’s recommendation.
»
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WASHINGTON—The Securities and Exchange Commission on Wednesday voted 5-0 to propose new rules for large traders that would assign them unique identifiers, in redundant and repetitive addition to those that already exist, and require them to report next-day transaction data when requested by regulators.
The rules are designed to give the appearance that the SEC has a handle on high-frequency trading, in which trades are transacted in milliseconds and dispersed among many trading centers, but will likely only allow hard working and under paid government staffers to have the same advantages trading on this information, although slightly delayed, as the prop desks have enjoyed.
Next-day access to trading data could be used by the SEC to promptly reconstruct market activity and perform other trading analyses, according to a summary of the proposal. The data also could assist investigators in conducting manipulative, abusive or otherwise-illegal trading activity for their own accounts, or their friends' and family's.
"The commission's need to better monitor these entities is heightened by the fact that large traders, including high-frequency traders but excluding the PPT that we promise does not even exist, appear to be playing an increasingly prominent role in the securities markets," said SEC Chairman Mary "Dry Pussy" Schapiro. "But you all know there is no way in hell that anyone will ever be prosecuted."
I sprayed coffee all over my screen when I read that last paragraph. Who says finance has to be boring.
Well, I'm glad the threshold is $20 million a day. I'll manage to keep under that wire.
blah blah blah blah blah get on YOUR KNEES SCHAPIRO!!!!
This is more for public appeasment than actual effective measures. Anyone that has more than 0 confidence in the SEC is ignorantly optomistic.
This. And if we did see the data, it would probably show that 70% to 80% of all volume is HFT/algo.
double post
Has the vampire squid Goldman approved this?
The internationally recognized flag of surrender of the US citizen has just been run up the flag pole at the SEC.
"You gotta stem the evil tide, and keep it all on the inside. Mary you're nearly a treat. Mary you're nearly a treat, but you're really a cry."
Reuters: "SEC Chairman Mary Schapiro said."
Tyler...
Is this where you came up with:
"Hopefully the SEC will tear itself away from... tranny porn..."
Just wondering...
Pat Yourself on the Back Tyler
You are like the electronic Alex Jones with your bull horn relentlessly shouting:
"HFT is an INSIDE JOB!"
Why 2 million? So if I "only" trade 1,999,999 shares on a given day, I can continue the next day?
And why not charge a fee on order cancellations or instant modifications made to orders placed, so that flash-trading would come at a cost?
> And why not charge a fee on order cancellations
Because it would merely get reflected in wider equity pricing spreads helping noone.
> or instant modifications made to orders placed, so that flash-trading would come at a cost?
Flash trading to the extent anyone is upset about it (red herring) allows some traders to see some orders (that the person placing the order allowed to be flashed, or their crappy broker allowed to be flashed without their consent) ahead of others. Those traders given the 25ms advanced look are in no position to cancel or modify orders - they can either ignore the orders or hit them, so you are mixing up the issues that you believe that you are upset about.
Why 2 million? So if I "only" trade 1,999,999 shares on a given day, I can continue the next day?
And why not charge a fee on order cancellations or instant modifications made to orders placed, so that flash-trading would come at a cost?
Because its just another dog and pony show. Lookie over there... ponies for everyone!!!! Yeah!!!
BullShit!
The SEC then would have a running account of the Algo's pumping the market.. or propping the market up... no one wants those numbers out and documented by a reliable source... so what the SEC is really saying is that they have a way to Document numbers palatable for the masses.
The SEC will not release the who is buying what and when, see the article on banks fighting for the release of information from today ( http://www.zerohedge.com/article/banks-threaten-go-supreme-court-prevent-fed-disclosing-details-2-trillion-bailout-loans-they ) for a forward looking response to requests for information.
THE SHAPE OF LARGE TRADE REGULATION:
http://picasaweb.google.com/lh/photo/3szJ6s33HHCcNbZCS5-4Sw?feat=directlink
> (i) two million shares or $20 million during any calendar day, or (ii) 20 million shares or $200 million during any calendar month.
I was listening to this meeting this morning.
I'm in favor of the SEC collecting this information and believe that it should be collected for all parties that trade (using SSN or tax-IDs).
I don't understand how the SEC believes that this will only hit 400 parties. $200 milllion per month, which is the aggregate of total costs and proceeds is roughly $4.5M per day in positions (22 days on average per month and each position opened and closed). This is not a particularly large number, and many strat arb and HFT prop shops will certainly exceed that figure.
Not that there's anything wrong with tracking a bigger group of traders, but I think the SEC will realize that their 400 count is off by at least 1 order of magnitude, as there are many unregistered prop trading shops doing more that these figures in trading, so I hope that they don't have an overly manual process in mind for the collection of form 13H filings, but I fear they do since that form doesn't even yet exist.
"The commission's need to better monitor these entities is heightened by the fact that large traders, including high-frequency traders but excluding the PPT that we promise does not even exist, appear to be playing an increasingly prominent role in the securities markets,", yea how do you exclude something that doesn't exists. Also why exclude them, oh I know they are needed to make sure the market keeps going up or stay stable. Everyday our economy and govt. is looking more and more like a third world. They actually tell you that they will allow the PPT to continue to manipulate the market and in the same breath say it doesn't exists. We are done, pure and simple.