Large Trader Reporting Deadline Looms

Terry Flanagan

Six months ahead of a compliance deadline for the Securities and Exchange Commission’s Large Trader Reporting rule, securities firms are faced with daunting recordkeeping and reporting requirements.

Registered broker-dealers, if they meet the definition of a large trader, must comply with the new regulatory requirements that pertain to large traders.

If they are not themselves considered large traders, they may be required to comply with the new monitoring, recordkeeping, and reporting requirements associated with the activities of large traders.

The SEC extended the compliance deadline from May 1 to November 1, 2013, following intense lobbying by Sifma and its members.

“There are critical gating issues that must be resolved before technological development and implementation can proceed,” said Sifma managing director Theodore Lazo said in a comment letter.

These include capturing and reporting execution fill details (e.g., times, quantities and prices) of each underlying execution when there are multiple broker-dealers involved in the execution and clearance chain, he said.

ConvergEx Group has announced that LiquidPoint customers will be able to meet the new Electronic Blue Sheet (EBS) reporting mandate when the SEC/Finra rule goes into effect on November 1, 2013.

“Many of our clients have expressed concern regarding their ability to meet these new requirements,” said Anthony Saliba, chief executive officer of ConvergEx’s LiquidPoint. “At LiquidPoint, we have always taken a prudent approach towards compliance reporting and have architected our products to be flexible and prepared for new requirements as they arise.”

The new regulations require brokers to include Large Trader IDs and also to be able to provide time stamps for every execution report when submitting securities transaction information to financial regulators.

Using functionality available through LiquidPoint, ConvergEx’s options technology business, customers can capture the necessary data. LiquidPoint already stores the required execution information via Exchange FIX messaging and a time stamp to the millisecond upon receipt. LiquidPoint also supports input fields for Large Trader IDs or other proprietary
identifiers. This data is available for both electronic trades as well as manual orders executed on exchange floors via LiquidPoint’s BrokerPoint.

Under the Large Trader Reporting regime, broker-dealers are required to maintain records regarding all transactions effected directly or indirectly by or through an account such broker-dealer carries for a large trader or an Unidentified Large Trader, or if the broker-dealer is a large trader, any proprietary or other account over which such broker-dealer exercises investment discretion.

The Large Trader rule, known as Rule 13h-1, imposes monitoring requirements on registered broker-dealers, including the monitoring of customers’ accounts to determine if they are compliant with the large trader reporting requirements.

Under Rule 13h-1, a large trader is defined as any person that effects transactions by or through one or more registered broker-dealers, in an aggregate amount equal to or greater than the identifying activity level than 2 million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month.

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