Corporate Update

SEC Proposes New “Large Trader” Reporting Rules

On April 14, 2010, the Securities and Exchange Commission (the “Commission”) proposed new Rule 13h-1 (the “Proposed Rule”) and related Form 13H, which would impose new reporting requirements on “large traders.” The avowed purpose of the rule is to “provide the Commission with information about traders conducting a substantial amount of trading activity.”

The Proposed Rule responds to the Commission’s view that the current market surveillance infrastructure, the electronic blue sheets (“EBS”) system,

is subject to lengthy delays, particularly with respect to files involving a large number of transactions over an extended time period. Commission staff often must make multiple requests to broker-dealers to obtain sufficient order information about the purchase or sale of a specific security to be able to adequately analyze the trading.

In addition, the Commission states in the proposing release accompanying the Proposed Rule that “large traders appear to be playing an increasingly prominent role in the securities markets” and “market observers have offered a wide range of estimates for the percentage of overall volume . . . attributed to one potential subcategory . . . -- high frequency traders -- which are typically estimated at 50% of total volume or higher.”

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