|SEC wants to create a database system for large traders|
The incursion of technology into stock market trading environments has disseminated the role of high frequency trader, an operator who trades large volumes with increasing speed. In order to keep control over this type of investor, who is capable of causing significant impacts on the market, the Securities and Exchange Commission (SEC) intends to create an integrated information system on large traders.
The proposal involves three steps: identifying these investors, monitoring their trading practices and analyzing their impact on the market. First of all, these large traders — individuals or companies whose security transactions involve over 2 million shares or US$ 20 million per day in the stock market — must register with the SEC.
Next, the agency will issue an identification number for each investor – the Large Trader Identification Number (LTID) – without which the trader will not be able to operate. Brokers must request this number from the investor and link it to every account in which the investor operates. Brokers are also obligated to record every operation made by these large traders.
At the regulator's request, information on specific large traders must be available the following day. Another requirement is that brokers monitor their clients so as to identify if one of them qualifies as a large trader. If this happens, the client must be immediately notified and required to obtain an LTID.