STA Trading Issues Committees

Grant Provided by:

February 15, 2012 | Slide 1

present

STA’s 2012 Regulatory Dashboard& Large Trader Reporting Update

Jim Toes

President & CEO

Security Traders AssociationManisha Kimmel

Executive Director

Financial Information Forum

Speakers:

February 15, 2012 | Produced via a Grant from the

Grant Provided by:


STA Trading Issues Committees

•Chairman•Up to 20 individuals with expertise

pertaining to Committee•Meet on a Quarterly basis or ad-hoc

FORMAT

•Education•Resource for the STA Board on its

comment lettersGOALS

•LinkedIn•Dedicated distribution lists•Webinar•Conference Calls•STA Website

INFORMATION

TRADING ISSUES:

DERIVATIVES

TRADING ISSUES: EQUITIESCOMPLIANCE

2012 STRUCTURE

http://www.securitytraders.org/

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Our Focuses in 2012…

• FINRA Regulatory Notice; 11-43. Proposed Amendments to Rule 5210 Regarding Publications of Indications of Interest; “IOIs”

• File No. 4-631, Plan to Address Extraordinary Volatility Submitted to the Securities and Exchange Commission Pursuant to Rule 608 of Regulation NMS Under the Securities Exchange Act of 1934. aka, The “Plan” and “Limit Up Limit Down”

• SEC Release; 34-66065, Federal Register; SEC response to SRO proposed rule changes to revise the existing market-wide circuit breakers.

• Commodity Futures Trading Commission (“CFTC”) proposed amendment to Rule 4.5; Commodity Pool Operators and Commodity Trading Advisors: Amendments to Compliance Obligations (RIN No. 3038–AD30)

• New York Stock Exchange LLC; Notice of Filing of Rule Change Proposing a One-Year Pilot Program Adding New Rule 107C to Establish a Retail Liquidity Program, (“RLP”) to Attract Additional Retail Order Flow to the Exchange for NYSE-listed Securities

• SEC adoption of Rule 13h-1 and Form 13H under Section 13(h) which assists in both identifying and obtaining trading information on market participants that conduct a substantial amount of trading, “Large Trader Reporting”.

Grant Provided by:


• Sponsored Access• General Rulemaking process

• Concept Release• Comment Period• Implementation

• Partnership Announcement on September 27, 2011• Multiple calls both to general audiences and specific

• Buy Side• Non Self Clearing firms• Discussions with Prime Brokerage• HFT• Clearing firms

• Regular meetings with Trading and Markets • Meetings with SEC Commissioners• Benefits

STA/ FIF Partnership on Large Trader Reporting

» February 28th/29th Washington DC meetings• Members of the House Financial Services Committee• SEC Commissioners Walter and Aguilar• SEC Trading and Markets staff on, Consolidated Audit Trail, “CAT”• Conference call in early March

GENER

AL HIG

HLIGHTS

FUTURE

ACTION IT

EMS

Grant Provided by:


FIF Large Trader Event

Jamie Brigagliano, Partner, Sidley Austin LLP, will provide a high level overview of Large Trader Reporting and its potential implications on Consolidated Audit Trail. David Shillman, Associate Director, Division of Markets and Trading, SEC will also participate. EVENT DATE: Tuesday, February 28, 2012

– 3:00 - 6:00 PM ET: Meeting» Large Trader Reporting, Looking Ahead to CAT, Jamie Brigagliano, Partner, Sidley

Austin LLP» Panel 1 - LTR Across the Order Lifecycle» Panel 2 - LTR - Broker Dealer Reporting Focus

– 6:00 - 8:00 PM ET: Networking Reception

LOCATION: Thomson Reuters, 3 Times Square, New York, NY 10036

FEE:– FIF Members / STA Members: FREE– Non FIF Members: $200 (Note: This event is not open to members of the media or consulting firms)

Register Now!Email: [email protected]

JOIN US AS WE TACKLE THE LARGE TRADER RULE in 2 distinct panels focusing on Large Trader Reporting (LTR) across the order lifecycle and Broker Dealer reporting LTID

mailto:[email protected]?subject=FIF%20Large%20Trader%20Event

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LTR At-A-Glance:

• The SEC adopted new Rule 13h-1 and Form 13H under Section 13(h) to assist in both identifying, and obtaining trading information on, market participants that conduct a substantial amount of trading activity, as measured by volume or market value, in the U.S. securities markets.

• Rule 13h-1 will require a “large trader,” defined as a person whose transactions in NMS securities equal or exceed 2 million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month, to identify itself to the Commission and make certain disclosures to the Commission on Form 13H.

• Upon receipt of Form 13H, the Commission will assign to each large trader an identification number that will uniquely and uniformly identify the trader, which the large trader must then provide to its registered broker-dealers.

LARGE TRADER OBLIGATIONS

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LTR At-A-Glance:

• Registered broker-dealers will then be required to maintain records of two additional data elements in connection with transactions effected through accounts of such large traders (the large trader identification number, and the time transactions in the account are executed

• Broker-dealers will need to report large trader transaction information to the Commission upon request through the Electronic Blue Sheets systems currently used by broker-dealers for reporting trade information

• Registered broker-dealers subject to the Rule will be required to perform limited monitoring of their customers’ accounts for activity that may trigger the large trader identification requirements of Rule 13h-1. These BDs will require policies and procedures reasonably designed to inform persons of their obligations to file Form 13H and disclose their large trader status

BROKER DEALER OBLIGATIONS

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Large Trader Reporting: Key Dates

Large Trader Reporting Approved

Large Trader Reporting Approved Filing Published in Federal Register

Compliance Date for Requirement on Large Traders to Identify to the Commission Pursuant to Rule 13h-1(b)

Compliance Date for Broker-Dealers to maintain records, report, and monitor large trader activity pursuant to Rule 13-h(d), (e), & (f).

Effective date ISG enhancements to Electronic Blue Sheet (EBS) submissions

Effective Date of Rule

July 27, 2011

Aug 3, 2011

Oct 3, 2011

Dec 1, 2011

April 30, 2012

Aug 31, 2012

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Summary of FIF’s Requests

1. Establish a common production date for EBS record layout changes for both SEC Large Trader requests and ISG Blue Sheet requests utilizing the new record layout.

2. Provide a ten month time period for the implementation of both initiatives once open issues are resolved and relief/accommodation is granted.

EXTENSION REQUESTS

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Relief Requests

3. Provide relief from reporting execution time on options exercise and assignments, along with ETF creation/redemption transactions since these types of transactions either do not have an execution time, or are processed outside of market hours. These transactions were excluded from the determination of Large Trader status.

4. Provide relief from Large Trader Reporting for non-self clearing broker dealers. Clearing broker dealers would perform Large Trader Reporting on behalf of their clients.

5. Provide relief for prime brokers from reporting individual executions and associated execution times. Clearing broker dealers and self‐clearing broker dealers would provide individual executions with associated execution time. Both prime brokers and clearing brokers would provide LTID(s) at the allocation level.

6. Provide relief for broker dealers involved in Large Trader transactions that do not have a direct relationship with the Large Trader. Only the self‐clearing and clearing broker dealers with a direct relationship with the Large Trader would perform Large Trader Reporting.

7. Provide relief in scenarios where clearing responsibility is transferred between clearing members. The clearing member associated with the executions would provide execution information including execution times. The clearing broker associated with the clearance and settlement of the transaction would supply LTID(s) at the allocation level.

BROKER DEALER RESPONSIBILITY

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Relief Request Continued…

8. Provide relief from providing LTIDs on executions in average price processing accounts exclusive of sponsored access arrangements. Executions in average price processing accounts would be reported with execution time but without LTIDs. Executions resulting from sponsored access arrangements would include both LTID and execution time.

9. Provide relief from providing execution time on allocations made out of average price processing accounts. Average price processing account allocations would be reported with LTIDs but not execution times.

AVERAGE PRICE PROCESSING ACCOUNT

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Disclaimers

STA and FIF Disclaimer: This document prepared by the offices of the Security Traders Association and Financial Information Forum. This publication is for information purposes only and is based on information, data and notes from sources considered to be reliable; however, we do not guarantee accuracy, originality or reliability of such. Nothing contained herein is intended to be, nor should it be construed as, investment advice; nor should it be considered a solicitation to buy or sell any security or other financial products. Any comments or statements made herein do not necessarily reflect the thoughts of FIF, its employees or the Security Traders Association Employees, its Board of Governors or its affiliates.

Documents

STA Trading Issues Committees