Large Trader Reporting Regulation - Comment Letters

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Gavel.png FINAL RULES: CFTC Final Rule: Large Trader Reporting Approved at CFTC Open Meeting, July 7, 2011 SEC Final Rule: Large Trader Reporting Approved at SEC Open Meeting, July 26, 2011
Dodd-Frank Timeline, Large Trader Reporting, SEC
Effective Date Compliance Date, "Sponsored Access" Compliance Date, Other Bkr-Dlrs
October 3, 2011 November 30, 2012 May 1, 2013
Timeline, Position Reports for Physical Commodity Swaps
Final Rule Effective Date No-action Relief Deadline
July 22, 2011 September 20, 2011 June 30, 2013

In response to recent market developments, such as the transformation of trading systems from manual to electronic platforms, and other changes in market structure related to the Dodd-Frank Act, regulatory authorities such as the SEC and CFTC. In 2010, the agencies issued separate proposed rulemakings regarding large trader reporting requirements. This page consists of comment letters submitted to the agencies in response to the proposed rules.

Managed Funds Association - June 16, 2010[edit]

Large Trader Reporting System
June 16, 2010

In the letter, MFA suggests that the SEC should:

  • implement a consolidated audit trail;
  • reconsider "identifying activity level" thresholds;
  • clarify the application of Large Trader IDs (LTIDs);
  • impose confidentiality safeguards on dealers; and
  • consult industry participants to develop protections against theft and the misappropriation of data.

MFA expresses concerns that certain individuals could use reported large trader data for inappropriate and manipulative purposes and asks for further consideration from the Commission.

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Investment Adviser Association - June 22, 2010[edit]

Large Trader Reporting System
June 22, 2010

From the comment letter:

  • "The Commission should not require aggregation among affiliates that do not share information about investment decisions;
  • The Commission should not require disclosure of account-specific information on Form 13H;
  • The Commission greatly underestimates the compliance burden of a large trader reporting system;
  • The Commission should modify the frequency of filings of Form 13H and permit electronic filing of Form 13H;
  • The Commission should consider the application of the proposed rule to traders that infrequently trade at the threshold level; and
  • The Commission should maintain confidentiality of information.

The IAA suggests that the rule would significantly and unnecessarily burden investment managers and would provide the SEC with unhelpful data.

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Investment Company Institute - June 22, 2010[edit]

Large Trader Reporting System
June 22, 2010

Among other things, the comment letter puts forward the following suggestions:

  • "The Institute recommends that the Commission adopt the proposed confidentiality provisions to ensure the protection of the information on Form 13H and to ensure that the information is used solely for the regulatory purposes described in the proposal. The Institute also recommends that the Commission regularly examine broker-dealers, and consider enforcement actions, for failures to comply with their stated policies and procedures to control information leakage;
  • The Institute recommends that the Commission eliminate the emphasis on filing at the parent company and, instead, permit a parent company – whether domiciled in the United States or elsewhere – to report only for some of its large trader affiliates and permit certain large trader affiliates to report separately. The Institute also recommends that the Commission develop a system of assigning related Large Trader Identification Numbers (LTIDs) within a single complex;
  • The Institute recommends that the Commission permit investment advisers who may not yet meet the applicable threshold level of trading to satisfy the definition of a large trader to register voluntarily and make the requisite filings;
  • The Institute recommends that the Commission provide a longer period to comply with the new rule (e.g., one year); and
  • The Institute recommends, in light of the costs and burdens of the large trader proposal and the costs that will be associated with the consolidated audit trail proposal, that the Commission amend the proposal to require only that large traders:
  1. identify themselves to the Commission; and
  2. provide their LTID to broker-dealers that execute transaction on their behalf. Large traders would still be required to provide additional information to the Commission upon request."
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SIFMA - June 24, 2010[edit]

Large Trader Reporting System
June 24, 2010

In an effort to reduce redundancy and harmonize the large trader reporting system as a part of the consolidated audit trail, SIFMA recommends that the SEC adopt the following modifications to the rule:

  • "narrow the scope of traders and broker-dealers that would be subject to the proposed rule;
  • clarify the duties of broker-dealers with respect to unidentified large traders and foreign entities;
  • lengthen the time periods for broker-dealer reporting;
  • reduce the burdens associated with filing Form 13H; and
  • extend the implementation timeframes."
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GETCO - June 28, 2010[edit]

Large Trader Reporting System
June 28, 2010

In the comment letter, GETCO recommends that the SEC:

  • clarify the monitoring obligations of market centers;
  • go further with the assignment of unique large trader identification numbers (LTIDs) and also require the use of unique market participant identification numbers (MPIDs);
  • coordinate with other regulators in using the electronic blue sheet (EBS) system to obtain market information.

"As a market participant who would meet the identifying activity level thresholds and thus be considered a large trader under the new rule, GETCO fully supports the Proposal. As noted above, the EBS system is insufficient in today's trading environment. Thus, GETCO agrees that regulators need additional leve1s of transparency into the trading practices of all firms with significant activity."

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Futures Industry Association - December 2, 2010[edit]

Position Reports for Physical Commodity Swaps
December 2, 2010

From the comment letter:

  • The commission is proposing to develop its report system "before it has had time to define what must be reported and precisely who must report, and before market participants have had an opportunity to build the infrastructure necessary to collect and protect the confidentiality of the required information."
  • "The burden of implementing the proposed transitional rule will greatly exceed the benefits to the commission and market participants."
  • "The reporting requirements under the proposed position reports rule are too broad."

The FIA letter concludes with a request for the implementation of a "modified special call" process during the transition.

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National Futures Association - December 2, 2010[edit]

Position Reports for Physical Commodity Swaps
December 2, 2010

From the comment letter:

NFA addresses one important issue raised in subsection D of Section ll of the Federal Reqister release whereby the Commission specifically requests comments relating to "any role that self-regulatory organizations could play in gathering positional data on paired swaps."

"The Commission has a well-established infrastructure to obtain the necessary information regarding exchange-traded futures. With respect to paired swaps, though, the Commission will need information from SEFs, contract markets trading swaps and swap data repositories. NFA could certainly play an important role in gathering and consolidating relevant data from those varied sources and transmitting that information to the Commission. While to date we have not attempted to detail exactly how NFA would perform this function we certainly have presented Commission staff with a conceptual framework for NFA to perform this role."

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Minneapolis Grain Exchange - December 2, 2010[edit]

Position Reports for Physical Commodity Swaps
December 2, 2010

In the comment letter, MGEX shares five concerns regarding physical position reports for its hard red spring wheat (HRSW) contracts:

  • "Disruption in pricing and activity in the HRSW contract could well occur should futures position limits among the wheat contracts vary."
  • The commission is "acting before adequate information is known about the activity and volume of swaps."
  • "Setting position limits aggregately across DCMs is begging for potential discrimination."
  • Regarding the process for “pairing” a swap with a futures contract, "more clarity is necessary."
  • A final concern is "the unknown financial risk and business risk the proposed rulemaking presents."
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