On July 27, 2011, the SEC adopted Rule 13h-1 and Form 13H under the Exchange Act to assist the SEC in identifying, and obtaining information on, “large traders.”
Rule 13h-1 defines a “large trader” as a person who directly or indirectly transacts at least 2 million shares or $20 million in exchange-listed securities during any calendar day, or at least 20 million shares or $200 million in exchange-listed securities during any calendar month. A “large trader” is also anyone who voluntarily registers as a large trader. Voluntary registration as a large trader is permitted in order to mitigate the monitoring burden of those who expect to reach the trading activity thresholds in the future.
A large trader must register as such with the SEC by submitting Form 13H, which requires certain disclosures including, among other items, its type of business and a list of affiliates. The SEC will assign each large trader a large trader identification number (LTID). Large traders will be required to disclose their LTID to their broker-dealers, as well as the accounts to which their LTID applies. Large traders must submit annual filings on Form 13H with 45 days after each calendar year and must file an amended filing on Form 13H no later than the end of the calendar quarter in which any information in their filing becomes inaccurate.
Rule 13h-1 requires additional recordkeeping by broker-dealers regarding large traders. The Rule expands upon the Electronic Blue Sheets (EBS) system used to collect transaction data from broker-dealers currently in place under Rule 17a-25. Rule 13h-1 requires broker-dealers to maintain records identifying the LTID associated with a transaction and the time a transaction occurs. This information must be available the morning after the transaction occurs and must be kept for three years, the first two in an easily accessible place.
The Rule became effective on October 3, 2011. Large traders will have two months to comply with the identification requirements, and broker-dealers will have seven months to comply with the recordkeeping and reporting requirements.