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U.S. Securities and Exchange Commission

Speech by SEC Commissioner:
A Step Toward Enhanced Market Surveillance


Commissioner Luis A. Aguilar

U.S. Securities and Exchange Commission

Washington, D.C.
July 26, 2011

In 1990, Congress gave the Commission authority to monitor large traders.1 At the time, Congress stated that it intended this authority to “greatly enhance the Commission’s understanding of how our markets are used by large traders and whether the strategies or practices employed by such large traders may pose routine or extraordinary risks, intended or not, to the stability or the integrity of our securities markets.”2 Today, the Commission takes the first step to implement Congress’ stated intention. The new rule before us, Rule 13h-1, would create the means for the Commission to identify and track the trading and market impact of significant market participants.

The Commission has long needed to enhance its ability to oversee the securities markets. Large trader reporting marks an important step in building a comprehensive system of market oversight, but many other steps must follow before the Commission has the oversight abilities that the public has a right to expect and that investor protection demands. One such step is the creation of an audit trail that effectively consolidates trading activity across all markets. I understand that the staff is in the final stages of preparing a recommendation regarding a consolidated audit trail, and I look forward to considering the staff’s recommendation in the very near future.

In the meantime, the large trader reporting rule being considered today will not only enhance Commission insight into the markets while the consolidated audit trail is being built, but it will continue to be relevant even after the consolidated audit trail is fully functional. The rule is a step forward in the SEC’s ability to oversee the market, and I will support it.3

I join my colleagues in thanking the staff for their work on this rule.

1 The Market Reform Act of 1990, Pub. L. No. 101-432, 104 Stat. 963 (1990), added Section 13(h) to the Securities Exchange Act of 1934, authorizing the Commission to adopt rules requiring large trader reporting.

2 H.R. Rep. No. 101-524, 1990 U.S.C.C.A.N. 1448 at 1466, 1990 WL 161317 at *24 (1990).

3 There is one additional provision that I would have supported had it been included. Under Rule 13h-1, broker-dealers will be identifying and pro-actively alerting customers who are not registered as large traders that they may have an obligation to do so. Even though this information will have already been collected, it will not automatically be conveyed to the Commission. Instead, the burden will be on staff to determine when, and how often, to request the information from broker-dealers. I believe that a provision to automatically provide the SEC with readily available information would have improved the rule.



Modified: 07/27/2011