New prop regulations?

Discussion in 'Prop Firms' started by illiquid, Jul 14, 2011.

  1. Why all of a sudden my firm is not allowed to change buying power, share max, but has to go through the clearing firm (penson)? Is this across the board? I was told this was a new SEC regulation.
  2. rmorse

    rmorse Sponsor

    This is because of the "Market Access Rule" that started today. It has to due with risk checks done before order entry as mandated by the SEC.
  3. Is your firm a BD? If not that could make a difference.
  4. rosy2


    is this for futures too? also, if you are an exchange member can you by pass this rule?
  5. rmorse

    rmorse Sponsor

    I'm not sure about futures. For the Equity and options market, the SEC wants the Prime Brokers to be responsible to make pre-order trade checks. So, before the order is routed to the exchange, they have to make many checks. Some of them are for the size of the order, others have to do with buying power. Does the client have enough equity to pay for the trade. Before the firms could monitor these things before and after. Now, they must be done before. This will slow down HFT because these trade checks can take "time."
  6. So did anyone notice anything different with their orders today? Everything looked the same to me. I did see that compliance for a couple of provisions of this new rule have been moved back until the end of November.

  7. rmorse

    rmorse Sponsor

    November 30 is the new date for compliance. But the firms that spent the time and effort to comply on time, have started to implement changes. For "high touch" trading, you should not see any lag. For automated trading through a "sponsored route", which normally takes advantage of Low-latency environment to compete, fractions of a second mean everything.
  8. bone

    bone ET Sponsor

    Your FCM already does a risk check every time you try to enter an order. Promise.
  9. brenden


    hey rmorse
    any link for november 30th?
    these changes are ludicrous if u ask me...
  10. Here's some info. We are not affected by this rule, I'm told, since we keep the Firm well capitalized with Firm money vs. trader money. This applies more to smaller firms, on a trader by trader basis.

    In connection with its implementation efforts to comply with
    the SEC Rule 15c3-5, Goldman Sachs Execution & Clearing, L.P. has enhanced its system of risk management controls relating to its access to exchanges and alternative trading systems for execution. The compliance dates set by the SEC are July 14, 2011 and November 30, 2011.
    The Firm’s controls required under the rule for July 14th are reasonably designed to systematically limit financial exposure to the Firm and to comply with applicable regulatory requirements in connection with market access. Specifically, the Firm has controls to limit entry of erroneous and duplicative orders on an exchange or alternative trading system as well as other orders that do not comply with regulatory requirements imposed on the Firm (e.g., Reg SHO, Reg NMS and the rules of FINRA and various exchanges). While the Firm’s controls are reasonably designed to take into account permissible trading parameters for each client, they will not prevent erroneous entries that do not exceed such parameters and, thus, should not be considered a substitute for client vigilance.

    It appears that this will applied to the Firm vs. individual traders (at least in the case of Broker Dealers, it seems).

    Anyway... just more "stuff" - geez, it never ends it seems.

    edit: will address during our Monday webinar as well.

    #10     Jul 15, 2011