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Article
Publication date: 3 July 2017

Larry E. Bergmann and James P. Dombach

To summarize and analyze guidance provided by the US Securities and Exchange Commission (“SEC”) on what constitutes “bona-fide market making” for purposes of Regulation SHO’s…

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Abstract

Purpose

To summarize and analyze guidance provided by the US Securities and Exchange Commission (“SEC”) on what constitutes “bona-fide market making” for purposes of Regulation SHO’s exception to the locate requirement.

Design/methodology/approach

Explains SEC guidance on this subject, focusing on statements by the SEC and its staff related to Regulation SHO and SEC enforcement matters, including a recent SEC administrative proceeding providing concrete examples of activity that does not constitute bona-fide market making.

Findings

While there is still a lot of room for additional SEC guidance on what constitutes bona-fide market making, the SEC has provided some details on the specific type of trading that would not fall within the Regulation SHO exceptions applying to bona-fide market making activities. However, there is still a large gap between the type of activity that most likely falls within the exception and the concrete examples analyzed by the SEC.

Originality/value

Practical guidance from experienced securities lawyers that consolidates SEC guidance on the bona-fide market making exception.

Details

Journal of Investment Compliance, vol. 18 no. 2
Type: Research Article
ISSN: 1528-5812

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