What Is a Large Trader?
Let me explain what a large trader is: you're looking at an investor or organization that executes trades meeting or exceeding specific volume or market value thresholds set by the SEC, and this requires them to register and report their activities.
As defined by the SEC, a large trader is a person whose transactions in National Market System (NMS) securities equal or exceed two million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month.
If you fit this definition as a market participant, you must identify yourself to the SEC and submit Form 13H, which is the 'Large Trader Registration: Information Required of Large Traders Pursuant to Section 13(h) of the Securities Exchange Act of 1934 and Rules Thereunder.'
Understanding Large Traders
I want you to understand that the SEC started large trader reporting under the Market Reform Act of 1990, responding to trading technologies that allow substantial volumes and fast executions.
Typically, large traders are professional market participants and large institutional investors like mutual funds, pension funds, hedge funds, banks, and insurance companies.
These entities can buy and sell large blocks of securities, such as stocks and bonds. In the Market Reform Act of 1990 and subsequent proposals, the SEC highlighted the growing role of large traders and high-frequency traders (HFTs) in the markets, emphasizing the need for better access to their NMS securities trading activity.
Large Trader Reporting
Large trader reporting helps the SEC identify those engaged in significant market activity and analyze how their trading affects the market; it also supports investigations and enforcement.
Since 2011, if you execute a substantial amount of trading activity—measured by volume or market value—you must identify yourself to the SEC by registering through Form 13H.
The SEC will assign you a Large Trader Identification Number (LTID), which you must provide to your broker-dealers, and you need to specify which accounts it applies to.
Registered broker-dealers have to keep records of their traders' LTIDs and transaction times, monitor client accounts for qualifying large trading activity, and report transactions that meet or exceed the thresholds in NMS securities.
If the SEC requests transaction details, broker-dealers must comply by sending information via the Electronic Blue Sheets (EBS) system.
Important Considerations
Know that the SEC uses data from the Electronic Blue Sheets system to examine causes of trading volatility and check if large traders are violating securities laws, like those on insider trading.
Special Considerations
As a large trader, you must submit an initial filing through Form 13H and an annual filing for each relevant calendar year. You can also submit quarterly updates if your information changes or is inaccurate.
If you haven't reached the identifying trading levels by volume or market value, you can file for inactive status and stay exempt from filing until you hit those levels again. To terminate your status, report the end of your large trader operations on Form 13H in the next filing period.
Key Takeaways
- A large trader is an investor or organization whose trades meet or exceed SEC-established volume and market value thresholds.
- Large traders are usually professional participants and institutional investors capable of handling large securities blocks.
- Entities like mutual funds, pension funds, hedge funds, banks, and insurance companies often qualify as large traders.
- The SEC defines large traders by transactions in NMS securities reaching two million shares or $20 million daily, or 20 million shares or $200 million monthly.
- The SEC tracks large traders to assess market impacts, detect securities law violations, and safeguard against manipulative practices.
