SEC Proposes More Restrictions on Broker-Dealers
Broker-dealers would be required to establish, document and maintain a system of risk management controls related to their clients' access to markets under a new SEC proposal.
The commission voted yesterday to propose a new rule that would prohibit broker-dealers from providing customers with "unfiltered" or "naked" access to an exchange or alternative trading system. Broker-dealers would be required to create financial risk management controls reasonably designed to prevent the entry of orders that exceed appropriate pre-set credit or capital thresholds, or that appear to be erroneous.
The SEC has also recommended creating regulatory risk management controls reasonably designed to ensure compliance with all regulatory requirements applicable in connection with market access.
"Unfiltered access is similar to giving your car keys to a friend who doesn't have a license and letting him drive unaccompanied," said SEC Chairman Mary Schapiro. "[The] proposal would require that if a broker-dealer is going to loan his keys, he must not only remain in the car, but he must also see to it that the person driving observes the rules before the car is ever put into drive."
The SEC is taking comments on the proposal, which will be posted on the agency's Web site soon, according to the commission.