At a Security Traders Association conference in Washington DC earlier this month, the Securities and Exchange Commission’s Division of Trading and Markets Director Erik Sirri told broker-dealers to “look for guidance” when using direct access systems when making trades.
The announcement that direct access systems guidance was pending comes after Goldman Sachs Execution and Clearing L.P., a prime broker and clearing affiliate of Goldman Sachs Group Inc., settled SEC charges over its alleged involvement in a customer fraud scheme that involved the use of direct access trading systems.
Also called sponsored access systems, direct access trading systems lets brokers quickly and efficiently handle large quantities of trades for clients. Sirri says that the guidance would help broker-dealers determine what controls need to be implemented to determine when customers are engaging in illegal trades. He says that the SEC and the Financial Industry Regulatory Authority have been in dialogues with direct access systems users.
Following the case involving the Goldman Sachs unit, SEC’s Enforcement Division Director Linda Chatman Thomsen says that brokerage firms should be held responsible when their customers engage in illegal activities.
On March 31, the Treasury Department recommended merging the SEC with the Commodity Futures Trading Commission. The recommendation was part of a regulatory reform blueprint. Sirri said the SEC would support this decision if implemented but that the major differences between the equities markets and the Commodities would have to be addressed.
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Related Web Resources:
SEC and NYSE Settle Enforcement Actions Against Goldman Sachs Unit for Role in Customers’ Illegal Trading Scheme, SEC.gov, March 14, 2007
Direct Access Trading Systems, Investopedia.com