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What is a Regulation SHO bona-fide market maker?

Larry E. Bergmann (Murphy & McGonigle P.C. in Washington, DC, USA)
James P. Dombach (Murphy & McGonigle P.C. in Washington, DC, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 3 July 2017




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.


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.


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.


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



Bergmann, L.E. and Dombach, J.P. (2017), "What is a Regulation SHO bona-fide market maker?", Journal of Investment Compliance, Vol. 18 No. 2, pp. 19-26.



Emerald Publishing Limited

Copyright © 2017 Murphy & McGonigle P.C.

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