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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

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.

Keywords

Citation

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. https://doi.org/10.1108/JOIC-04-2017-0019

Publisher

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Emerald Publishing Limited

Copyright © 2017 Murphy & McGonigle P.C.