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High Frequency Traders as Dealers? Issues Ahead

A recent client alert from Morgan Lewis outlines the challenges that may lie ahead should SEC Chair Mary Jo White pursue an idea she outlined in a recent speech that would require high frequency traders to register as dealers.  The alert notes that the SEC has relied on a long-standing interpretive framework to make the “dealer-trader distinction,” and requiring high frequency traders to register as dealers would require a reinterpretation of that framework.  The authors identify three primary issues should the SEC adopt rules to require high frequency traders to register as dealers: “(1) defining high frequency traders, (2) preserving the dealer-trader distinction for other market participants, and (3) justifying the economics of any proposal.”