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February 6, 2024

SEC’s Rules on the Definition of a Dealer Will Help Protect Investors From the Risks That High-Frequency Trading Firms Pose

WASHINGTON, D.C.—Today, the U.S. Securities and Exchange Commission (SEC) adopted final rules to ensure that market participants that perform dealer functions are required to register as a dealer. Director of Securities Policy Benjamin Schiffrin released the following statement:

“High-frequency trading firms using lightning-fast computer technology have begun to dominate our markets. High-frequency trading is responsible for about 50% of U.S. equity trading by volume, and about 50% of trading by volume in the U.S. Treasury market. These firms often trade opposite retail investor orders, but their trading patterns aren’t always fair to investors and they can be primary contributors to huge market price swings and even crashes.

“High-frequency trading firms played a significant role in both the 2010 flash crash in the U.S. equities market and the 2014 flash crash in the U.S. Treasury market. Yet despite the volume of trading represented by high-frequency trading firms, many are not registered as a dealer or government securities dealer. The SEC’s action today is a classic example of the SEC keeping pace with new developments in our securities markets to better protect investors and market stability.

“The SEC’s new rules provide that a person is a dealer or government securities dealer if they regularly express trading interest that is at or near the best available prices on both sides of the market for the same security and that is accessible to other market participants. The new rules further provide that a person is a dealer or government securities dealer if they earn revenue primarily from capturing bid-ask spreads, by buying at the bid and selling at the offer, or from capturing any incentives offered by trading venues to liquidity-supplying trading interest.

“The use of these qualitative standards to regulate dealers will confer significant benefits in terms of investor protection, market stability, transparency, oversight, and fairness. High-frequency trading firms will be required to register with the SEC and comply with capital requirements, reporting and disclosure requirements, and anti-manipulation and anti-fraud provisions. High-frequency trading firms—and any others—that perform the functions of a dealer should be no less subject to these provisions than traditional dealers. The SEC’s rules show it is committed to treating similar market activity in similar ways. We fully support these reforms.”

See our comment letter for more information.


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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