SEC’s new proposal redefines “dealer” or affects DeFi

The U.S. Securities and Exchange Commission introduced a new proposed rule on March 28 aimed at getting more trading firms to register as dealers and open their books for tighter regulation.

The proposed new rule plans to expand the definition of a regulated dealer (dealer) to require all Automated Market Maker AMMs and liquidity providers (companies or individuals) with total assets greater than $50 million to regularly trade the same securities on the same day. Comparable trades or companies or individuals that profit primarily from bid-ask spreads) are included in the SEC’s regulatory scope and must meet the SEC’s registration requirements. Separately, those with at least $25 billion in U.S. debt trading volume in at least four of the last six months will also be forced to sign up. A footnote to the draft rule states that the proposed rule would also apply to digital assets that are considered securities.

SEC Chairman Gary Gensler said the move would require many firms that perform algorithm-based high-frequency trading to be scrutinized by regulators to ensure liquidity in U.S. financial markets. “I am pleased to support this proposal because I believe it reflects Congress’ statutory intent that firms with significant liquidity-providing roles in securities markets, including the U.S. Treasury market, be registered with the Commission.”

c3Hc0FIFpFGrMCm23TNYeDscW7kL1Dc7BtqAs39w.pngThe new proposed rules have sparked attention and discussion in the market.

“Cryptomom” SEC Commissioner Hester Peirce said: Markets generally benefit when there are more liquidity providers, not fewer. A wider variety of liquidity providers is also beneficial for market resilience; when one liquidity provider is reluctant to step in, another may be able to fill the void. The proposal appears to favor this model: a market in which all liquidity supply is concentrated in a few large traders regulated by the traditional model could erode market liquidity without increasing market resilience. In addition to leveling the regulatory playing field, does the proposal clearly articulate the rationale for requiring active traders who do not have any clients to register? What are the benefits of requiring active liquidity providers to register as traders? The proposed release appears to take the position that some non-dealer liquidity providers are too leveraged to be too risky for their own and the market’s interests, and that dealer rules would be to inhibit this leverage. Handy tool. However, one of the reasons our capital markets are so active is that we allow market participants to fail.


Gabriel Shapiro, general counsel of Delphi Digital, tweeted that this is a full-blown shadow attack on decentralized finance. If the proposal is accepted and executed, it could kill DeFi.

Russell Sacks, a partner at law firm King & Spalding, said he believed the real consequence of the rules would be to require large private funds to register as dealers. “What they mean is that if you’re a private fund large enough to provide liquidity to other market participants on a regular basis, you should register as a dealer. The entities targeted here are run by what we call hedge fund managers and pension funds. Capital pool.”

“Unfortunately, the SEC continues to introduce a great deal of confusion and uncertainty into the markets it seeks to regulate,” said Jake Chervinsky, head of policy at the Blockchain Association. “In a healthy rulemaking process, we don’t have to speculate on the SEC’s intentions or its Potential targets. This is far from a healthy rulemaking process.”

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-03-29 09:29
Next 2022-03-29 09:30

Related articles