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Marisa
@mtcoppel
So yesterday, the SEC finalized the "dealer" rule. Below are my preliminary thoughts about what this means. Tl;dr - LPs, DEXs, RIAs, Prop Trading Firms may all be impacted. The SEC created yet another amorphous "facts and circumstances" test. https://www.sec.gov/files/rules/final/2024/34-99477.pdf
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Marisa
@mtcoppel
The rule changes the definition of a dealer under the securities laws so that dealer means a person engaged in a "regular pattern of buying and selling securities that has the effect of providing liquidity to other market participants."
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Marisa
@mtcoppel
The SEC applies a "qualitative standard" to determine if a participant falls within the scope of the rule:
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Marisa
@mtcoppel
(1) Regularly expressing trading interest; or (2) Earning revenue primarily from capturing bid-ask spreads or from capturing any incentives offered by trading venues to liquidity-supplying trading interest.
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Marisa
@mtcoppel
The SEC is VERY focused on "the effect of providing liquidity" which is an amorphous standard and pulls in market participants despite the stated exceptions. This is how LPs would be pulled in.
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Marisa
@mtcoppel
And the standard isn't clear. For instance, there is an exception for RIAs, but then the SEC explains that this exception is not "express" and depends on....guess what..."the totality of the facts" - again pointing to whether the qualitative standard is met. Depending on providing liquidity.
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