Posted on April 15, 2021 in
Written by: David B. Honig
In the Hamlin case, the SEC also reported a significantly higher number of transactions and accounts receivable and stated that in 2014, more than 97% of Hamlin`s fixed-rate sales were made to other Hamlin customers. Hamlin also executed all cross-trades with two brokers, because they were willing to export trades to “pre-defined favorable spreads, narrower than the average spread of transactions on identical or similar securities made on the secondary market during the reporting period.” In the case of Market Makern, pre-agreed trading of stocks, futures, options and commodities is illegal among market creators. Most stock markets also have their own rules on the pre-agreed market and on the commodity market expressly prohibits the Commodity Exchange Act. The client`s consent is also required. Disclosure that a company can operate crosses is not sufficient. Although many client management agreements may include cross language, clear and detailed explanations and consent are a necessity. On all types of market exchanges, orders are executed on the basis of a “Bid-Ask” process that relies on “Market Makern” to find buyers and sellers. Market Makerns include a wide range of companies and trading systems. Investors can have a variety of different types of orders on a variety of different securities available for trading. Whether it`s market placement or borderline order, if the order is executed, it will be done through the bid-ask process facilitated by a Market Maker.
Like Putnam, Hamlin`s practice is contrary to his statements in its ADV form, according to the SEC. From March 2012 to October 2014, Hamlin stated in the forms that it “maintains procedures that require all cross-transactions to be conducted at a current independent market price.” Despite political and written procedures, Hamlin systematically crossed bonds at the offer price throughout the period, after the order. The main advantage of crossing securities is often granted to the seller on an illiquid title. That is why pricing is a key factor.