Private Funds Warn SEC Underestimates Impact of ‘Dealer’ Label

Private funds are poring over the Securities and Exchange Commission’s new rules broadening the definition of a securities “dealer,” fearing more firms than predicted will be hit with steep compliance costs for heavy trading in US Treasuries and stocks.

The SEC adopted rules this week to boost oversight over proprietary traders and other firms that are responsible for significant liquidity in securities markets but operate without regulation as dealers. Such firms have taken an increased role with advancements in electronic trading, particularly in the $26 trillion Treasury market, the agency said.

The SEC predicted its new rules, which would impose ...