Ruling last Wednesday, the US Court of Appeals for the Seventh District dismissed a challenge to SEC rules on market timing activities brought by trading firm DH2 Inc.
The Securities and Exchange Commission introduced the rules following an investigation by New York attorney general, Eliot Spitzer which revealed that many firms were taking advantage of "stale prices" resulting from time-zone differences.
Under the rules put in place by the securities regulator, fund boards are now required to have written policies on the pricing of securities when the underlying markets are closed.
DH2 reportedly argued that its business would suffer damage if the funds in which it traded were obliged to undertake "subjective, estimated pricing of their securities".
However, according to the MarketWatch news service, the appeals court stated that DH2 did not have the constitutional standing to challenge the SEC, going on to add that in its opinion, the trading firm doesn't have a legally protected interest "in the perpetuation of a fund valuation formula that preserves its ability to make money in market-timing arbitrage".
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