Securities Financing Industry News | SEC proposes changes to increase disclosure of securities lending

The Securities and Exchange Commission has proposed rule changes to increase transparency in securities lending and borrowing transactions.

Under proposed rule 10c-1 of the Exchange Act, the US securities regulator will require lenders to report the terms of a securities lending transaction to a registered national securities association, such as than the Financial Industry Regulatory Authority.

This registered national securities association will then make the terms of this loan transaction available to the public.

This step, says the SEC, will be important in ensuring that market participants, the public and regulators have access to timely and complete information about the securities lending market.

Lenders will be required to fulfill this trade reporting obligation with a registered national securities association within 15 minutes. In addition, they will be required at the end of each trading day to declare the number of shares they have loaned in each security and the number of shares available to borrow.

Commenting on the proposed rule changes, SEC Chairman Gary Gensler said, “Securities lending and borrowing are an important part of our market structure. Currently, the securities lending market is opaque.

“In today’s rapidly changing financial markets, it is important that market participants have access to fair, accurate and timely information. I believe this proposal would bring securities lending out of obscurity. We have posted this proposal for comment, and I look forward to hearing from the public. “

The SEC says the proposed rule aligns with Congress’ mandate in the Dodd-Frank Act, which encourages the regulator to improve transparency in securities lending and borrowing for brokers, traders and investors.

SEC Chief Economist Jessica Wachter said: “The rule will bring much needed transparency to the securities lending market by giving the market both complete and timely information.”

David Saltiel, Acting Director of the Division of Trading and Markets, said: “The proposal focuses on the need for transparency in the securities lending market and further satisfies the Congressional mandate of the Commission to promulgate designed rules. to ensure such transparency in this market. “

The public comment period will run for 30 days from the date the proposal is posted in the Federal Register.

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