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New Reporting of Securities Loans proposal by the SEC could affect shorts


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A proposed rule change by the SEC on the reporting of securities loans, Rule 10c-1, has been published which, if enacted, may increase transparency relating to short seller activities. The full text of the proposed rule can be found here.

One of the most interesting parts of the proposal comes following the testimony of Dennis Kelleher to the House Financial Committee in March 2021, and refers to “The lack of public information and data gaps creates inefficiencies in the securities
lending market. The gaps in securities lending data render it difficult for borrowers and lenders alike to ascertain market conditions and to know whether the terms that they receive are consistent with market conditions.”

The Securities and Exchange Commission today published proposed Exchange Act Rule 10c-1, which would require lenders of securities to provide the material terms of securities lending transactions to a registered national securities association, such as the Financial Industry Regulatory Authority. The registered national securities association would then make the material terms of the securities lending transaction available to the public.

“The rule will bring much needed transparency into the securities lending market giving the market information that is both comprehensive and timely.”

SEC Chief Economist Jessica Wachter

“Securities lending and borrowing is an important part of our market structure. Currently, though, the securities lending market is opaque,” said SEC Chair Gary Gensler. “In today’s fast-moving financial markets, it’s important that market participants have access to fair, accurate, and timely information. I believe this proposal would bring securities lending out of the dark. We have put out this proposal for comment, and I look forward to hearing feedback from the public.”

The proposed rule on the reporting of Securities loans is consistent with Congress’s mandate in the Dodd-Frank Act that the Commission increase transparency regarding the loan or borrowing of securities for brokers, dealers, and investors by ensuring that market participants, the public, and regulators have access to timely and comprehensive information about the market for securities lending.

“The proposal focuses on the need for transparency in the securities lending market and further satisfies the Commission’s Congressional mandate to promulgate rules that are designed to provide such transparency to this market.”

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

The public comment period will remain open for 30 days following publication of the proposal in the Federal Register. 

This information comes directly from the SEC itself, and the proposal can be found here.

How to provide your opinion on Reporting of Securities Loans proposal

According to the SEC documentation, there are 3 ways in which retail investors can submit their opinions, these being either via an internet comment form, by email, or by snail mail. The public comments will be opened for 30 days after the reporting of securities loans proposal is listed on the federal register:

By Internet comment form

Use the Commission’s internet comment form (https://www.sec.gov/regulatoryactions/how-to-submit-comments)

By Email

Send an email to rule-comments@sec.gov. Please include File Number S7-18-21 on the subject line.

By Snail Mail

Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number S7-18-21.


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