SEC Takes a Step Toward Increased Transparency in Securities Lending Market

In a bid to boost transparency in the securities lending market, the U.S. Securities and Exchange Commission (SEC) has introduced Rule 10c-1a. This new regulation mandates specific entities to report crucial information about securities loans to registered national securities associations (RNSAs) and compels RNSAs to provide certain transaction details to the public. The rule's ultimate aim is to enhance transparency and efficiency in the securities lending sector.

SEC Chair Gary Gensler underscored the significance of this development, explaining, "Securities lending played a role in the 2008 financial crisis, and today, the securities lending market lacks transparency. In response to a mandate from Congress in the Dodd-Frank Act, the SEC is taking a step to rectify this situation. Transparency is a core component of the SEC's mission; it fosters competition and contributes to fair, orderly, and efficient markets. By adopting this rule, we aim to provide regulators and the public with greater insight into the securities lending markets."

Under Rule 10c-1a, specific confidential information pertaining to securities loans must be reported to an RNSA. This move enhances the RNSAs' ability to oversee and enforce market activities effectively. Moreover, the rule requires RNSAs to make certain information accessible to the public, including daily data on aggregate transaction activities and the distribution of loan rates for each reportable security. Currently, the only registered national securities association is the Financial Industry Regulatory Authority (FINRA).

The final rule will come into effect 60 days after it is published in the Federal Register. This step is part of the SEC's ongoing initiatives to bolster transparency, promote competition, ensure fairness in financial markets, and safeguard the interests of both regulators and the general public.