Proposed Rule Seeks More Transparency in Securities Lending

The SEC has proposed an Exchange Act rule requiring lenders of securities to provide the material terms of securities lending transactions to a registered national securities association, which would then make the material terms of the securities lending transaction available to the public. “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.” According to a fact sheet that explains the rule’s requirements, the proposal is aimed at increasing transparency and efficiency in the securities lending market by requiring any person that loans a security on behalf of itself or another person to report certain material terms of those loans and related information regarding the securities the person has on loan and available to loan to a registered national securities association (RNSA), such as Finra. The proposed rule would also require that the RNSA make available to the public certain information concerning each transaction and aggregated information on securities on loan and available to loan. 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.