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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations

SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 240
[Release No. 34–98737; File No. S7–18–21]

Table of Contents

RIN 3235–AN01

Reporting of Securities Loans
Securities and Exchange
Commission.
ACTION: Final rule.
AGENCY:

The Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
is adopting a new rule under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) to increase the
transparency and efficiency of the
securities lending market by requiring
certain persons to report information
about securities loans to a registered
national securities association
(‘‘RNSA’’). The new rule also requires
certain confidential information to be
reported to an RNSA to enhance an
RNSA’s oversight and enforcement
functions. Further, the new rule requires
that an RNSA make certain information
it receives, along with daily information
pertaining to the aggregate transaction
activity and distribution of loan rates for
each reportable security, available to the
public.
DATES:
Effective date: January 2, 2024.
Compliance date: The applicable
compliance dates are discussed in Part
VIII of this release.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Sandoe, Senior Special
Counsel, James Curley, Special Counsel,
Elisabeth Van Derslice, AttorneyAdvisor, Theresa Hajost, Special
Counsel, Brendan McLeod, AttorneyAdvisor, Roland Lindmayer, AttorneyAdvisor, Josephine J. Tao, Assistant
Director, Office of Trading Practices, or
Carol McGee, Associate Director, Office
of Derivatives Policy and Trading
Practices, Division of Trading and
Markets, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–7010, at (202)
551–5777.
SUPPLEMENTARY INFORMATION: The
Commission is adopting 17 CFR
240.10c–1a (‘‘final Rule 10c–1a’’ or
‘‘final rule’’) under the Exchange Act,
which requires covered persons to
provide to an RNSA information
concerning certain securities loans, in
the format and manner required by an
RNSA, and within specified time
periods. The final rule requires an
RNSA to make publicly available certain
information it receives, within specified
time periods, and to keep confidential

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certain information it receives. The final
rule contains requirements regarding an
RNSA’s data retention and availability
and permits an RNSA to establish and
collect reasonable fees.

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I. Introduction
II. Background
III. Statutory Mandate
IV. Proposed Rule 10c–1
V. Overview of Final Rule
VI. Overview of Changes From Proposed Rule
VII. Discussion of the Final Rule
A. Scope of Persons With Reporting
Obligations—10c–1a(j)(1)
B. Reporting Agent Overview
1. Use of a Reporting Agent—Rule 10c–
1a(a)(2)
2. Reporting Agent Definition—Rule 10c–
1a(j)(4)
C. Reporting Agent Requirements—Rule
10c–1a(b)
1. Reporting Agent Reporting
Requirements—Rule 10c–1a(b)
2. Recordkeeping Requirements of a
Reporting Agent—Rule 10c–1a(b)(5)
D. Scope of Securities Required To Be
Reported—Rule 10c–1a(j)(3)
E. Scope of Transactions Required To Be
Reported—Rule 10c–1a(j)(2)
F. Information To Be Provided to an RNSA
1. Loan Data Elements—Rule 10c–1a(c)
2. Loan Modification Data Elements—Rule
10c–1a(d)
3. Confidential Data Elements—Rule 10c–
1a(e)
4. Removal of Securities Available to Loan
Data Element
5. Removal of Securities on Loan Data
Element
G. Timing of Required Reporting to an
RNSA
1. Timing of Reporting of Loans
2. Timing of Reporting of Loan
Modification
3. Timing of Reporting of Confidential Data
Elements
H. Definition of Registered National
Securities Association—10c–1a(j)(5)
I. RNSA Rules To Administer the
Collection of Information—Rule 10c–
1a(f)
J. RNSA Publication of Data—10c–1a(g)
K. RNSA Data Retention, Availability,
Fees, and Security
1. Data Retention—Rule 10c–1a(h)(1)
2. Data Availability to the Public—Rule
10c–1a(h)(3)
3. RNSA Fees—Rule 10c–1a(i)
4. Data Security—Rule 10c–1a(h)(4)
L. Data Availability to the Commission and
Other Persons—Rule 10c–1a(h)(2)
M. Cross-Border Application of Rule 10c–
1a
N. Additional Comments
VIII. Compliance Date
IX. Economic Analysis
A. Introduction and Market Failure
1. Introduction
2. Market Failures
B. Economic Baseline
1. Securities Lending
2. Current State of Transparency in
Securities Lending

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3. Characteristics of the Securities Lending
Market
4. Structure of the Securities Lending
Market
5. Structure of the Market for Securities
Lending Data and Analytics
6. Short Selling Transparency
C. Economic Effects of the Final Rule
1. Benefits of Increased Transparency in
the Securities Lending Market
2. Regulatory Benefits
3. Direct Compliance Costs
4. Other Costs
5. Reduced Benefits From Alternative
Arrangements
D. Impact on Efficiency, Competition, and
Capital Formation
1. Efficiency
2. Competition
3. Capital Formation
E. Alternatives
1. Report Loan Sizes Without a Delay
2. Alternative Timeframes for Reporting or
Dissemination
3. Only Require Dissemination of
Aggregate or Wholesale Statistics
4. Require Reporting of Shares Available
To Lend and Shares on Loan
5. Restrict Covered Persons to BrokerDealers
6. Expand Reporting Agents Beyond
Broker-Dealers and Clearing Agencies
7. Publicly Releasing the Information in
10c–1a(e)
8. Additional Information in the Reported
or Disseminated Information
9. Only Allow an RNSA To Charge Fees to
Data Reporters
10. Longer Holding Period Requirement
11. Longer Implementation Period
12. Report to the Commission Rather Than
to an RNSA
13. Report Through an NMS Plan
X. Paperwork Reduction Act
XI. Regulatory Flexibility Act Certification
XII. Other Matters

I. Introduction
The securities lending market is
opaque.1 There is a general lack of
comprehensive information on current
market conditions in the securities
lending market. Although various
market participants, such as certain
registered investment companies
(‘‘investment companies’’), are required
to periodically make certain disclosures
regarding their securities lending
activities,2 parties to securities lending
1 See Reporting of Securities Loans, Release No.
34–93613 (Nov. 18, 2021), 86 FR 69802 (Dec. 8,
2021) (‘‘Proposing Release’’), 86 FR 69804–21.
2 See, e.g., Form N–CEN, Item C.6 (requiring
general disclosures relating to an investment
company’s securities lending activities); Form N–
PORT, Items B.4 and C.12 (requiring disclosure by
certain investment companies of certain aggregate
information on borrowers of loaned securities and
collateral received for loaned securities); 17 CFR
274.101; 17 CFR 274.150. See also Investment
Company Reporting Modernization, Release No. 34–
79095 (Oct. 13, 2016), 81 FR 81870 (Nov. 18, 2016)
(discussing, among other things, requirements for
securities lending disclosures on Form N–PORT by
certain investment companies).

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
transactions are not currently required
to report the material terms of those
transactions.3 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 end borrowers
and lenders alike to ascertain market
conditions and to know whether the
terms that they receive are consistent
with market conditions. These gaps also
impact the ability of the Commission,
RNSAs and other self-regulatory
organizations (‘‘SROs’’), and other
Federal financial regulators to oversee
transactions that are vital to fair,
orderly, and efficient markets.4 Indeed,
the size of the U.S. securities lending
market can only be estimated as the data
currently available with respect to
securities lending transactions are
‘‘spotty and incomplete.’’ 5 Further, the
FSOC 2020 Annual Report noted data
gaps in certain important financial
markets including transaction data for
securities lending arrangements.6
Private vendors have attempted to
address the opacity in the securities
lending market by offering systems that
provide data to borrowers and lenders of
securities, such as systems that are only
available to those who voluntarily
provide their transaction data to the
3 See

Proposing Release, 86 FR 69803.
its 2021 Annual Report, the Financial
Stability Oversight Council (‘‘FSOC’’) provides that
‘‘[c]entralized monitoring of securities lending
activities is difficult due to the lack of
comprehensive, standardized statistics on securities
lending activities . . . the estimated value of
securities on loan globally was $3.1 trillion at the
end of September 2021, up from $2.5 trillion at the
end of September 2020 . . . U.S. securities continue
to account for the majority of global securities on
loan, accounting for 58 percent of global securities
on loan as of the end of September 2021.’’ See
FSOC 2021 Annual Report, at 46, available at
https://home.treasury.gov/system/files/261/
FSOC2021AnnualReport.pdf. See also Viktoria
Baklanova, Adam Copeland & Rebecca McCaughrin,
Reference Guide to U.S. Repo and Securities
Lending Markets (Off. of Fin. Research, Working
Paper No. 15–17, 2015), at 5, available at https://
www.financialresearch.gov/working-papers/files/
OFRwp-2015-17_Reference-Guide-to-U.S.-RepoandSecurities-Lending-Markets.pdf (‘‘Office of
Financial Research Reference Guide’’ or ‘‘OFR
Reference Guide’’).
5 OFR Reference Guide, at 5, available at https://
www.financialresearch.gov/working-papers/files/
OFRwp-2015-17_Reference-Guide-to-U.S.-Repoand-Securities-Lending-Markets.pdf.
6 See FSOC 2020 Annual Report, at 187. See also
the FSOC 2020 Annual Report describing securities
lending as ‘‘support[ing] the orderly operation of
capital markets, principally by enabling the
establishment of short positions and thereby
facilitating price discovery and hedging . . . it is
estimated that at the end of September 2020 the
global securities lending volume outstanding was
$2.5 trillion, with around 57 percent of it attributed
to the U.S,’’ at 45, available at https://
home.treasury.gov/system/files/261/
FSOC2020AnnualReport.pdf.

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data vendor.7 However, data gaps
remain despite the private vendor
attempts to address opacity in the
securities lending market. The private
systems are limited to voluntary
submissions of data. Further, the data
captured by these private vendors is not
available to the general public without
a subscription, and is not available in
one centralized location. Only
subscribers to the private vendor have
access to such data, which only
provides a limited view into securities
lending activity. No single vendor has
access to pricing information that
reflects all securities lending
transactions that take place. In addition,
data from certain private vendors is
limited to loans from a lending program
to a broker or dealer and do not capture
loans from a broker or dealer to an end
borrower. There have also been calls
from industry observers and market
participants for the Commission to
consider measures to provide additional
transparency in the securities lending
market.8
II. Background
Securities lending is the market
practice by which securities are
transferred temporarily from one party,
a securities lender, to another, a
securities borrower, for a fee.9 A
securities loan is typically a fully
collateralized transaction. Securities
lenders are generally large institutional
investors including investment
companies, central banks, sovereign
wealth funds, pension funds,
endowments, and insurance
companies.10 Owners of large, static,
unleveraged portfolios, mainly pension
funds, increasingly cite securities
lending as an important incomeenhancing strategy with minimal, or at
least controlled, risk.11 This incremental
income not only helps defined-benefit
pension funds to generate income, but
also provides investment company
investors with additional returns.12
Traditionally, securities lending and
borrowing transactions have been
conducted on a bilateral basis.13
Generally, when an end investor wishes
to borrow securities, it may obtain a
loan from its broker or dealer from the
broker’s or dealer’s inventory or through
customer margin accounts, or the broker

or dealer will borrow the securities from
a lending agent with whom it has a
relationship and will then re-lend the
securities to its customer. Loans from
lending programs to brokers or dealers
occur in what is referred to by market
participants as the ‘‘Wholesale market,’’
while loans from a broker or dealer to
the end borrower occur in what is
referred to by market participants as the
‘‘Customer market’’ (sometimes also
known as the ‘‘retail market’’).
Obtaining a securities loan often
involves an extensive search for
counterparties by brokers or dealers.14
Brokers and dealers are the primary
borrowers of securities; they borrow for
their market making activities or on
behalf of their customers.15 Brokers and
dealers who borrow securities typically
re-lend those securities or use the
securities to cover fails to deliver or
short sales arising from proprietary or
customer transactions.16 While the
identities of the ultimate securities
borrowers are usually unknown,
anecdotally, hedge funds rank among
the largest securities borrowers and
access the lending market mainly
through their prime brokers.17 Brokers
and dealers may also lend securities that
are owned by the broker or dealer,
customer securities that have not been
fully paid for (i.e., have been purchased
with a margin loan from the broker or
dealer), and the securities of customers
who have agreed to participate in a fully
paid securities lending program offered
by their broker or dealer.18
Other securities lending transactions
are often facilitated by a third party.
Custodian banks have traditionally been
the primary lending agent or
intermediary 19 and lend securities on
behalf of their customers for a fee.20
Advances in technology and operational
efficiency have made it easier to
separate securities lending services from
custody services. Such developments
have given rise to specialist third party
agent lenders, who have established
themselves as an alternative to
custodian banks.21 Agent lenders
provide potential borrowers with the
inventory of securities available for
lending on a daily basis.22
14 See

Proposing Release, 86 FR 69805.
Proposing Release, 86 FR 69805.
16 See Proposing Release, 86 FR 69805.
17 See Proposing Release, 86 FR 69805.
18 See Proposing Release, 86 FR 69805.
19 As discussed below, in Part VII.A, the final rule
defines the term ‘‘intermediary’’ as a person that
agrees to a covered securities loan on behalf of the
lender.
20 See infra Part VII.A.
21 See Proposing Release, 86 FR 69805.
22 See Proposing Release, 86 FR 69805.
15 See

7 See OFR Reference Guide, at 64, available at
https://www.financialresearch.gov/working-papers/
files/OFRwp-2015-17_Reference-Guide-to-U.S.Repo-and-Securities-Lending-Markets.pdf.
8 See Proposing Release, 86 FR 69803 n.11.
9 See Proposing Release, 86 FR 69804.
10 See Proposing Release, 86 FR 69804.
11 See Proposing Release, 86 FR 69804.
12 See Proposing Release, 86 FR 69804.
13 See Proposing Release, 86 FR 69805.

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III. Statutory Mandate

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Section 984(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (‘‘Dodd-Frank Act’’) added section
10(c) to the Exchange Act to provide the
Commission with authority over
securities lending.23 Section 984(b) of
the Dodd-Frank Act mandates that the
Commission increase transparency of
information available to brokers,
dealers, and investors.24
On November 18, 2021, to
supplement the publicly available
information involving securities
lending, close the data gaps in this
market, and minimize information
asymmetries between market
participants, the Commission proposed
Rule 10c–1 under the Exchange Act
(‘‘proposed Rule 10c–1’’ or ‘‘proposed
rule’’).25 Proposed Rule 10c–1 was
designed to provide investors and other
market participants with access to
pricing and other material information
regarding securities lending transactions
in a timely manner. The Commission
stated that the data collected and made
available by the proposed rule would
improve price discovery in the
securities lending market and lead to a
reduction of the information asymmetry
faced by end borrowers and beneficial
owners in the securities lending
market.26 In addition, the Commission
stated its preliminary belief that the
proposed rule would close securities
lending data gaps, increase market
efficiency, and lead to increased
competition among providers of
securities lending analytics services and
reduced administrative costs for broker23 Section 984(a) of the Dodd-Frank Act, now
section 10(c)(1) of the Exchange Act, makes it
unlawful for any person, directly or indirectly, by
the use of any means or instrumentality of interstate
commerce or of the mails, or of any facility of any
national securities exchange to effect, accept, or
facilitate a transaction involving the loan or
borrowing of securities in contravention of such
rules and regulations as the Commission may
prescribe as necessary or appropriate in the public
interest or for the protection of investors. 15 U.S.C.
78j(c)(1). Section 10(c)(2) of the Exchange Act states
that nothing in section 10(c)(1) may be construed
to limit the authority of the appropriate Federal
banking agency (as defined in 12 U.S.C. 1813(q)),
the National Credit Union Administration, or any
other Federal department or agency having a
responsibility under Federal law to prescribe rules
or regulations restricting transactions involving the
loan or borrowing of securities in order to protect
the safety and soundness of a financial institution
or to protect the financial system from systemic
risk. 15 U.S.C. 78j(c)(2).
24 Section 984(b) of the Dodd-Frank Act directs
the SEC to ‘‘promulgate rules that are designed to
increase the transparency of information available
to brokers, dealers, and investors with respect to
loan or borrowing securities.’’ Public Law 111–203,
sec. 984(b), 124 Stat. 1376 (2010).
25 See Proposing Release, 86 FR 69851–53.
26 Proposing Release, 86 FR 69804.

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dealers and lending programs.27 On
balance, the final rule requirements are
designed to achieve the objectives of the
proposed rule,28 as discussed below, in
Parts VII and IX, and are designed to
increase the transparency of information
available to brokers, dealers, and
investors with respect to loans or
borrowing securities.
IV. Proposed Rule 10c–1
The Commission proposed that any
person that loans a security on behalf of
itself or another person (a ‘‘Lender’’)
provide certain securities lending
information (‘‘Rule 10c–1 information’’)
to an RNSA 29 in the time periods
specified by the proposed rule (e.g.,
transaction data elements and
confidential data elements would be
reported within 15 minutes after each
loan is effected).30 As proposed, all
securities would be within the scope of
the rule.31
The proposed rule stated that a bank,
clearing agency, broker, or dealer that
acts as an intermediary to a loan of
securities (lending agent) on behalf of a
person that owns the loaned securities
(beneficial owner) shall provide the
Rule 10c–1 information to an RNSA on
behalf of the beneficial owner within
the time periods specified by the
proposed rule or enter into a written
agreement with a broker or dealer that
agrees to provide the Rule 10c–1
information to an RNSA (reporting
agent) in accordance with the proposed
rule’s requirements.32 The proposed
rule also provided that a beneficial
owner would not be required to provide
Rule 10c–1 information to an RNSA if
a lending agent acts as an intermediary
to the loan of securities on behalf of the
beneficial owner.33
The proposed rule would have
permitted persons required to report
(including intermediaries) to enter into
a written agreement with a reporting
agent that is a broker or dealer to
provide the Rule 10c–1 information to
an RNSA.34 Such a reporting agent
would be required to establish,
maintain, and enforce policies and
procedures as well as preserve
27 Proposing

Release, 86 FR 69804.
Proposing Release, 86 FR 69804.
29 See proposed Rule 10c–1(a). Proposed Rule
10c–1 referred to ‘‘Rule 10c–1 information’’ as ‘‘the
information in paragraphs (b) through (e) of this
section.’’ These paragraphs specifically included
transaction data elements, loan modification data
elements, confidential data elements, and securities
available to loan and securities on loan.
30 See, e.g., proposed Rules 10c–1(b) and (d).
31 See Proposing Release, 86 FR 69807 n.60.
32 See proposed Rule 10c–1(a)(1)(i)(A).
33 See proposed Rule 10c–1(a)(1)(i)(B).
34 See proposed Rule 10c–1(a)(1)(ii)(A).

records.35 The reporting agent would
also be required to provide an RNSA
with an updated list of persons on
whose behalf the reporting agent is
providing information under the
proposed rule.36
The proposed rule would have
required that an RNSA make certain
reported information publicly available
as soon as practicable but no later than
the next business day.37 To track the
securities lending transaction, the
proposed rule would require an RNSA
to assign each securities lending
transaction with a unique transaction
identifier.38 Loan modifications would
be provided to an RNSA if the
modifications to the loan involved any
of the terms required to be reported.39
The terms of the loan modification, but
not the parties to the loan, would be
made public.40 In addition, proposed
Rule 10c–1 required that by the end of
each business day information
concerning securities ‘‘on loan’’ and
‘‘available to loan’’ would be provided
to an RNSA.41 Such information would
be made publicly available by an RNSA
on an aggregated basis per security.42
Not all information reported to an
RNSA would have been made publicly
available under the proposed rule.
Certain information reported to an
RNSA would be necessary for regulatory
functions, but would not have been
made publicly available due to the
likelihood that it would identify market
participants or reveal investment
decisions.43 Proposed Rule 10c–1 would
have required an RNSA to keep certain
information confidential, subject to the
provisions of applicable law.44
The proposed rule would have
allowed an RNSA to charge fees to
lenders, but prohibited an RNSA from
charging for or limiting the use of the
publicly reported data. Specifically, the
proposed rule would have required an
RNSA to make the published
information available without use
restrictions and without charge, for at
least five years.45
In response to the Proposing Release,
the Commission received numerous
comments expressing a diversity of

28 See

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35 See

proposed Rules 10c–1(a)(2)(i) and (2)(iv).
proposed Rule 10c–1(a)(2)(iii).
37 See proposed Rule 10c–1(e).
38 See proposed Rule 10c–1(b).
39 See proposed Rule 10c–1(c).
40 See proposed Rule 10c–1(c).
41 See proposed Rule 10c–1(e).
42 See proposed Rule 10c–1(e)(3).
43 See Proposing Release, 86 FR 69816.
44 See proposed Rules 10c–1(d) and (e)(3).
45 See proposed Rule 10c–1(g)(3).
36 See

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perspectives,46 which are discussed in
detail below. Many commenters
supported enhanced transparency of
information about securities loans.47
46 Comment letters to the proposed rule are
available at https://www.sec.gov/comments/s7-1821/s71821.htm.
47 See, e.g., Letter from Jaime Klima, Chief
Regulatory Officer, NYSE Group, Inc. (Jan. 7, 2022)
(‘‘NYSE Letter 2’’), at 1 (stating that ‘‘regulatory
oversight of the securities lending market will be
meaningfully enhanced if Rule 10c–1 is adopted’’);
Letter from Marcia E. Asquith, Executive Vice
President, FINRA, (Jan. 7, 2022) (‘‘FINRA Letter’’),
at 1 (stating that ‘‘the public dissemination of
securities lending information under the Proposal
will, among other benefits, improve price discovery
in the securities lending market, reduce information
asymmetries, close data gaps, and increase market
efficiency’’); Letter from Kevin Kennedy, Senior
Vice President, Nasdaq, Inc. (Jan. 11, 2022)
(‘‘Nasdaq Letter’’), at 3 (supporting the proposal to
make ‘‘certain data elements publicly available,
thereby increasing the transparency of the securities
lending market and reducing competitive
advantages that may exist in the marketplace’’);
Letter from Andrew Park, Americans for Financial
Reform Education Fund (Jan. 7, 2022) (‘‘AFREF
Letter 1’’), at 1, 3 (stating ‘‘there is an urgent need
to require securities lenders to provide greater
details of their loans to a registered national
securities association (RNSA) . . . [m]arket
participants and regulators alike will greatly benefit
from the greater transparency that comes from
reporting every securities lending transaction as a
result of the proposed changes to Rule 10c–1 . . .’’);
Letter from Stephen W. Hall, Legal Director and
Securities Specialist, and Jason Grimes, Senior
Counsel, Better Markets, Inc. (Jan. 7, 2022) (‘‘Better
Markets Letter’’), at 5 (stating that ‘‘increasing
transparency into the securities lending market, as
the Proposal would do, is sound public policy. It
will increase the transparency that investors, other
market participants, and regulators (including the
SEC) have into the opaque securities lending
market.’’); Letter from James J. Angel, Ph.D., CFP,
CFA, Associate Professor of Finance, McDonough
School of Business, Georgetown University (Jan. 4,
2022) (‘‘James J. Angel Letter’’), at 2 (stating that
‘‘increasing transparency in the securities lending
market will reduce the price dispersion seen in the
market. Better information about the price and
availability of securities lending will allow asset
owners . . . to make sure that they are getting
proper value for their securities lending.’’); Letter
from Gregory Babyak, Global Head of Regulatory
Affairs, Bloomberg L.P. (Jan. 31, 2022) (‘‘Bloomberg
L.P. Letter’’), at 1 (stating ‘‘[w]e appreciate the
Commission’s endeavor to improve the
transparency and efficiency of the securities
lending market by increasing the availability of
information regarding securities lending
transactions.’’); see also Letter from Brian Lamb,
CEO, Equilend Holdings, LLC (Mar. 29, 2022)
(‘‘Equilend Letter’’) (expressing general support for
the proposed rule); Letter from Chris Iacovella,
Chief Executive Officer, American Securities
Association (Jan. 7, 2022) (‘‘ASA Letter’’), at 1
(stating ‘‘investors, especially retail investors, have
no idea what the cost to borrow a security in the
market is at any given time. The SEC and the public
need transparency into what a loan costs . . .’’);
Letter from Aron Szapiro, Head of Retirement
Studies and Public Policy, Morningstar, Inc. (Jan. 7,
2022) (‘‘Morningstar Letter’’), at 4 (expressing
general support for increasing transparency in the
securities lending market and that the public will
obtain a ‘‘well-informed view’’ of the securities
lending market from the proposed data
publication); Letter from Joseph P. Kamnik, Chief
Regulatory Counsel, Options Clearing Corp. (Jan. 7,
2022) (‘‘OCC Letter’’); Form Letter from John
Burkle, et al. (Aug. 16, 2022) (expressing support for

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Other commenters did not support the
rule.48 Certain commenters addressed
the scope of the proposed rule and the
timing for reporting information to an
RNSA as discussed below, in Parts VII.A
through VII.G.

Rule 10c–1a(a)’’) specifies that any
covered person that agrees to a covered
securities loan must comply with the
rule.57
If any person agrees to a covered
securities loan on behalf of the lender
(an ‘‘intermediary’’), the intermediary
V. Overview of Final Rule
has the obligation to provide Rule 10c–
The final rule requires covered
1a information to an RNSA.58 If an
persons 49 to provide securities loan
intermediary is not used, the lender is
information concerning reportable
required to provide Rule 10c–1a
securities 50 to an RNSA,51 in the format information to an RNSA.59 If a covered
and manner required by an RNSA,52 and securities loan consists of a broker or
within specified time periods 53 (‘‘Rule
dealer borrowing fully paid or excess
10c–1a information’’).54 The term
margin securities, only the broker or
‘‘covered person’’ is defined to mean: (1) dealer is required to provide the Rule
any person that agrees to a covered
10c–1a information to an RNSA, not the
securities loan on behalf of a lender
lender.60
However, in a change from the
(‘‘intermediary’’); (2) any person that
proposed rule, as discussed below, in
agrees to a covered securities loan as a
lender when an intermediary is not used Part VII.A, the final rule excludes from
the definition of the term ‘‘covered
unless 17 CFR 240.10c–1a(j)(1)(iii)
(‘‘final Rule 10c–1a(j)(1)(iii)’’) applies to person’’ a clearing agency when
providing only the functions of a central
a broker or dealer borrowing fully paid
counterparty as defined pursuant to 17
or excess margin securities; 55 or (3) a
CFR 240.17Ad–22(a)(3) (‘‘Rule 17Ad–
broker or dealer when borrowing fully
22(a)(2)’’) of the Exchange Act or a
paid or excess margin securities.56 In
central securities depository as defined
addition, 17 CFR 240.10c–1a(a) (‘‘final
pursuant to 17 CFR 240.17Ad–22(a)(3)
increased transparency in the securities lending
(‘‘Rule 17Ad–22(a)(3)’’) of the Exchange
market); Letter from Aaron Swaney (Jan. 4, 2022)
Act.61 Thus, a clearing agency is not
(‘‘Requiring entities with significant involvement in
required
to report Rule 10c–1a
the markets to report their activities . . . is quite
information to an RNSA for a covered
reasonable and very necessary.’’); Letter from Peter
Antosh, Lawyer (Jan. 4, 2022) (‘‘. . . the
securities loan when acting in the
information received and shared via this proposed
capacity or engaged in activities as a
rule would also . . . increase the public’s access to
central counterparty or a central
reliable pertinent market information, improving
securities depository in connection with
overall market efficiency’’); Letter from Tim DG
(Aug. 16, 2022) (‘‘This rule is essential to give retail
a covered securities loan.
and more importantly, the regulators more insight
The final rule permits a covered
to keep fraudulent behaviors at bay.’’); Letter from
person
to rely on a reporting agent that
Adam Slee (Aug. 16, 2022) (‘‘We need greater
is a broker, dealer, or registered clearing
transparency in the market to help ordinary people
agency to provide Rule 10c–1a
be able to better understand what is going on[;] this
is a good step in the right direction.’’); Letter from
information to an RNSA to fulfill such
Tim R. (Aug. 16, 2022) (‘‘This proposal will help
covered person’s reporting obligation.62
true price discovery.’’); Letter from Don M. Cromer
To do so, the covered person must enter
(Oct. 31, 2022) (‘‘I believe strongly in the
transparency of our markets, and I feel that this rule into a written agreement with a
is a strong step in the right direction, and I hope
reporting agent, that agrees to provide
to see many more like it.’’).
Rule 10c–1a information to an RNSA,
48 See, e.g., Letter from Kevin To, Data Boiler
and provide such reporting agent with
Technologies, LLC (Jan. 7, 2022) (‘‘Data Boiler
timely access to such information.63 If
Technologies Letter’’), at 4; Letter from Stephen
John Berger, Managing Director, Global Head of
the reporting agent receives the Rule
Government & Regulatory Policy, Citadel (Apr. 4,
10c–1a information from the covered
2022) (‘‘Citadel Letter’’).
person on a timely basis, the reporting
49 See infra Part VII.A (discussing the definition
agent assumes responsibility for
of the term ‘‘covered person’’).
50 See 17 CFR 240.10c–1a(j)(3) (‘‘final Rule 10c–
1a(j)(3)’’).
51 See 17 CFR 240.10c–1a(j)(5) (‘‘final Rule 10c–
1a(j)(5)’’).
52 See 17 CFR 240.10c–1a(f) (‘‘final Rule 10c–
1a(f)’’).
53 See 17 CFR 240.10c–1a(c) (‘‘final Rule 10c–
1a(c)’’); 17 CFR 240.10c–1a(d) (‘‘final Rule 10c–
1a(d)’’); 17 CFR 240.10c–1a(e) (‘‘final Rule 10c–
1a(e)’’).
54 The change in designation from proposed Rule
10c–1 to final Rule 10c–1a conforms with Federal
Register requirements for rule designations.
55 See Proposing Release, 86 FR 69803 n.9.
56 See 17 CFR 240.10c–1a(j)(1)(i) (‘‘final Rule 10c–
1a(j)(1)(i)’’); 17 CFR 240.10c–1a(j)(1)(ii) (‘‘final Rule
10c–1a(j)(1)(ii)’’); final Rule 10c–1a(j)(1)(iii).

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57 In addition, as discussed below, in Part VII.E,
the use of the term ‘‘agrees to a covered securities
loan’’ clarifies that the Rule 10c–1a information is
not limited to securities loans that have been
settled. If there are multiple lenders to the same
loan, to avoid duplicative reporting, the parties
could coordinate to file a single, combined report.
58 See final Rule 10c–1a(j)(1)(i).
59 See final Rule 10c–1a(j)(1)(ii).
60 See final Rule 10c–1a(j)(1)(iii).
61 See final Rule 10c–1a(j)(1)(i).
62 See 17 CFR 240.10c–1a(a)(2) (‘‘final Rule 10c–
1a(a)(2)’’).
63 See 17 CFR 240.10c–1a(a)(2)(i) (‘‘final Rule
10c–1a(a)(2)(i)’’); 17 CFR 240.10c–1a(a)(2)(ii) (‘‘final
Rule 10c–1a(a)(2)(ii)’’).

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compliance with the reporting
requirements under the final rule.
The final rule defines a ‘‘covered
securities loan’’ as a transaction in
which any person on behalf of itself or
one or more other persons, lends a
‘‘reportable security’’ to another person
(except for a position at a clearing
agency that results from certain central
counterparty or central securities
depository services).64 In addition, the
use of margin securities, as defined in
17 CFR 240.15c3–3(a)(4) (‘‘Rule 15c3–
3(a)(4)’’), by a broker or dealer is not a
covered securities loan for purposes of
the final rule unless the broker or dealer
lends such margin securities to another
person.65
The term ‘‘reportable security’’ is
defined as any security or class of an
issuer’s securities for which information
is reported or required to be reported to
the consolidated audit trail as required
by Rule 613 of the Exchange Act and the
CAT NMS Plan (‘‘CAT’’), the Financial
Industry Regulatory Authority’s Trade
Reporting and Compliance Engine
(‘‘TRACE’’), or the Municipal Securities
Rulemaking Board’s (‘‘MSRB’’) RealTime Transaction Reporting System
(‘‘RTRS’’), or any reporting system that
replaces one of these systems.66
The final rule requires a covered
person, directly or indirectly through a
reporting agent, to report three types of
data, which together comprise the Rule
10c–1a information. The first type of
data concerns the material terms of the
covered securities loan and must be
provided to an RNSA by the end of the
day on which the covered securities
loan is effected (‘‘data elements’’).67 The
second type of data concerns
modifications to a covered securities
loan and must be provided to an RNSA
by the end of the day on which a
covered securities loan is modified, if
the modification occurs after other
information about the covered securities
loan has already been provided to an
RNSA, and results in a change to such
information.68 The third type of data
concerns confidential information in
connection with a covered securities
loan and must be provided to an RNSA
by the end of the day on which a
covered securities loan is effected.69
The final rule requires that an RNSA
keep the third type of information
64 See 17 CFR 240.10c–1a(j)(2)(i) (‘‘final Rule 10c–
1a(j)(2)(i)’’); 17 CFR 240.10c–1a(j)(2)(ii) (‘‘final Rule
10c–1a(j)(2)(ii)’’).
65 See 17 CFR 240.10c–1a(j)(2)(iii) (‘‘final Rule
10c–1a(j)(2)(iii)’’).
66 See final Rule 10c–1a(j)(2)(ii).
67 See final Rule 10c–1a(c).
68 See 17 CFR 240.10c–1a(d) (‘‘final Rule 10c–
1a(d)’’).
69 See final Rule 10c–1a(e).

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confidential subject to applicable law.70
The final rule also requires an RNSA to
make the Rule 10c–1a information
available to the Commission; or other
persons as the Commission may
designate by order upon a demonstrated
regulatory need.71
An RNSA is required to make
publicly available the following
information not later than the morning
of the business day 72 after the covered
securities loan is effected: 73 (1) the
unique identifier assigned to a covered
securities loan by an RNSA 74 and the
security identifier; 75 (2) the data
elements, except for loan amount; 76 and
(3) information pertaining to the
aggregate transaction activity and the
distribution of rates among loans and
lenders (‘‘distribution of loan rates’’) 77
for each reportable security and related
unique identifier.78 An RNSA is also
required to make publicly available the
loan amount on the twentieth business
day after the covered securities loan is
effected along with loan and security
identifying information.79
In addition, an RNSA is required to
make publicly available any
modification to the data elements,
except for modification to the loan
amount, not later than the morning of
the business day after the covered
securities loan is modified.80 An RNSA
is also required to make publicly
70 See 17 CFR 240.10c–1a(g)(4) (‘‘final Rule 10c–
1a(g)(4)’’).
71 See 17 CFR 240.10c–1a(h)(2) (‘‘final Rule 10c–
1a(h)(2)’’).
72 Similar to the proposed rule, the final rule does
not specify, for purposes of compliance with the
final rule, exactly what time is the ‘‘end of the
business day,’’ ‘‘morning of the business day,’’ or
what holidays should not be considered a ‘‘business
day,’’ to give an RNSA the discretion to structure
its systems and processes as it sees fit and
implement its rules accordingly. See, e.g.,
Proposing Release, 86 FR 69816 n.104. The
Commission did not receive any comments
addressing this point. As an example, for times set
by an RNSA for other reporting regimes, an RNSA
has set reporting for 6 p.m. (see, e.g., https://
www.finra.org/filing-reporting/regulatory-filingsystems/short-interest) or times depending on
whether transactions are executed during or after
system hours or on non-business days (see, e.g.,
https://www.finra.org/rules-guidance/rulebooks/
finra-rules/6730).
73 See 17 CFR 240.10c–1a(g)(1) (‘‘final Rule 10c–
1a(g)(1)’’).
74 See 17 CFR 240.10c–1a(g)(1)(i)(A) (‘‘final Rule
10c–1a(g)(1)(i)(A)’’).
75 See 17 CFR 240.10c–1a(g)(1)(i)(C) (‘‘final Rule
10c–1a(g)(1)(i)(C’’) and 17 CFR 240.10c–1a(g)(5)
(‘‘final Rule 10c–1a(g)(5)’’).
76 See 17 CFR 240.10c–1a(g)(1)(i)(B) (‘‘final Rule
10c–1a(g)(1)(i)(B)’’).
77 See infra Part IX.C.1 (Benefits of Increased
Transparency in the Securities Lending Market).
78 See final Rule 10c–1a(g)(5).
79 See 17 CFR 240.10c–1a(g)(2) (‘‘final Rule 10c–
1a(g)(2)’’).
80 See 17 CFR 240.10c–1a(g)(3)(i) (‘‘final Rule
10c–1a(g)(3)(i)’’).

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available modifications to the loan
amount on the twentieth business day
after the loan amount is modified along
with loan and security identifying
information.81
The final rule requires an RNSA to
implement rules regarding the format
and manner of its collection of
information and make publicly available
such information in accordance with
rules promulgated pursuant to 15 U.S.C.
78s(b) (‘‘section 19(b)’’) and 17 CFR
240.19b–4 (‘‘Rule 19b–4’’) of the
Exchange Act.82 The final rule also
contains requirements regarding an
RNSA’s data retention and
availability.83 Specifically, an RNSA
must maintain the information on its
website or a similar means of electronic
distribution, without use restrictions,
for a period of at least five years.84 In
addition, the final rule permits an RNSA
to establish and collect reasonable fees
pursuant to rules promulgated pursuant
to section 19(b) and Rule 19b–4.85
Final Rule 10c–1a is designed to
provide access to timely, comprehensive
securities loan information to market
participants, the public, and regulators,
which will help provide borrowers and
lenders with better tools to assess the
terms of their securities loans and
enhance the ability of regulators to
oversee the securities lending market. In
addition, the final rule will result in the
public availability of new information
for investors and other market
participants to consider in the mix of
information about the securities lending
market and the securities markets
generally to better inform their
decisions.86 The final rule will also
provide regulators with information that
may be used in conjunction with other
81 See 17 CFR 240.10c–1a(g)(3)(ii) (‘‘final Rule
10c–1a(g)(3)(ii)’’).
82 See final Rule 10c–1a(f).
83 See 17 CFR 240.10c–1a(h) (‘‘final Rule 10c–
1a(h)’’).
84 See 17 CFR 240.10c–1a(h)(3) (‘‘final Rule 10c–
1a(h)(3)’’).
85 See 17 CFR 240.10c–1a(i) (‘‘final Rule 10c–
1a(i)’’) and section 19(b). See also 15 U.S.C. 78o–
3 (‘‘section 15A’’).
86 As discussed in the Proposing Release,
currently available data on the securities lending
market are incomplete, as private vendors do not
have access to pricing information that reflects all
transactions. This, in part, reflects the voluntary
submission of transaction information by
subscribers to vendors and is compounded by the
uncertain comparability of data due to, among other
things, the variability of the transaction terms
disseminated, as well as how those terms are
defined. As no single vendor has information for all
securities lending transactions that take place, some
persons pay to subscribe to multiple vendors’
systems in order to capture as much of the currently
available data as they determine to purchase, which
can be expensive. See Proposing Release, 86 FR
69807 (citing Beneficial Owners Demand
Independent Benchmarking, Global Inv., 2017
WLNR 5380098 (Feb. 2, 2017)).

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information that is currently available to
regulators to help assess market events.

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VI. Overview of Changes From
Proposed Rule
The Commission is adopting final
Rule 10c–1a with certain modifications
from the proposed rule made in
response to comments. The final rule:
• Modifies the scope of persons
required to report by:
Æ Specifying the persons who have a
reporting obligation with a new
definition of ‘‘covered person’’ to
distinguish persons who have a
reporting obligation from those persons
who do not; 87 specifically, requiring
reporting by any person that agrees to a
covered securities loan on behalf of the
lender, any person that agrees to a
covered securities loan as a lender if an
intermediary is not used, or a broker or
dealer when borrowing fully paid or
excess margin securities, and providing
that an intermediary need not be a
certain type of entity;
Æ Excluding clearing agencies from
the new definition of ‘‘covered person’’
when engaged only in certain central
counterparty or central securities
depository activities;
Æ Separating the requirements for
covered persons and reporting agents
into distinct paragraphs; 88 and
Æ Adding a new definition for
‘‘reporting agent’’ to specify that a
covered person may rely on a reporting
agent that is a broker, dealer, or
registered clearing agency 89 provided
there is a written agreement between the
covered person and the reporting agent
under which the reporting agent agrees
to establish, maintain, and enforce
policies and procedures to ensure
compliance with the final rule and if the
covered person provides timely
information to the reporting agent.90
• Modifies the scope of securities for
which loans must be reported by adding
a new definition for ‘‘reportable
security’’ to mean any security or class
of an issuer’s securities for which
information is reported or required to be
reported to the CAT, TRACE, or RTRS,
or any reporting system that replaces
one of these systems; 91 and
• Specifies the type of loan
transaction to which the final rule
applies by defining a new term ‘‘covered
securities loan,’’ which excludes the use
of margin securities by a broker or
87 See 17 CFR 240.10c–1a(j)(1) (‘‘final Rule 10c–
1a(j)(1)’’).
88 See final Rules 10c–1a(a) and 17 CFR 240.10c–
1a(b) (‘‘final Rule 10c–1a(b)’’).
89 See 17 CFR 240.10c–1a(j)(4) (‘‘final Rule 10c–
1a(j)(4)’’).
90 See final Rule 10c–1a(a)(2).
91 See final Rule 10c–1a(j)(3).

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dealer (e.g., rehypothecation) other than
the lending of such margin securities by
a broker or dealer, as well as a position
at a clearing agency that results from
certain central counterparty or central
securities depository services.92
• Streamlines information required to
be reported by:
Æ Removing the requirements in
paragraph (e) of the proposed rule to
provide securities ‘‘available to loan’’
and securities ‘‘on loan’’ information to
an RNSA and the requirement for an
RNSA to make such information
public; 93 and
Æ Replacing the requirement to report
a description of the loan modification
with a requirement to report the specific
modification and the specific data
element being modified.94
• Specifies that all data elements for
covered securities loans that were not
required to be reported on the date
agreed to or on the date last modified,
but which subsequently become covered
securities loans, must be reported when
the covered securities loan is
modified.95
• Modifies the timing of reporting by:
Æ Replacing the requirements to
report data elements and confidential
data elements to an RNSA within 15
minutes after each loan is effected with
requirements to report such elements by
the end of the day on which a covered
securities loan is effected; 96 and
Æ Replacing the requirement to report
loan modification data elements to an
RNSA within 15 minutes after each loan
is modified with a requirement to report
such elements by the end of the day on
which a covered securities loan is
modified.97
• Specifies the treatment of openended loans in existence prior to the
final rule.98
• Modifies the responsibilities of an
RNSA by:
Æ Defining the term ‘‘RNSA’’ to
specify that such term refers to an
association of brokers and dealers that is
registered as a national securities
association pursuant to 15 U.S.C. 78o–
3 (‘‘section 15A’’) of the Exchange
Act; 99
Æ Separating an RNSA’s data
publication requirements into new
paragraph (g) of the final rule to more
92 See 17 CFR 240.10c–1a(j)(2) (‘‘final Rule 10c–
1a(j)(2)’’).
93 See proposed Rule 10c–1(e).
94 See 17 CFR 240.10c–1a(d)(1)(ii) (‘‘final Rule
10c–1a(d)(1)(ii)’’).
95 See 17 CFR 240.10c–1a(d)(2) (‘‘final Rule 10c–
1a(d)(2)’’).
96 See final Rules 10c–1a(c) and 10c–1a(e).
97 See final Rule 10c–1a(d).
98 See final Rule 10c–1a(d)(2).
99 See final Rule 10c–1a(j)(5).

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clearly delineate an RNSA’s
requirements from the reporting
requirements applicable to covered
persons and reporting agents; 100
Æ Replacing the requirement for an
RNSA to publish the loan amount (as
well as any modifications to loan
amount) as soon as practicable and
instead: (1) make the loan amount
public on the twentieth business day
after the covered security loan is
effected (or modified), and (2) make
specified loan and security identifying
information public on the twentieth
business day after the covered security
loan is effected (or modified); 101
Æ Adding a new requirement to
paragraph (g) of the final rule for an
RNSA to publish, on a daily basis,
information pertaining to the aggregate
transaction activity and distribution of
loan rates for each reportable security in
order to provide market participants
with timely access to loan rate
information that incorporates
information about loan sizes; 102 and
Æ Removing the requirement in
paragraph (g) of the proposed rule that
collected information be made available
to the public ‘‘without charge,’’ and
removing the requirement in paragraph
(h) of the proposed rule that fees only
be paid from persons who provide Rule
10c–1a information directly to an
RNSA.103
In addition, the final rule includes
some technical modifications, such as
modifying the rule designation to
conform with Federal Register
requirements as well as additional
technical or conforming modifications
that are minor and not substantive.
Responses to comments requesting
clarification about the cross-border
scope of the rule are also provided
below, in Part VII.M. Further, the
Commission is providing compliance
dates requiring that: (1) RNSAs propose
rules pursuant to final Rule 10c–1a(f)
within four months of the effective date
of final Rule 10c–1a; (2) the proposed
RNSA rules are effective no later than
12 months after the effective date of
final Rule 10c–1a; (3) covered persons
report Rule 10c–1a information to an
RNSA starting on the first business day
24 months after the effective date of
final Rule 10c–1a (the ‘‘reporting date’’);
and (4) RNSAs publicly report Rule
10c–1a information pursuant to final
Rules 10c–1a(g) and (h)(3) within 90
calendar days of the reporting date.
100 See 17 CFR 240.10c–1a(g) (‘‘final Rule 10c–
1a(g)’’).
101 See final Rule 10c–1a(g)(2).
102 See final Rule 10c–1a(g)(5).
103 See proposed Rule 10c–1(h).

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VII. Discussion of the Final Rule
A. Scope of Persons With Reporting
Obligations—10c–1a(j)(1)
Proposed Rule

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The proposed rule would have
required that any person that loans a
security on behalf of itself or another
person shall provide Rule 10c–1
information to an RNSA.104 The
Proposing Release stated that the term
‘‘person,’’ for purposes of the Exchange
Act, means a natural person, company,
government, or political subdivision,
agency, or instrumentality of a
government.105
The proposed rule also stated that ‘‘a
bank, clearing agency, broker, or dealer,
that acts as an intermediary to a loan of
securities (lending agent) on behalf of a
person that owns the loaned securities
(beneficial owner) shall . . . provide the
Rule 10c–1 information to an RNSA
. . . .’’ 106 However, if a person loaned
a security on behalf of itself, and an
intermediary did not act on its behalf,
such person would be the one required
to provide the Rule 10c–1 information
to an RNSA.107
The Commission proposed that when
‘‘a bank, clearing agency, broker, or
dealer’’ acts as an intermediary (or
‘‘lending agent’’) on behalf of a person
that owns loaned securities the lending
agent would have the reporting
obligation.108 When discussing the
rationale for this requirement, the
Commission stated that lending agents
are in the best position to know when
securities have been loaned from the
portfolios that the lending agent
represents, and that the owner may not
know that the lending agent has lent
securities from their portfolio until after
the time prescribed by proposed Rule
10c–1 to provide Rule 10c–1
information to an RNSA.109 The
Proposing Release also stated that
custodian banks have traditionally been
the primary lending agent or
intermediary and lend securities on
behalf of their customers.110
The Commission proposed a singlesided approach of only applying the
rule’s reporting requirements to
104 See proposed Rule 10c–1(a). See also
Proposing Release, 86 FR 69807.
105 See Proposing Release, 86 FR 69807 (citing 15
U.S.C. 78c(a)(9)).
106 See proposed Rules 10c–1(a)(1)(i)(A)(1) and
10c–1(a)(1)(i)(B) (stating that ‘‘[a] beneficial owner
is not required to provide the Rule 10c–1
information to an RNSA if a lending agent acts as
an intermediary to the loan of securities on behalf
of the beneficial owner’’).
107 See proposed Rule 10c–1(a)(1).
108 See proposed Rule 10c–1(a)(1)(i)(A).
109 See Proposing Release, 86 FR 69809.
110 See Proposing Release, 86 FR 69805.

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securities lenders and intermediaries
acting on behalf of lenders, and not to
borrowers. The Proposing Release
explained that such an approach could
avoid the potential double counting of
transactions.111 It also explained that
lenders are more likely to have access to
the Rule 10c–1 information, but a
borrower may not be privy to all of the
information required to be provided to
an RNSA under the proposed rule.112
The Commission also stated that to the
extent smaller entities engage in
securities lending, they generally
employ lending agent intermediaries,
which would relieve them from having
to provide proposed Rule 10c–1
information to an RNSA.113
Accordingly, the Commission stated its
preliminary belief that requiring only
securities lenders or intermediaries to a
loan of securities to provide the
proposed Rule 10c–1 information will
alleviate the potential for the double
counting of transactions and limit the
burdens of proposed Rule 10c–1 to
larger institutions.114
Final Rule
Many commenters requested
additional clarity regarding the market
participants that would be required to
provide the proposed Rule 10c–1
information to an RNSA.115 As
111 See

Proposing Release, 86 FR 69807.
Proposing Release, 86 FR 69807.
113 See Proposing Release, 86 FR 69808.
114 See Proposing Release, 86 FR 69808.
115 See Letter from Susan Olson, General Counsel,
and Sarah A. Bessin, Associate General Counsel,
Investment Company Institute (Jan. 7, 2022) (‘‘ICI
Letter 1’’), at 8 (‘‘there is a lack of clarity in the
Proposal regarding the concepts of ‘lender,’
‘beneficial owner,’ ‘lending agent,’ and ‘reporting
agent’ ’’); Letter from Peter J. Germain, Chief Legal
Officer, Federated Hermes, Inc. (Jan. 7, 2022)
(‘‘Federated Hermes Letter’’), at 2; Letter from
Elizabeth Kent, Managing Director, Global Public
Policy Group, and Roland Villacorta, Managing
Director, Securities Lending, BlackRock (Jan. 7,
2022) (‘‘BlackRock Letter’’), at 2 (‘‘We recommend
the Commission provide more clarity on the scope
of lenders and loans subject to the proposed
requirements.’’). In addition, one commenter stated
that empowering the owner of the securities to
determine the manner of reporting would reduce
the implementation costs for lenders and mitigate
the risk of inaccurate data being reported. The
commenter further stated that responsibility for
reporting obligations would then be included in
either the master securities lending agreement
between lender and borrower or in the securities
lending agent agreement between lender and
lending agent, or both. See Letter from Jennifer W.
Han, Executive Vice President, Chief Counsel &
Head of Global Regulatory Affairs, Managed Funds
Association (Aug. 4, 2023) (‘‘MFA Letter 3’’), at 7.
The final rule permits covered persons to contract
with reporting agents that are brokers, dealers, or
registered clearing agencies under certain
conditions intended to ensure that the reporting
obligations are met. A beneficial owner cannot
assign the reporting obligation when an
intermediary is used, as the intermediary has the
reporting obligation under final Rule 10c–1a(j)(1)(i).
112 See

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discussed below in this part, to address
commenter concerns, and to specify
which persons are required to provide
Rule 10c–1a information to an RNSA,
the final rule defines the term ‘‘covered
person’’ to mean: (1) any person that
agrees to a covered securities loan on
behalf of a lender (‘‘intermediary’’) other
than a clearing agency when providing
only the functions of a central
counterparty or central securities
depository; (2) any person that agrees to
a covered securities loan as a lender
when an intermediary is not used,
unless the borrower is a broker or dealer
borrowing fully paid or excess margin
securities; or (3) a broker or dealer when
borrowing fully paid or excess margin
securities.116 Accordingly, if a person
uses an intermediary, such as a lending
agent that is a custodian bank, to run its
lending program to lend securities to
other persons on its behalf, the
custodian bank is the covered person for
purposes of the final rule.117 If,
However, the final rule allows persons other than
banks, brokers, dealers, and clearing agencies to act
as intermediaries (i.e., lending agents), which could
increase competition among such entities. The final
rule also permits covered persons to use third party
vendors to help facilitate the fulfillment of their
reporting obligation. These elements of the final
rule should address some of the implementation
costs raised by the commenter. As the Commission
stated in the Proposing Release, lending agents are
in the best position to know when securities have
been loaned from the portfolios that the lending
agent represents. Indeed, a beneficial owner might
not know that the lending agent has lent securities
from the portfolio until after the time prescribed by
final Rule 10c–1a to provide Rule 10c–1a
information to an RNSA. See Proposing Release, 86
FR 69809. Expanding reporting requirements
further, as the commenter suggests, could reduce
the timeliness of the information required to be
reported.
116 See final Rule 10c–1a(j)(1). The final rule’s
approach of requiring reporting by an intermediary
if one is used, and by the lender if an intermediary
is not used, is comparable to one commenter’s
recommendation ‘‘to include a set reporting
hierarchy . . . to determine the counterparty that
will be responsible to report the required
information.’’ See Letter from Linklaters LLP (Apr.
1, 2022) (‘‘Linklaters Letter’’), at 5.
117 One commenter recommended that ‘‘[lending]
agents should not be liable for the failure to report
any information that they do not control as the
intermediary unless such information has been
provided to them by the principal in a timely
manner. The rule should also reflect that a lending
agent should not be liable for the content of
information provided to it by a principal unless the
agent has actual knowledge that the information is
inaccurate.’’ See Letter from Briget Polichene, Chief
Executive Officer, Institute of International Bankers
(Jan. 7, 2022) (‘‘IIB Letter’’), at 10. However, the
Commission continues to believe that lending
agents, as parties to the loan, are well positioned
to provide the required Rule 10c–1a information
and often are in possession of more information
concerning the loan than the principal (or beneficial
owner). See Proposing Release, 86 FR 69109–10
(‘‘responsibility for failing to provide 10c–1
information to an RNSA should be on the lending
agent and not the beneficial owners because the
lending agent is directly responsible for the loan of
securities’’).

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
however, a person does not use an
intermediary to lend securities on their
behalf, such person is the covered
person for purposes of the final rule. For
example, a fund is a covered person for
purposes of the final rule if that fund
runs its own lending program and lends
securities to other persons without the
use of an intermediary, such as
custodian bank. Further, a broker or
dealer who borrows fully paid or excess
margin securities from its customer is
the covered person for purposes of the
final rule, and the customer of the
broker or dealer is not a covered person.
The definition of ‘‘covered person’’
uses the term ‘‘agrees to’’ instead of
‘‘loans a security’’ as proposed to make
clear that a customer of a broker or
dealer that loans a reportable security to
the broker or dealer in a fully paid
lending arrangement is not required to
comply with the final rule. Instead, the
broker or dealer that borrows the
reportable security is required to
comply with the final rule and must
report Rule 10c–1a information on the
covered securities loan. Further, as
discussed below, in Part VII.E, the term
‘‘agrees to a covered securities loan’’
also provides that Rule 10c–1a
information is not limited to covered
securities loans that have been settled.
One commenter recommended that
the Commission not ‘‘limit permitted
‘lending agents’ for purposes of the rule
to banks, clearing agencies, brokers, or
dealers, as proposed,’’ but instead
‘‘permit any lending agent that acts as
an intermediary to a loan of securities
to report on behalf of a beneficial
owner.’’ 118 The commenter stated that
as long as a lending agent could meet
the requirements of the proposed rule,
such an expansion would ‘‘reflect the
variety of lending agents that funds use’’
and ‘‘would facilitate reporting by
beneficial owners that prefer to use nonbroker-dealer lending agents to report
their securities loans.’’ 119 The
Commission agrees, and has modified
the final rule to define ‘‘covered person’’
to encompass ‘‘[a]ny person that agrees
to a covered securities loan on behalf of
the lender.’’ 120
One commenter sought clarification of
whether a ‘‘branch or the entity’’ would
be responsible for proposed Rule 10c–1
information reporting if the branch
118 See

ICI Letter 1, at 5.
ICI Letter 1, at 5.
120 See final Rule 10c–1a(j)(1)(i). Although the
Commission is not limiting who can act as an
intermediary for the purposes of this rule, other
regulatory requirements may apply to persons who
intermediate transactions such as loans of
securities. See, e.g., 15 U.S.C. 240.78o (section 15(b)
of the Exchange Act) (registration requirements); 15
U.S.C. 240.78c (sections 3(a)(4) and (5) of the
Exchange Act) (definitions of broker and dealer).

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119 See

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enters into a covered securities loan,
although the commenter did not define
the terms ‘‘branch’’ or ‘‘entity.’’ 121
Determining the ‘‘person’’ required to
report in complex organizational
structures will depend on the facts and
circumstances. A branch or office of a
covered person, as opposed to a
subsidiary or affiliate, may not
constitute a distinct covered person, but
rather different parts of the same
covered person.122 The designation of a
business unit as a branch, office, or
otherwise, is not dispositive of whether
such business unit has the obligation to
report Rule 10c–1a information.123 One
commenter sought confirmation that a
clearing agency’s provision of
depository or central clearing services,
including novation, processing,
settlement, netting, and incidental
services, do not make the clearing
agency an intermediary to a loan of
securities.124 The Commission agrees
that a clearing agency’s provision of
depository or central clearing
services 125 to securities lending
transactions is not the type of activity
that final Rule 10c–1a is designed to
cover. By acting as a central
counterparty, including by novating a
loan, a clearing agency steps into the
shoes of the parties to the loan and
technically may become a person that
121 See Letter from Mary Jane Schuessler,
Canadian Securities Lending Association (Jan. 12,
2022) (‘‘CASLA Letter’’), at 3.
122 See Regulation SBSR—Reporting and
Dissemination of Security-Based Swap Information,
Release No. 34–74244 (Feb. 11, 2015), 80 FR 14564,
14652 n.813 (Mar. 19, 2015) (discussing foreign
branches and stating that ‘‘because a branch or
office has no separate legal existence under
corporate law, the branch or office would be an
integral part of the U.S. person itself’’). See also
infra Part VII.M (discussing the cross-border
application of final Rule 10c–1a).
123 See infra Part VII.M.
124 See Letter from Michele Hillery, Managing
Director, General Manager of Equity Clearing and
DTC Settlement Service, DTCC (Jan. 7, 2022)
(‘‘DTCC Letter’’), at 3–4. See also DTCC Letter, at
1 (stating that ‘‘requiring the clearing agency to
assume the obligations of traditional lending agents
for providing [traditional securities depository,
central counterparty, or incidental services] would
misplace the burden of responsibility and result in
double reporting.’’); OCC Letter, at 9
(recommending that a clearing agency should not
assume the reporting obligations as an intermediary
to a loan of securities under the proposed rule when
it is not actively involved with the lending of
securities of beneficial owners or for their own
account, but providing only central counterparty
services).
125 See DTCC Letter, at 2–3 (stating that it is ‘‘a
central securities depository that . . . holds
securities on behalf of its participants and effects
transfers between participant accounts by book
entry, including to facilitate the settlement of
securities lending transactions.’’ Also, that
‘‘depository activities and related incidental
services do not affect supply or demand in the
securities lending market, the pricing of securities
lending transactions, or other relevant data
regarding the securities lending market’’).

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75651

agrees to a loan on its own behalf or on
behalf of another person. However,
requiring reporting by a registered
clearing agency providing such central
counterparty or securities depository
services would not provide additional
transparency and would be duplicative
of the reporting requirements that apply
to the loan’s lender or intermediary
prior to it being cleared. Accordingly,
the final rule specifically excludes from
the ‘‘covered person’’ definition a
clearing agency when providing only
the functions of a central counterparty
pursuant to 17 CFR 240.17Ad–22(a)(2)
(‘‘Rule 17Ad–22(a)(2)’’) or a central
securities depository pursuant to 17
CFR 240.17Ad–22(a)(3) (‘‘Rule 17Ad–
22(a)(3)’’).126 The exclusion would not
apply when the clearing agency is acting
in a different capacity (e.g., as an
intermediary providing the services of a
lending agent).127
Certain commenters supported the
proposed single-sided reporting
structure (i.e., requiring reporting by
any person that loans a security on
behalf of itself or another person, but
not requiring reporting by the borrower)
to alleviate concerns about double
counting loans of securities.128 One
126 See final Rule 10c–1a(j)(1)(i). Rule 17Ad–
22(a)(2) of the Exchange Act defines ‘‘central
counterparty’’ to mean a clearing agency that
interposes itself between the counterparties to
securities transactions, acting functionally as the
buyer to every seller and the seller to every buyer.
Rule 17Ad–22(a)(3) of the Exchange Act defines
‘‘central securities depository’’ to mean a clearing
agency that is a securities depository as described
in section 3(a)(23)(A) of the Exchange Act. Section
3(a)(23)(A) describes a securities depository as a
person who: (i) acts as a custodian of securities in
connection with a system for the central handling
of securities whereby all securities of a particular
class or series of any issuer deposited within the
system are treated as fungible and may be
transferred, loaned, or pledged by bookkeeping
entry without physical delivery of securities
certificates; or (ii) otherwise permits or facilitates
the settlement of securities transactions or the
hypothecation or lending of securities without
physical delivery of securities certificates.
127 The Commission understands that clearing
agencies do not currently provide services related
to securities loans beyond acting as a central
counterparty or central securities depository.
Registered clearing agencies that wish in the future
to expand services relating to securities loans, will
be required to submit rule filings under section
19(b) and Rule 19b–4 in which they will be
required to describe how the proposed changes
would comply with existing federal securities laws,
including the final rule. Clearing agencies that are
operating under an exemption from registration will
be required to seek modifications to their
exemptions that are compliant with the final rule
in order to expand the services they provide in
relation to securities loans. See section 19(b) and
Rule 19b–4 of the Exchange Act.
128 See, e.g., ICI Letter 1, at 5; Letter from Phoebe
Papageorgiou, Vice President, Trust Policy,
American Bankers Association (Jan. 7, 2023) (‘‘ABA
Letter’’), at 2–3; Letter from Thomas Deinet,
Executive Director, The Standards Board of

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commenter stated that ‘‘we strongly
support the Proposal’s approach of
requiring single-sided reporting . . . the
approach would reduce the potential for
double counting of securities lending
transactions and limit the burden on
lenders. A single-sided reporting regime
avoids problems with reconciling
reports by each party to a
transaction.’’ 129 Other commenters
supported the application of the final
rule’s reporting requirements to all
lenders to facilitate a comprehensive
view of the securities lending market.130
In consideration of these comments, the
final rule generally employs a singlesided approach to reporting, with the
Rule 10c–1a information reporting
obligations placed on either an
intermediary that agrees to a covered
securities loan on behalf of the lender,
or any person that agrees to a covered
securities loan as a lender when an
intermediary is not used.131 Consistent
with the proposed rule, this approach is
designed to avoid the potential for the
double counting of transactions that
could arise if both sides, borrowers and
lenders, were required to report final
Rule 10c–1a information to an RNSA.132
However, one commenter opposed the
proposed single-sided reporting
approach, and recommended that the
final rule require reporting by SECregistered brokers or dealers only and
for transactions in which they act as
borrowers, lenders, or lending agents.133
The commenter stated that ‘‘whether
Alternative Investments (Jan. 21, 2022) (‘‘SBAI
Letter’’), at 1 (‘‘We support single-sided reporting,
i.e., requiring the lenders (or their agents) to report,
but not duplicating the framework by requiring
borrowers to report as well.’’); Letter from Joseph
J. Barry, Senior Vice President and Global Head of
Regulatory Affairs, State Street Corp. (Apr. 1, 2022)
(‘‘State Street Letter’’), at 3 (stating that ‘‘we do not
object to the imposition of a single-sided reporting
obligation on the lender of a security (or its
agent)’’).
129 See ICI Letter 1, at 5.
130 See Morningstar Letter, at 3–4 (stating that
‘‘we recommend that all persons who lend should
be required to report. As some lenders may not be
registrants, the public will not have a
comprehensive picture of securities lending
transactions if only those registered with the
Commission are required to report to an RNSA.’’);
Nasdaq Letter, at 2 (stating that ‘‘the inclusion of
all market participants who lend provides investors
with comprehensive information from which to
formulate investing strategies’’).
131 See final Rules 10c–1a(j)(1)(i) and (ii). Final
Rule 10c–1a(j)(1)(ii) includes a technical change
from the proposed rule to add the phrase ‘‘unless
paragraph (j)(1)(iii) of this section applies’’ to clarify
that only the broker or dealer when borrowing fully
paid or excess margin securities, and not the lender,
has the obligation to report in that instance.
132 See Proposing Release, 86 FR 69808.
133 See Letter from Fran Garritt, Director,
Securities Lending & Market Risk, and Mark
Whipple, Chairman, Committee on Securities
Lending, Risk Management Association (Jan. 7,
2022) (‘‘RMA Letter’’), at 3.

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acting as borrower or lender acting in a
principal or agency capacity, [requiring
SEC-registered broker-dealers to report]
would substantially reduce overall
implementation costs, would not
impose costs on a single side of the
market and would still provide for
sufficient market data.’’ 134 The
commenter reasoned that reporting costs
would be lower, due to brokers or
dealers having existing reporting
infrastructure and connectivity.135 The
commenter cited to the Office of the
Financial Research Pilot Survey (‘‘OFR
Pilot Survey’’) 136 to support the view
that although such a structure would be
‘‘less comprehensive than lender
reporting, the data loss entailed should
not be substantial’’ and ‘‘would be
substantially captured’’ and
‘‘sufficient.’’ 137 The commenter also
stated that its proposed structure
‘‘would also provide better data
integrity as broker-dealers are better
positioned than beneficial owners and
Lending Agents to evaluate whether a
securities loan is made for the purpose
of facilitating short sales or settlement of
fails rather than some other
purpose.’’ 138
The Commission is not adopting the
commenter’s recommended reporting
structure. Requiring reporting by
brokers or dealers acting as borrowers,
lenders, or lending agents introduces
the same double counting problem that
the final rule’s single-sided reporting
approach is designed to address.139
Additionally, under the final rule
brokers or dealers are permitted to act
as reporting agents provided specified
requirements are met. The Commission
also does not agree with the commenter
that the data lost if its recommended
reporting structure were adopted would
not be substantial. The OFR Pilot
Survey cited by the commenter states
that banks, credit unions, pension
funds, and hedge funds, all of whom
134 See

RMA Letter, at 3.
RMA Letter, at 13 n.19.
136 See A Pilot Survey of Agent Securities Lending
Activity, Off. Of Fin. Research, Working Paper No.
16–08, 2016 at 7–8, available at https://
www.financialresearch.gov/working-papers/2016/
08/23/pilot-survey-of-agent-securities-lendingactivity/ (In its annual reports, the FSOC identified
a lack of data about securities lending activity as a
priority for the Council. This pilot data collection
was a step toward addressing this critical data need.
The voluntary pilot collection included end-of-day
loan-level data for three non-consecutive business
days from seven securities lending agents. Most but
not all participating lending agents were
subsidiaries of banks.).
137 See RMA Letter, at 13 (stating that ‘‘roughly
85% of loans made by Lending Agents are to
registered broker-dealer borrowers’’) (citing the OFR
Pilot Survey, at 8).
138 See RMA Letter, at 14.
139 See Proposing Release, 86 FR 69807.
135 See

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would not be required to report covered
securities loans under the commenter’s
proposed structure, are the borrowers of
nearly 15 percent of the value of all
outstanding securities loans.140 Based
on the survey, the Commission
estimated that brokers or dealers
facilitate between 60 percent and 90
percent of transactions in the equity
lending market.141 Accordingly, while
the Commission acknowledges that the
precise percentage of broker or dealer
facilitated transactions is unknown, the
survey indicates that a significant
percentage of transactions in the equity
lending market, between 10 percent and
40 percent, are facilitated by nonbrokers or dealers.142 Therefore, the
commenter’s recommended approach
would exclude a significant percentage
of securities lending transactions from
being reported. Any improved ‘‘data
integrity’’ achieved by the commenter’s
proposed structure would be
undermined by its exclusion of
securities loans that do not involve an
SEC-registered broker or dealer acting as
borrower, lender, or lending agent.
Additionally, excluding certain types of
entities from reporting would create
incentives for market participants to
agree to covered securities loans
through such excluded entities, which
would further diminish the
comprehensiveness of the reported
information. Instead, the Commission
agrees with one commenter’s statement
that, ‘‘all lenders (or their lending or
reporting agents) should be required to
report, whether or not they are
registered with the Commission.
Otherwise, the data will be
incomplete.’’ 143 As such, the final rule’s
definition of ‘‘covered person’’ is not
limited to brokers or dealers.
One possible alternative to address
double counting under the commenter’s
140 See

OFR Pilot Survey, at 7–8.
Proposing Release, 86 FR 69807 n.68.
142 See Proposing Release, 86 FR 69807 n.68
(stating that, ‘‘[w]hile the Commission preliminarily
believes that the majority of transactions involve
broker-dealers the precise percentage is currently
unknown. Based on 2015 survey data the
Commission stated that it estimated that brokerdealers facilitate between 60% and 90% of
transactions in the equity lending market.’’), citing
the OFR Pilot Survey, at 7–8. Further, custodian
banks have traditionally been the primary lending
agent or intermediary and lend securities on behalf
of their customers for a fee. See, e.g., Proposing
Release, 86 FR 69805 (citing Comptroller’s
Handbook: Custody Services/Asset Management,
Off. Of the Comptroller of the Currency, at 27 (Jan.
2002), available at https://www.occ.treas.gov/
publications-and-resources/[]publications/
comptrollers-handbook/files/custody-services/
index-custody-services.html).
143 See Letter from Howard Myerson, Managing
Director, Financial Information Forum (Jan. 19,
2022) (‘‘FIF Letter’’), at 7. See also Letter from JD
Cumpson (Mar. 14, 2022).
141 See

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suggestion of requiring only brokers or
dealers to report as lenders and
borrowers would be to require
identification (such as using a flag) of
loans reported by borrowers and loans
reported by lenders. However, this
would not address the lack of securities
loan data from persons that are not
brokers or dealers, or the incentives to
avoid reporting by migrating to such
persons. Further, expanding the
reporting obligation generally to all
lenders and borrowers, and requiring
each to identify whether they are
reporting as a lender or borrower, would
increase burdens unnecessarily,
resulting in the collection of duplicative
(albeit identified) data by more persons.
One commenter suggested that ‘‘it
would be appropriate for the borrower
broker-dealer (not the lender customer)
to provide the Rule 10c–1 information
to an RNSA where such broker-dealer
borrows a customer’s fully paid
securities.’’ 144 The Commission agrees
with this recommendation. Such an
approach would help avoid placing a
reporting obligation on customers who,
upon lending fully paid or excess
margin securities, may not have timely
access to the required information and
less familiarity with reporting
information to RNSAs than their broker
or dealer.145 Therefore, the definition of
the term ‘‘covered person’’ under the
final rule generally does not apply to a
borrower,146 except in the instance of a
broker or dealer borrowing fully paid or
excess margin securities from a
customer.147 The definition specifically
includes a broker or dealer when
borrowing fully paid or excess margin
securities pursuant to 17 CFR 240.15c3–
3(b)(3) (‘‘Rule 15c3–3(b)(3)’’).148 This
144 See Letter from Kenneth E. Bentsen, Jr.,
President and CEO, SIFMA (Jan. 7, 2022) (‘‘SIFMA
Letter 1’’), at 18 n.66 (stating that it ‘‘understands
this would apply where a broker-dealer borrows
securities it carries in a customer’s account’’).
145 For example, a lender may not necessarily
know when a broker or dealer has borrowed
securities from its fully paid or excess margin
account if it has not reviewed the schedule of
borrowed securities provided to it pursuant to 17
CFR 240.15c3–3(b)(3)(ii) (‘‘Rule 15c3–3(b)(3)(ii)’’) or
if the collateral for the securities loan is not
provided to the lender before the close of the
business day pursuant to 17 CFR 240.15c3–
3(b)(3)(iii)(A) (‘‘Rule 15c3–3(b)(3)(iii)(A)’’), whereas
the broker or dealer will know that such securities
have been lent by the customer upon the broker or
dealer borrowing them. See 17 CFR 240.15c3–3
(‘‘Rule 15c3–3’’). See also SIFMA Letter 1, at 13
(stating that ‘‘in fully paid lending arrangements,
collateral is not required to be delivered until the
end of the business day on which the loan is
entered into’’).
146 See final Rules 10c–1a(j)(1)(i) and (ii).
147 See final Rule 10c–1a(j)(1)(iii).
148 See final Rule 10c–1a(j)(1)(iii). Paragraph
(b)(3) of Rule 15c3–3 under the Exchange Act
addresses a broker-dealer’s borrowing of fully paid
or excess margin securities of a customer. This rule

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definition will result in a broker or
dealer (as opposed to the customer)
being responsible for reporting Rule
10c–1a information to an RNSA if it
borrows fully paid or excess margin
shares from one of its customers.
Pursuant to final Rule 10c–1a, the
broker or dealer would also be
responsible for reporting Rule 10c–1a
information to an RNSA should the
broker or dealer act as a lender of those
shares to a third-party.149
B. Reporting Agent Overview
1. Use of a Reporting Agent—Rule 10c–
1a(a)(2)
Proposed Rule
The Commission proposed that ‘‘[a]
person required to provide Rule 10c–1
information . . . including a lending
agent, may enter into a written
agreement with a broker or dealer that
agrees to provide the Rule 10c–1
information to an RNSA (reporting
agent).’’ 150 The proposed rule stated
that a ‘‘reporting agent is required to
provide the Rule 10c–1 information to
an RNSA if it has entered into [the
required] written agreement . . . and is
provided timely access to the Rule 10c–
1 information.’’ 151 The proposed rule
also stated that ‘‘[a]ny person that enters
into [the required] written agreement
. . . with a reporting agent is not
required to provide the Rule 10c–1
information to an RNSA if the reporting
agent is provided timely access to the
Rule 10c–1 information.’’ 152 Therefore,
under the proposed rule, only when a
person fulfilled the requirements of: (i)
entering into a written agreement with
a broker or dealer that agrees to provide
the Rule 10c–1 information; 153 and (ii)
requires, among other things, that a broker-dealer
borrowing fully paid or excess margin securities
from a customer to enter into a written agreement
with the customer that, among other things,
specifies that the broker-dealer must undertake to:
(1) provide the lender collateral that fully secures
the loan consisting of cash, U.S. Treasuries, an
irrevocable letter of credit issued by a bank, or such
other collateral as the Commission designates as
permissible; (2) mark the loan to market not less
than daily and provide additional collateral as
necessary to fully collateralize the loan; and (3)
notify the lender that the provisions of the
Securities Investor Protection Act may not protect
the lender and that, therefore, the collateral
delivered to the lender may constitute the only
source of satisfaction of the broker-dealer’s
obligation to return the securities. In the adopting
release for these requirements, the Commission
stated that the rule will ‘‘compel the firm to turn
over the collateral physically to the lender.’’ See
Net Capital Requirements for Brokers and Dealers,
Release No. 34–18737 (May 13, 1982), 47 FR 21759,
21768 (May 20, 1982).
149 See final Rule 10c–1a(j)(1)(ii).
150 See proposed Rule 10c–1(a)(1)(ii)(A).
151 See proposed Rule 10c–1(a)(1)(ii)(B).
152 See proposed Rule 10c–1(a)(1)(ii)(C).
153 See proposed Rule 10c–1(a)(1)(ii)(C).

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providing the reporting agent with
timely access to the Rule 10c–1
information,154 would the person shift
its Rule 10c–1 information reporting
obligation for a loan of securities from
itself to a reporting agent.
The Commission in the Proposing
Release stated its preliminary belief that
it is appropriate that lenders, including
a lending agent, be able to enter into a
written agreement with a broker or
dealer acting as a reporting agent to
provide Rule 10c–1 information to an
RNSA on behalf of the lender because
such an arrangement would ease
burdens on lenders, including lending
agents, that do not have and do not want
to establish connectivity to an RNSA.155
The Commission also stated that the use
of reporting agents could reduce the
costs for non-RNSA-members, because
rather than incurring the costs
associated with directly reporting Rule
10c–1 information, such persons would
have the option to use a third-party to
provide the Rule 10c–1 information to
an RNSA.156
Final Rule
The Commission received broad
support from commenters for the
proposed rule’s provisions permitting
covered persons to use a reporting agent
if certain conditions are met.157 One
commenter stated that it ‘‘agree[s] with
the Commission that permitting the use
of reporting agents to report 10c–1
information will ‘ease burdens on
Lenders, including lending agents, that
do not have or do not want to establish
connectivity to an RNSA.’ ’’ 158 The
Commission continues to believe it is
appropriate to permit a covered person
to use a reporting agent to help fulfill
Rule 10c–1a information reporting
obligations. Furthermore, many entities
that may act as reporting agents may
have existing RNSA connectivity,
experience with reporting information
to an RNSA, and economies of scale that
could benefit covered persons with final
Rule 10c–1a reporting obligations.
Thus, consistent with the proposed
rule, the final rule requires that, in order
to use a reporting agent to fulfill its Rule
10c–1a information reporting
obligations, a covered person must: (1)
enter into a written agreement with the
reporting agent, and (2) provide the
reporting agent with timely access to the
154 See

proposed Rule 10c–1(a)(1)(ii)(C).
Proposing Release, 86 FR 69810.
156 See Proposing Release, 86 FR 69809.
157 See, e.g., infra note 173 (listing commenters
that requested an expansion of the types of entities
that could act as reporting agents under the final
rule).
158 See DTCC Letter, at 4.
155 See

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations

required Rule 10c–1a information.159
Requiring a written agreement between
the covered person and the reporting
agent will memorialize the contractual
obligations for the reporting agent to
provide the Rule 10c–1a information to
an RNSA.160 Consistent with the
Proposing Release, for purposes of final
Rule 10c–1a, ‘‘timely access’’ means that
the reporting agent has access to the
Rule 10c–1a information with sufficient
time to provide such information to an
RNSA (i.e., in the format and manner
required by the rules of an RNSA and
within the time periods specified in
paragraphs (c) through (e) of the final
rule). However, this definition of
‘‘timely access’’ differs from the
Proposing Release in that the timing of
the required reporting of certain
securities loan information to an RNSA
has changed (i.e., to no longer require
reporting ‘‘within the fifteen minutes
after the securities loan is effected or the
terms of the loan are modified’’).161 As
discussed below, in Part VII.G, the
required timing for the reporting of data
elements pursuant to final Rules 10c–
1a(c), (d), and (e) is now by the end of
the day on which a covered securities
loan is effected or modified.162
If the reporting agent is unable to
provide Rule 10c–1a information to an
RNSA because it lacks timely access to
it, the covered person who enters into
the written agreement with the reporting
agent is responsible for providing such
information to an RNSA.163 Ultimately,
responsibility for non-compliance will
be a facts and circumstances
determination. For instance, if the
covered person fails to provide the
reporting agent with access to accurate
Rule 10c–1a information, then the
covered person remains responsible for
compliance with Rule 10c–1a.164
However, if the reporting agent that
receives timely and accurate
information from the covered person
provides late or inaccurate information
to an RNSA, as discussed below in Part
VII.C.1, the reporting agent is
159 See

final Rule 10c–1a(a)(2).
Proposing Release, 86 FR 69822 n.129.
161 See Proposing Release, 86 FR 69810.
162 See final Rules 10c–1a(c), (d), and (e).
163 For example, if a reporting agent establishes
an automated system that pulls Rule 10c–1a
information directly from the records management
system of a beneficial owner, but the beneficial
owner disables the connectivity to the automated
system for any reason, the reporting agent would
not have access to the Rule 10c–1a information. As
a result, the beneficial owner is required to provide
Rule 10c–1a information to an RNSA under final
Rule 10c–1a(a)(2).
164 See 17 CFR 240.10c–1a(a)(1) (‘‘final Rule 10c–
1a(a)(1)’’).

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responsible for compliance with final
Rule 10c–1a.165
2. Reporting Agent Definition—Rule
10c–1a(j)(4)
Proposed Rule
The Commission proposed that, ‘‘[a]
person required to provide Rule 10c–1
information . . . may enter into a
written agreement with a broker or
dealer that agrees to provide the Rule
10c–1 information to an RNSA
(reporting agent) within the time
periods specified in Rule 10c–1.’’ 166
The Proposing Release stated that
limiting who can act as a reporting agent
to a broker or dealer that is regulated
directly by the Commission, would aid
the Commission in overseeing
compliance with proposed Rule 10c–1
and provide RNSAs with the ability to
oversee the activity of its members that
perform a reporting agent function.167
The Proposing Release also stated that if
reporting agents were to include other,
non-broker or dealer entities, the
Commission might lack an efficient way
to oversee how the entity is complying
with its responsibility to provide Rule
10c–1 information to an RNSA.168
Final Rule
The Commission received numerous
comments discussing what types of
entities should be permitted to act as a
reporting agent, including differing
views on the proposed rule’s restriction
to only brokers or dealers.169 The
Commission also received comment
stating that there was a lack of clarity in
the Proposing Release around the term
‘‘reporting agent.’’ 170
The Commission received a comment
supporting the requirement that
reporting agents be registered brokers or
dealers and stating that it ‘‘would allow
an RNSA to oversee the activity of
reporting agents and enable it to fulfill
an essential regulatory function that
promotes just and equitable principles
of trade.’’ 171 Another commenter
165 See 17 CFR 240.10c–1a(b) (‘‘final Rule 10c–
1a(b)’’).
166 See proposed Rule 10c–1(a)(1)(ii)(A).
167 See Proposing Release, 86 FR 69810–11.
168 See Proposing Release, 86 FR 69811.
169 See, e.g., ICI Letter 1, at 4–5; DTCC Letter, at
4; FIF Letter, at 7; James J. Angel Letter, at 6; IIB
Letter, at 10; Letter from Edward M. Marhefka,
Managing Director, Global Head of Equities Data
and Analytics, IHS Markit (Jan. 4, 2022) (‘‘IHS
Markit Letter’’), at 4; Letter from Robert Zekraus,
COO & Head of Americas, Pirum Systems Limited
(Jan. 7, 2022) (‘‘Pirum Letter’’), at 4–5; Letter from
Robert Sloan, Managing Partner, S3 Partners, LLC
(Apr. 1, 2022) (‘‘S3 Partners Letter’’), at 12; Letter
from Boaz Yaari, CEO, Sharegain Ltd. (Jan. 7, 2022)
(‘‘Sharegain Letter’’), at 2. But see RMA Letter, at
13.
170 See ICI Letter 1, at 8.
171 See Nasdaq Letter, at 2.

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expressed support for permitting
brokers or dealers to act as reporting
agents.172 However, other commenters
recommended that entities other than
brokers or dealers should be eligible to
act as reporting agents.173
One commenter recommended that
registered clearing agencies should be
eligible to serve as a reporting agent
because such agencies are subject to
regulation and examination by the
Commission and have experience
providing the infrastructure that would
be used by, and function as, a reporting
agent.174 Another commenter suggested
that reporting agents should include
clearing agencies that operate stock
lending platforms.175 Having considered
the commenters’ recommendations, the
Commission agrees that registered
clearing agencies should be permitted to
act as reporting agents on behalf of
covered persons, and therefore be
included under the final rule’s
definition of the term ‘‘reporting
agent.’’ 176 Allowing registered clearing
agencies to act as reporting agents will
facilitate cost-effective and efficient
reporting.177 Additionally, like brokers
and dealers, registered clearing agencies
are subject to the Commission’s direct
oversight and examination functions.178
172 See Equilend Letter, at 1 (stating that it
‘‘maintains two FINRA registered and SEC
registered broker-dealers . . . and welcomes the
opportunity to act as a reporting agent for the
Proposed Rule’’).
173 See, e.g., FIF Letter, at 7 (stating that ‘‘[f]or
other reporting systems established by the
Commission (such as CAT), vendors that are not
broker-dealers are permitted to submit reports on
behalf of reporting parties. The same approach
should apply for the proposed securities loan
reporting system’’); James J. Angel Letter, at 6; IIB
Letter, at 10; IHS Markit Letter, at 4–5; Sharegain
Letter, at 2 (stating that ‘‘the qualification criteria
and application process to become a broker-dealer
go far beyond the scope of reporting services under
the proposed Rule and would unfairly restrict the
market’’); Letter from Tyler Gellasch, Executive
Director, Healthy Markets Association (Mar. 2,
2022) (‘‘HMA Letter’’), at 8 (stating that ‘‘by opening
up the reporting agent role to non-broker entities,
the Proposal could promote more competition
amongst intermediaries—including lending
agents—in the securities lending marketplace’’);
DTCC Letter, at 4 (‘‘we do not believe it is necessary
to limit the scope of entities that may be reporting
agents exclusively to broker-dealers’’).
174 See DTCC Letter, at 4.
175 See James J. Angel Letter, at 6 (stating that
lending platforms operated by clearing agencies
‘‘could provide low-cost reporting solutions to
market participants’’).
176 See final Rule 10c–1a(j)(4).
177 See IHS Markit Letter, at 15 (stating that
‘‘[a]llowing entities other than FINRA-registered
broker-dealers to facilitate reporting is a costeffective and efficient way to achieve the SEC’s
objectives . . . . The Commission should
encourage a variety of organizations to provide
innovative and cost-effective solutions to meet this
regulation.’’)
178 See, e.g., 15 U.S.C. 240.78q(b) (section 17(b) of
the Exchange Act).

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Some commenters stated that
allowing non-brokers or dealers to act as
reporting agents could facilitate lowcost service providers.179 Another
commenter stated that ‘‘by opening up
the reporting agent role to non-broker
entities, the Proposal could promote
more competition amongst
intermediaries—including lending
agents—in the securities lending
marketplace.’’ 180 One commenter stated
that limiting the reporting agents to only
brokers or dealers would unfairly
restrict the market for such services.181
Other commenters specifically stated
that certain non-brokers or dealers have
existing technological capability to be
able to act as a reporting agent (e.g., data
vendors and entities that report
information for other regulatory
purposes).182 One such commenter
supported leveraging the existing
technology of non-broker-dealers to
reduce implementation time and staff
training costs relating to the
implementation of proposed Rule 10c–
1.183
Allowing clearing agencies, as well as
brokers or dealers, to act as reporting
agents should help facilitate low-cost
service providers, introduce more
competition, and not unduly restrict the
market for reporting agent services to
only brokers or dealers.184 Expanding
the definition of reporting agent to
include registered clearing agencies
strikes a balance between increasing
participation and competition in the
marketplace for such services, while
only applying the definition to entities
over which the Commission has direct
oversight.185 Limiting who can act as a
179 See IIB Letter, at 10 (stating that many lenders
already rely on non-broker or dealer third-party
vendors to ‘‘perform similar functions, and such
vendors would likely be willing to provide
securities lending reporting services and be lowcost providers’’). See also Letter from Edmon
Blount, Executive Director, Advanced Securities
Consulting (Jan. 7, 2022) (‘‘Advanced Securities
Consulting Letter’’), at 1.
180 See HMA Letter, at 8.
181 See Sharegain Letter, at 2.
182 See S3 Partners Letter, at 12; Sharegain Letter,
at 2; IIB Letter, at 10.
183 See S3 Partners Letter, at 12.
184 See infra Part IX.E.6 (stating that ‘‘expanding
reporting agents to entities other than brokerdealers would serve to increase the number of
entities that would compete to provide lenders and
lending agents with reporting services. Thus,
expanding the eligibility of reporting agents would
serve to promote more competition in this market,
potentially leading to lower fees for lenders and
lending agents that would rely on these reporting
agents for these services.’’).
185 See Standards for Covered Clearing Agencies,
Release No. 34–71699 (Mar. 12, 2014), 79 FR 29508,
29510 (May 22, 2014) (‘‘If the Commission registers
a clearing agency, the Commission oversees the
clearing agency to facilitate compliance with the
Exchange Act using various tools that include,
among other things, the rule filing process for self-

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reporting agent to brokers, dealers, and
registered clearing agencies, all of which
are regulated directly by the
Commission, will assist the Commission
in overseeing compliance with final
Rule 10c–1a. Including other entities
would leave the Commission without an
efficient way to oversee how the entity
is complying with its responsibility to
provide Rule 10c–1a information to an
RNSA on behalf of a covered person.
Two commenters stated that some nonbrokers or dealers should be eligible to
serve as reporting agents because they
are already permitted to report
information in connection with other
Commission reporting regimes and have
experience doing so.186 The commenters
identified the CAT, TRACE, and
FINRA’s Large Options Positions Report
(‘‘LOPR’’) as examples of reporting
regimes that allow brokers or dealers to
use non-brokers or dealers as reporting
agents. In each of the reporting regimes
identified by the commenters, the
reporting requirements apply to entities
that are registered with the Commission
or are a member of an RNSA or an
exchange,187 and that retain legal
liability for compliance notwithstanding
the existence of an agreement for a third
party to provide connectivity services
on behalf of the registrant.188
The Commission is also clarifying that
the ability to use a reporting agent does
not prevent covered persons from
contracting privately with third-party
vendors to assist in reporting. The
regulatory organizations (‘SROs’) and on-site
examinations by Commission staff. The
Commission also oversees registered clearing
agencies through regular contact, including onsite
visits, by Commission staff with clearing agency
senior management and other personnel and
ongoing interactions of Commission staff with the
registered clearing agencies regarding current and
expected proposed rule changes under section 19(b)
of the Exchange Act.’’).
186 See FIF Letter, at 7–8; S3 Partners Letter, at
12.
187 See FINRA Rule 6810(u) (‘‘‘Industry Member’
means a member of a national securities exchange
or a member of a national securities association that
is required to record and report information
pursuant to the CAT NMS Plan and this Rule 6800
Series’’); FINRA Rule 6730(a) (applying the TRACE
reporting obligations to FINRA members); FINRA
Rule 2360(b)(5)(A)(i)b (‘‘FINRA member firms that
conduct a business in standardized options but are
not themselves members of the options exchange on
which such options are listed and traded . . . are
required under FINRA Rule 2360(b)(5)(A)(i)b to
report to the LOPR system positions in standardized
options covering the same underlying security or
index that meet the 200 contract reporting
threshold.’’).
188 See, e.g., Nasdaq Rulebook, General Equity
and Options Rules—General 7: Consolidated Audit
Trail Compliance, at section 8(c)(3), available at,
https://listingcenter.nasdaq.com/rulebook/nasdaq/
rules. See also FINRA Regulatory Notice 21–29
(Aug. 13, 2021), available at, https://www.finra.org/
rules-guidance/notices/21-29 (FINRA guidance on
outsourcing to third party vendors and the retention
of responsibility by the FINRA member).

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proposed rule required that ‘‘[a]ny
person that loans a security on behalf of
itself . . . shall provide to a [RNSA] the
[Rule 10c–1 information].’’ 189 However,
the proposed rule did not address the
use of a third-party vendor by a lender
to help facilitate its reporting
obligations. The rule as adopted does
not prohibit the use of third-party
vendors by covered persons. The use of
third-party vendors by covered persons
to help facilitate the reporting of Rule
10c–1a information should allow
covered persons flexibility and decrease
costs,190 and help address a
commenter’s concerns with the ability
of certain covered persons to report.191
The difference between a covered
person relying on a reporting agent to
fulfill its Rule 10c–1a reporting
requirements and using a third-party
vendor to help facilitate its Rule 10c–1a
reporting is solely with respect to
liability and responsibility under final
Rule 10c–1a. When a covered person
uses a reporting agent and meets the
conditions of the rule, the covered
person may rely on a reporting agent to
fulfill its reporting obligations.192
However, the use of other third-party
vendors that are not reporting agents
would not relieve a covered person of
its obligation to report Rule 10c–1a
information to an RNSA, as reliance on
a reporting agent would.193
Some commenters stated that
providing the proposed Rule 10c–1
information to a reporting agent that is
a broker or dealer could reveal
confidential information to such broker
or dealer relating to covered securities
loans.194 One such commenter stated
that ‘‘[w]ithout an alternative, beneficial
owners would either be forced to build
their own direct reporting to RNSAs to
mitigate these concerns, thereby
significantly increasing their costs, or to
exit the market entirely, thereby
189 See proposed Rule 10c–1(a)(1). See also
Proposing Release, 86 FR 69809 (stating that a
lender that did not use a lending agent or reporting
agent to provide Rule 10c–1 information to an
RNSA must directly provide such information to an
RNSA).
190 See infra Parts IX.C.3 and IX.E.6. Additionally,
the use of third party vendors by covered persons
could enable the innovation and development of
novel reporting services, such as the data trusts
described by one commenter. See Advanced
Securities Consulting Letter, at 1–3.
191 See ICI Letter 1, at 12 (stating that ‘‘beneficial
owners will not have the infrastructure to report’’).
192 See final Rule 10c–1a(a)(1).
193 See final Rule 10c–1a(a)(2) (stating that ‘‘a
covered person may rely on a reporting agent to
fulfill its reporting obligations under paragraph
(a)(1)’’ of the final rule, if certain conditions are
met)
194 See S3 Partners Letter, at 12; IHS Markit
Letter, at 4; Advanced Securities Consulting Letter,
at 1–3.

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reducing overall liquidity.’’ 195 Another
commenter mentioned operational and
confidentiality considerations involved
with appointing a reporting agent.196
Brokers, dealers, and clearing
agencies, like all persons, are subject to
prohibitions on misuse of material nonpublic information. Brokers, dealers,
and clearing agencies are subject to
Commission examination for
compliance with this,197 and other,
requirements. To the extent that a
covered person may, nonetheless, be
concerned about providing sensitive
information to another person, it may
elect to hire third party vendors for
specific tasks to help with compliance
obligations. As noted above, the covered
person would retain legal responsibility
for reporting.
One commenter appeared to believe
that all reporting required by the
proposed rule must be done through
members of FINRA (the only currently
existing RNSA).198 The final rule does
not require that all covered persons that
are required to report Rule 10c–1a
information to an RNSA be members of
that RNSA.199 The final rule requires
only that reporting agents, if relied upon
by a covered person to fulfill its
reporting obligations, must be a broker,
dealer, or registered clearing agency.200
Covered persons, including persons that
are not RNSA members, that elect not to
use a reporting agent, are responsible for
providing the Rule 10c–1a information
to an RNSA directly and may do so
without becoming RNSA members.201
Having considered the commenters’
recommendations discussed above, in
this part, and for the foregoing reasons,
the final rule defines the term
‘‘reporting agent’’ to mean ‘‘a broker,
dealer, or registered clearing agency that
enters into a written agreement with a
covered person under paragraph (a)(2)
of [the final rule].’’ 202 Therefore, the
final rule adds ‘‘registered clearing
agencies’’ to the proposed rule’s scope
of entities that are permitted to act as
reporting agents, which was limited to
brokers or dealers.203

195 See

Pirum Letter, at 5.
BlackRock Letter, at 3, 9.
197 See, e.g., 15 U.S.C. 240.78q(b) (section 17(b) of
the Exchange Act).
198 See James J. Angel Letter, at 6.
199 See final Rule 10c–1a(j)(1).
200 See final Rule 10c–1a(j)(4).
201 See final Rule 10c–1a(a)(1).
202 See final Rule 10c–1a(j)(4).
203 See proposed Rule 10c–1(a)(1)(ii)(A).

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C. Reporting Agent Requirements—Rule
10c–1a(b)
1. Reporting Agent Reporting
Requirements—Rule 10c–1a(b)
Proposed Rule
As discussed above, in Part VII.B,
paragraph (a)(1)(ii)(B) of the proposed
rule required the reporting agent to
provide the Rule 10c–1 information to
an RNSA if the reporting agent had
entered into a written agreement (with
the covered person) to provide the Rule
10c–1 information to an RNSA pursuant
to paragraph (a)(1)(ii)(A) 204 of the
proposed rule and the reporting agent
had been provided timely access to such
Rule 10c–1 information by the covered
person. The proposed rule, in
paragraphs (a)(2)(i) through (a)(2)(iv),205
also included requirements for the
reporting agent to assist both an RNSA
and the Commission with surveillance
and compliance with RNSA
requirements and proposed Rule 10c–
1.206 In proposing the specific
requirements for reporting agents, the
Commission preliminarily believed it
was appropriate for a reporting agent to
be responsible for providing Rule 10c–
1 information to an RNSA, provided the
reporting agent has contractually agreed
to provide such information to an RNSA
and the reporting agent has also been
provided with timely access to such
information.207
In addition, the proposed rule’s
requirement that the reporting agent
enter into a written agreement with an
RNSA was intended to evidence the
explicit permission the reporting agent
has to provide Rule 10c–1 information
on behalf of the covered person.208
Similarly, the reporting agent would
also have been required to provide an
RNSA with a list of each covered person
on whose behalf the reporting agent
would be providing the Rule 10c–1
information (and also to update the list
by the end of the day when the list
204 See Proposing Release, 86 FR 69810 (stating
‘‘[s]uch written agreements under proposed Rule
10c–1(a)(1)(ii)(A) would memorialize and provide
proof of the contractual obligations for the reporting
agent to provide the Rule 10c–1 information to an
RNSA.’’).
205 The reporting-related requirements specific to
the reporting agent, as proposed, included:
paragraph (a)(2)(i) of the proposed rule’s policies
and procedures requirement; paragraph (a)(2)(ii) of
the proposed rule’s written agreement with an
RNSA requirement; and, paragraph (a)(2)(iii) of the
proposed rule’s list of names requirement. See
proposed Rules 10c–1(a)(2)(i) through (a)(2)(iii).
Proposed paragraph (a)(2)(iv) is discussed below, in
Part VII.C.2, regarding a reporting agent’s
recordkeeping requirements.
206 See Proposing Release, 86 FR 69809.
207 See Proposing Release, 86 FR 69810.
208 See Proposing Release, 86 FR 69810.

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changes).209 As the Commission
explained in the Proposing Release,
requiring the reporting agent to provide
the identities of each covered person on
whose behalf the reporting agent is
providing Rule 10c–1 information to an
RNSA is intended to provide the
Commission with the ability to obtain
the identities of the covered persons
from an RNSA in order to aid the
Commission with its oversight of the
covered persons that have entered into
agreements with reporting agents,
including with their compliance with
the proposed rule.210 In addition, the
proposed requirement for a reporting
agent to have written policies and
procedures was intended to provide
regulators with a means to examine and
enforce a reporting agent’s compliance
with proposed Rule 10c–1. Moreover,
the proposed recordkeeping
requirements were intended to help
facilitate the Commission’s oversight of
reporting agents and to review the
reporting agents’ compliance with the
requirements to provide the Rule 10c–
1 information to an RNSA.211
Final Rule
The Commission sought specific
comment regarding the role and
requirements of a reporting agent. The
Commission received a number of
reporting agent-related comments in
response; however, most of these
comments focused primarily on a
covered person’s use of a reporting
agent or the eligibility requirements for
a reporting agent, as discussed above, in
Part VII.B.2, rather than the
requirements of an already eligible
reporting agent, as relevant here.212 The
Commission is adopting the specific
reporting agent requirements,
substantially as proposed, but with
some non-substantive modifications.
First, the requirements are relocated
into a separate paragraph (b) under the
final rule.213 This non-substantive,
technical modification is intended to
streamline and simplify the proposed
rule text, by combining into one
paragraph, the requirements specific to
a reporting agent (as distinguished from
the requirements applicable to the
covered person) in order to help clarify
which party is ultimately responsible
209 See

Proposing Release, 86 FR 69810.
Proposing Release, 86 FR 69810–11.
211 See Proposing Release, 86 FR 69811.
212 One commenter, however, stated that it is
clearer and more efficient to impose the obligation
directly on the lending and reporting entities when
the conditions of the proposed rule are satisfied.
See ICI Letter 1, at 4 (discussing a reporting agent’s
role in terms of its obligation to report for purposes
of compliance with the requirements of the
proposed rule).
213 See final Rules 10c–1a(b) through (b)(5).
210 See

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for providing the Rule 10c–1a
information to an RNSA.
Second, to reduce redundancy and
complexity in the proposed rule text,
paragraph (b) of the final rule requires
that ‘‘any reporting agent’’ that assumes
the reporting obligation on behalf of the
covered person, pursuant to paragraph
(a)(2) of the final rule, comply with the
specific requirements in paragraph (b) of
the final rule.214 A covered person that
enters into a written agreement with a
reporting agent to provide the Rule 10c–
1a information to an RNSA on behalf of
the covered person as required by the
final rule, and that provides the
reporting agent with timely access to the
Rule 10c–1a information, may rely on
the reporting agent to fulfill the covered
person’s reporting obligations under
paragraph (a)(1) of the final rule.
Lastly, the final rule combines the
reporting-related requirements that were
previously located in paragraphs
(a)(1)(ii)(B) and (a)(2) of the proposed
rule with the proposed reporting agent
recordkeeping requirements in
paragraphs (a)(1)(ii)(A) and (a)(1)(ii)(B),
into paragraph (b) in the final rule.215
Paragraph (b) of the final rule’s
specific inclusion of the term ‘‘reporting
agent,’’ which is defined in final Rule
10c–1a(j)(4) to mean a broker, dealer, or
registered clearing agency that enters
into a written agreement with a covered
person under paragraph (a)(2) of the
final rule, as well as inclusion of the
‘‘assumes the reporting obligation’’
language, sets forth the reporting agent’s
ultimate responsibility for reporting
Rule 10c–1a information to an RNSA.
The final rule provides that a reporting
agent will be required to provide the
Rule 10c–1a information to an RNSA
under the new reporting regime only
when the covered person has both: (1)
entered into the required written
agreement with the reporting agent, and
(2) provided the reporting agent with
timely access to the Rule 10c–1a
information.216 Thus, if a reporting
agent is unable to provide the Rule 10c–
1a information to an RNSA because it
lacks timely access to it, the covered
person who enters into the written
agreement with the reporting agent
214 See final Rule 10c–1a(j)(4), defining ‘‘reporting
agent’’ to mean a broker, dealer, or registered
clearing agency that enters into a written agreement
with a covered person under paragraph (a)(2) of
final Rule 10c–1a.
215 See final Rule 10c–1a(b). Paragraph (b)(1) of
the final rule clarifies that the reporting agent is
required to comply with the rules of an RNSA in
terms of the format and manner of reporting the
required information to an RNSA and comply with
the specific time periods set forth in paragraphs (c)
through (e) of final Rule 10c–1a.
216 See final Rule 10c–1a(b)(1). See also final Rule
10c–1a(a)(2).

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under paragraph (a)(2)(i) of the final rule
remains responsible for providing the
required Rule 10c–1a information to an
RNSA, consistent with the proposed
rule.
Additionally, the Commission is
adopting: 17 CFR 240.10c–1a(b)(1)
(‘‘final Rule 10c–1a(b)(1)’’); 17 CFR
240.10c–1a(b)(2) (‘‘final Rule 10c–
1a(b)(2)’’); and 17 CFR 240.10c–1a(b)(3)
(‘‘final Rule 10c–1a(b)(3)’’) as new
paragraphs (b)(1) through (b)(3) of the
final rule, the specific reporting-related
requirements 217 of a reporting agent,
substantially as they were proposed in
paragraphs (a)(2)(i) through (a)(2)(iii) of
the proposed rule.218 Paragraph (b)(2) of
final Rule 10c–1a will require a
reporting agent to establish, maintain,
and enforce written policies and
procedures that are reasonably designed
to provide Rule 10c–1a information to
an RNSA. However, in the final rule, as
modified with non-substantive,
technical, or clarifying changes to the
rule text consistent with the other
changes made to the overall final rule
text, such Rule 10c–1a information is
provided (by the reporting agent) to an
RNSA on behalf of a ‘‘covered person’’
(which is a newly defined term in the
final rule, rather than the term ‘‘another
person,’’ as was used in the proposed
rule); and, also consistent with the
proposed rule, such information is to be
provided ‘‘in the format and manner
required by the applicable rule(s) of an
RNSA, and within the time periods
specified in paragraphs (c) through
(e)’’ 219 (which is designed to clarify the
proposed rule text, ‘‘in the manner,
format, and time consistent with Rule
10c–1’’ 220). Apart from the
aforementioned changes, the policies
and procedures requirement of the
reporting agent remains unchanged from
the proposed rule.
Additionally, consistent with the
proposed rule, paragraph (b)(3) of the
final rule requires the reporting agent to
enter into a written agreement with an
217 See supra note 205 regarding paragraph
(a)(2)(i) of the proposed rule’s policies and
procedures requirement; paragraph (a)(2)(ii) of the
proposed rule’s written agreement with an RNSA
requirement; and paragraph (a)(2)(iii) of the
proposed rule’s list of names requirement.
218 Specifically, once the covered person enters
into the required written agreement with the
reporting agent, and the covered person provides
the reporting agent with timely access to the Rule
10c–1a information, paragraph (b)(1) of the final
rule specifically requires the reporting agent to
provide the Rule 10c–1a information to an RNSA
on behalf of a covered person (in the format and
manner required by the rule(s) of such RNSA and
within the time periods specified in paragraphs (c)
through (e) of final Rule 10c–1a). See final Rule
10c–1a(b)(1).
219 See final Rule 10c–1a(b)(2).
220 See proposed Rule 10c–1(a)(2)(i).

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75657

RNSA that permits the reporting agent
to provide the required Rule 10c–1a
information to an RNSA (e.g., establish
the required connectivity with such
RNSA) on behalf of a covered person.
More specifically, the final rule
provides that a reporting agent shall
‘‘[e]nter into a written agreement with
an RNSA that permits the reporting
agent to provide Rule 10c–1a
information to an RNSA on behalf of a
covered person.’’ 221 Other than
replacing the proposed term ‘‘another
person’’ with the newly defined term
‘‘covered person’’ in the final rule, the
written agreement requirement of the
reporting agent remains unchanged from
the proposed rule.
Moreover, the Commission is
adopting 17 CFR 240.10c–1a(b)(4)
(‘‘final Rule 10c–1a(b)(4)’’), which
requires the reporting agent to ‘‘provide
an RNSA with a list naming each
covered person on whose behalf the
reporting agent is providing Rule 10c–
1a information to an RNSA,’’ consistent
with the proposed rule, although
paragraph (b)(4) of final Rule 10c–1a
adds the term ‘‘naming’’ to replace the
less-descriptive term ‘‘of,’’ as was used
in the proposed rule. For consistency,
the final rule also includes the newly
defined term ‘‘covered person’’ in place
of ‘‘person and lending agent,’’ as was
used in paragraph (a)(2)(iii) of the
proposed rule. Moreover, paragraph
(b)(4) of the final rule clarifies the
proposed rule by streamlining the text,
‘‘provide an RNSA with any updates to
the list of such persons by the end of the
day such list changes,’’ by removing the
extra ‘‘on the day’’ in the sentence. Also,
the final rule slightly modifies the rule
text ‘‘an updated list’’ to read instead
‘‘any updates to the list’’ to clarify that
any updates (or changes) to the list (and
the updated list itself) must be provided
to an RNSA ‘‘by the end of the day such
list changes.’’ 222 A reporting agent’s
written policies and procedures will
need to address the above requirements.
2. Recordkeeping Requirements of a
Reporting Agent—Rule 10c–1a(b)(5)
Proposed Rule
Paragraph (a)(2)(iv) of the proposed
rule would have required that the
reporting agent maintain certain
information for a period of three years,
the first two in an easily accessible
place.223 The information required to be
maintained included the Rule 10c–1
information provided by the covered
221 See final Rule 10c–1a(b)(3) (replacing term
‘‘another person’’ from paragraph (a)(2)(ii) of the
proposed rule with the term ‘‘covered person’’).
222 See final Rule 10c–1a(b)(4).
223 See proposed Rule 10c–1(a)(2)(iv).

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person to the reporting agent, including
the time of receipt, as well as the Rule
10c–1 information that the reporting
agent provided to an RNSA, and time of
transmission. Additionally, under the
proposed rule, the reporting agent
would have to retain the written
agreements between the reporting agents
and beneficial owners, lending agents,
and an RNSA.224 As the Commission
explained, the proposed recordkeeping
requirements were designed to help
facilitate the Commission’s oversight of
reporting agents and review the
reporting agents’ compliance with the
requirement to provide the Rule 10c–1
information to an RNSA.225
Final Rule
One commenter stated that it was
redundant and unnecessary for the
reporting agent to retain data, as FINRA
already has the data.226 However,
pursuant to 17 CFR 240.10c–1a(b)(5)
(‘‘final Rule 10c–1a(b)(5)’’), the
reporting agent would not only be
required to retain data that it submitted
to an RNSA (including time of
transmission), but would also be
required to retain the data it received
from the covered person (including time
of receipt), which would demonstrate
compliance with the timeliness
requirements of the rule or whether the
reporting agent itself received the data
in an untimely manner from the covered
person, as well as the written
agreements required in order to be
eligible as a reporting agent. Such
records would be helpful to regulators
in identifying and reconstructing the
reasons for missing, incomplete, or
untimely data (e.g., whether it was the
result of untimely receipt by the
reporting agent or issues with the
reporting agent’s operations). The data
would also help reporting agents
respond to Commission inquiries as to
whether the reporting agent or the
covered person appropriately complied
with the final rule. The records of data
submitted to an RNSA would provide
context for such inquiries, as well as
allow for a comparison of data received
(by the reporting agent) and submitted
to an RNSA, to the data published by an
RNSA, allowing regulators to determine
whether there are issues with an
RNSA’s processing of data received.
Accordingly, the Commission is
adopting, in paragraph (b)(5) of final
Rule 10c–1a without substantive
changes, the proposed recordkeeping
requirements contained in paragraphs
(a)(2)(iv)(A) and (B) of the proposed rule
224 See

Proposing Release, 86 FR 69811.
225 See Proposing Release, 86 FR 69811.
226 See James J. Angel Letter, at 7.

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that provide for the reporting agent to
preserve for a period of not less than
three years, the first two years in an
easily accessible place, both the Rule
10c–1a information obtained by the
reporting agent from the covered person
pursuant to paragraph (a)(2) of the final
rule, including the time of receipt, and
the corresponding Rule 10c–1a
information provided by the reporting
agent to an RNSA, including the time of
transmission to an RNSA 227; and, the
written agreements as required under
paragraphs (a)(2) and (b)(3) of the final
rule.228

Other commenters offered support for
the inclusion of all loans of
securities.233 Another commenter
expressed the view that ‘‘[t]here is an
urgent need to require securities lenders
to provide greater details of their loans
to a RNSA as outlined by the proposed
changes to Rule 10c–1 . . . [m]arket
participants and regulators alike will
greatly benefit from the greater
transparency that comes from reporting
every securities lending transaction as a
result of the proposed changes to Rule
10c–1, just as they have from the tradeby-trade reporting that was instituted in
the corporate bond market since TRACE
D. Scope of Securities Required To Be
was introduced.’’ 234
Reported—Rule 10c–1a(j)(3)
One commenter recommended that
Proposed Rule
the Commission make explicit ‘‘the
types of securities loans to which Rule
In the Proposing Release, the
Commission stated its preliminary belief 10c–1 applies so that market
participants have clarity as to which
that proposed Rule 10c–1 should apply
types of securities loans must be
to all securities ‘‘to ensure that a
reported.’’ 235 The final rule makes
complete picture of transactions
explicit the types of transactions to
involving the loan of securities is
provided to the RNSA.’’ 229 Accordingly, which the final rule applies and the
securities that are within the scope of
the proposed rule would have required
the final rule through two newly
the reporting of loans of any security
defined terms: ‘‘covered securities loan’’
(e.g., both equity and debt).230
and ‘‘reportable security.’’ The
Specifically, the Commission stated
definition of the term ‘‘covered
that, ‘‘if the Commission were to limit
securities loan’’ in paragraph (j)(2) of the
the scope of the proposed Rule (e.g., to
only equity securities) then a significant final rule makes explicit the types of
loans to which the final rule applies, as
number of securities lending
transactions would be excluded and the discussed below, in Part VII.E. The
definition of the term ‘‘covered
market efficiencies and reduction of
securities loan’’ refers to a transaction in
information asymmetry that the
Commission anticipates will result from which any person on behalf of itself or
one or more other persons, lends a
proposed Rule 10c–1 would not accrue
‘‘reportable security’’ to another
to non-equity securities.’’ 231
person.236 The final rule defines the
Final Rule
term ‘‘reportable security’’ as ‘‘any
In response to proposed Rule 10c–1,
security or class of an issuer’s securities
some commenters expressed general
for which information is reported or
support for increased transparency and
required to be reported to the
price discovery in the securities lending consolidated audit trail as required by
market by increasing the amount and
§ 242.613 (‘‘Rule 613’’) of the Exchange
availability of data in the market.232
Act and the CAT NMS Plan (‘‘CAT’’),
the Financial Industry Regulatory
227 See final Rule 10c–1a(b)(5); 17 CFR 240.10c–
Authority’s Trade Reporting and
1a(b)(5)(i) (‘‘final Rule 10c–1a(b)(5)(i)’’); 17 CFR
Compliance Engine (‘‘TRACE’’), or the
240.10c–1a(b)(5)(ii) (‘‘final Rule 10c–1a(b)(5)(ii)’’).
228 While the term ‘‘Rule 10c–1a information’’ has
Municipal Securities Rulemaking
stayed the same in the final rule, as also explained
Board’s Real Time Reporting System
below, in Part VII.F, the scope of the information
(‘‘RTRS’’), or any reporting system that
required by the final rule has been modified with
237 The
the deletion of the proposed requirement to provide replaces one of these systems.’’
definition
of
the
term
‘‘reportable
information regarding the total amount of
‘‘securities on loan’’ and ‘‘available to lend’’ data,
security’’ aligns the securities for which
as was originally proposed.
loans must be reported with securities
229 See Proposing Release, 86 FR 69808.
for which transactions are currently
230 See proposed Rule 10c–1(a)(1). See also
being reported to existing reporting
Proposing Release, 86 FR 69808. See, e.g., 17 CFR
230.902 (defining ‘‘Debt securities’’ as ‘‘any security regimes, specifically, the CAT, TRACE,
other than an equity security’’ and an ‘‘equity
and RTRS. At this time, data on
security’’ as defined in 17 CFR 230.405).
231 See Proposing Release, 86 FR 69808 (citing A
Pilot Survey of Agent Securities Lending Activity,
Off. Of Fin. Research, Working Paper No. 16–08,
2016, at 8, available at https://www.financial
research.gov/working-papers/files/OFRwp-2016-08_
Pilot-Survey-of-Securities-Lending.pdf).
232 See supra note 47.

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233 See

Nasdaq Letter, at 2; Morningstar Letter, at

4.
234 See

AFREF Letter 1, at 3.
Letter 1, at 7.
236 Final Rule 10c–1a(j)(2).
237 Final Rule 10c–1a(j)(3).
235 ICI

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securities loans should be consistent
with existing reporting regimes for other
transactions in the same securities.
Aligning the scope of securities for
covered securities loans with existing
transaction reporting systems will
provide a number of benefits. For
instance, such alignment will allow
regulators to obtain a more complete
view across the different types of
transactions for the same securities. In
addition, many market participants are
already familiar with the existing
systems, either as reporting entities or,
in the case of TRACE and RTRS, as
users of the data.
Presently, securities that fall outside
of the existing reporting regimes
include: (1) for TRACE: fixed-income
transactions in securities with a
maturity of one calendar year or less,
such as money market instruments,238
and non-U.S. dollar-denominated debt
are excluded from reporting
requirements in TRACE; 239 (2) for the
CAT: equity transactions in ‘‘restricted
securities,’’ as that term is defined in 17
CFR 230.144(a)(3) (‘‘Rule 144’’) of the
Securities Act,240 are generally not
reportable to the CAT because they are
not subject to prompt last sale reporting
rules; 241 and (3) for RTRS: municipal
securities transactions excepted under

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238 See,

e.g., FAQ 3.1.43, available at https://
www.finra.org/filing-reporting/trace/faq (‘‘[a]s
stated in Rule 6710(a), the definition of TRACEEligible Security does not include a Money Market
Instrument. Under recent amendments to Rule
6710(o) pertaining to discount notes, ‘‘Money
Market Instrument’’ means a debt security that at
issuance has a maturity of one calendar year or less,
or, if a discount note issued by an Agency, as
defined in Rule 6710(k), or a GovernmentSponsored Enterprise, as defined in Rule 6710(n),
a maturity of one calendar year and one day or less
(i.e., not later than 366 days from the date of
issuance, or if a leap year, not later than 367 days
from the date of issuance).’’).
239 See, e.g., https://www.finra.org/filingreporting/trace/trace-foreign-sovereign-debt.
240 See, e.g., https://www.catnmsplan.com/faq
(see FAQ B11 describing the types of products in
scope for reporting to the CAT).
241 Under the CAT NMS Plan, ‘‘Eligible Security’’
includes: (i) all NMS Securities, meaning ‘‘any
security or class of securities for which transaction
reports are collected, processed, and made available
pursuant to an effective transaction reporting plan,
or an effective national market system plan for
reporting transactions in Listed Options,’’ and (ii)
all OTC Equity Securities, meaning ‘‘any equity
security, other than an NMS Security, subject to
prompt last sale reporting rules of a registered
national securities association and reported to one
of such association’s equity trade reporting
facilities.’’ Further, while the CAT NMS Plan does
not define ‘‘prompt last sale reporting rules,’’ the
Operating Committee has determined that
transactions in ‘‘restricted securities’’ (as defined by
Rule 144(a)(3)) are not reportable to the CAT
because they are not subject to prompt last sale
reporting rules. However, transactions in direct
participation programs must be reported to the CAT
in Phase 2c of Industry Member reporting.

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MSRB Rule G–14,242 including a small
number of transactions for securities
without assigned Committee on
Uniform Securities Identification
Procedure (‘‘CUSIP’’) numbers,
municipal fund securities (i.e., 529
Plans, ABLE programs, local
government investment pools), and
inter-dealer transactions ineligible for
comparison of trade settlement date at a
clearing agency.243 To provide
consistency with existing reporting
regimes, final Rule 10c–1a also
incorporates these exclusions.
The Commission also received
comments with suggestions to limit the
scope of securities for which loans must
be reported under the proposed rule.244
One commenter favored narrowing the
proposed scope of securities to only
equity securities that transact in
significant volume in the U.S., namely
equity securities listed or traded on a
national securities exchange ‘‘to avoid
uncertainty for non-U.S. borrowers and
lenders transacting in securities that are
primarily relevant in non-U.S. markets
and to provide for a measured approach
in introducing data reporting and
dissemination into the marketplace.’’ 245
Investors will also benefit from the
increased transparency into loans of
equity securities that are not listed or
242 Brokers, dealers, and municipal securities
dealers (‘‘municipal dealers’’) must report
transactions in municipal securities pursuant to
MSRB Rule G–14. Pursuant to Rule G–14, each
municipal dealer reports to the MSRB or its
designee information about each purchase and sale
transaction effected in municipal securities to RTRS
in the manner prescribed by Rule G–14, available
at https://www.sec.gov/rules/sro/msrb/2018/3483038-ex5.pdf.
243 See, e.g., Specifications for Real-Time
Reporting of Municipal Securities Transactions
(Nov. 2022), at 15 (‘‘1.2.1 Securities that Must be
Reported[:] In the real-time environment, all
customer trades in municipal securities issues that
have CUSIP numbers assigned by the CUSIP Service
Bureau of Standard & Poor’s must be reported,
except municipal fund securities. Dealers should
not report (a) customer transactions in issues
ineligible for CUSIP number assignment and (b)
municipal fund securities. For inter-dealer trades,
transactions must be reported in all municipal
securities issues eligible for comparison in RTTM
[the National Securities Clearing Corporation’s
(‘‘NSCC’’) Real-Time Trade Matching (‘‘RTTM’’)
web-based trade input method]. In addition, Rule
G–14 requires that the role of a clearing broker in
RTTM-eligible agency transactions effected by an
introducing broker against the principal positions of
the clearing broker shall be reported . . .. If an
issue is not RTTM-eligible (because of the lack of
a CUSIP number for the security or other reasons),
inter-dealer trades in the issue are not subject to the
reporting requirement.’’) (footnotes omitted),
available at https://www.msrb.org/sites/default/
files/RTRS-Specifications.pdf.
244 See, e.g., Federated Hermes Letter, at 2; Letter
from Jirˇı´ Kro´l, Deputy CEO, Global Head of
Government Affairs, Alternative Investment
Management Association (Jan. 7, 2022) (‘‘AIMA
Letter 1’’), at 5; RMA Letter, at 5; ICI Letter 1, at
7; ABA Letter, at 4.
245 See, e.g., RMA Letter, at 15.

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traded on a national securities exchange
(i.e., loans of equities that are traded
over-the-counter (‘‘OTC’’)) provided by
the final rule. The Commission
understands that existing lending
transparency systems currently include
information about loans of exchangelisted and OTC securities. Thus, lenders
should generally already be accustomed
to providing and receiving such data.
Further, OTC securities tend to be less
liquid and publicly available
information about an issuer of an OTC
security may be limited or
nonexistent,246 and thus such securities
may be harder to borrow. Accordingly,
data concerning loans of less liquid
securities, such as OTC securities, will
be beneficial to market participants by
reducing information asymmetries and
improving pricing efficiency by
facilitating benchmarking for the loans
of less liquid securities.247
Commenters also requested
clarification regarding which types of
securities would be reportable,248 and
some suggested limiting the scope of
reportable securities. For example, one
commenter suggested limiting the scope
to equities for a period of time while the
Commission evaluates whether to
expand the scope of reporting to
additional asset classes.249 Another
commenter stated that the final rule
should ‘‘capture the most relevant and
appropriate securities for the reporting
regime [referring to equity securities]
while not precluding the inclusion of
other securities over time as the SEC
and market participants gain more
experience with the reporting
regime.’’ 250 The definition of the term
‘‘reportable security’’ in the final rule is
not limited to equities for the reasons
discussed below, in this part. The
definition of the term ‘‘reportable
246 See, e.g., Publication or Submission of
Quotations Without Specified Information, Release
No. 34–89891 (Sept. 16, 2020), 85 FR 68124 at
68125 (Oct. 27, 2020) (Adopting Release)
(‘‘However, in other cases, there is no or limited
current public information available about certain
issuers of quoted OTC securities to allow investors
or other market participants to make informed
investment decisions.’’).
247 See infra Part IX.C.1 (discussing the benefits
of increased transparency in less liquid lending
markets).
248 See, e.g., BlackRock Letter, at 2 (‘‘as securities
lending market dynamics differ by the asset class,
we recommend the Commission provide further
clarity on which asset classes are in scope’’); ICI
Letter 1, at 6.
249 See ICI Letter 1, at 7.
250 See RMA Letter, at 17 (supporting an initial
definition of ‘‘securities’’ to include ‘‘equity
securities that are part of the national market
system’’ because that definition ‘‘captures the most
relevant and appropriate securities for the reporting
regime while not precluding the inclusion of other
securities over time as the SEC and market
participants gain more experience with the
reporting regime’’).

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security’’ in paragraph (j)(3) of the final
rule will help provide certainty to nonU.S. borrowers and lenders regarding
the securities that are within the scope
of the final rule (i.e., securities or any
class of an issuer’s securities for which
information is reported or required to be
reported to the CAT, TRACE, or RTRS,
or any reporting system that replaces
one of these systems). In addition, Part
VII.M below discusses the domestic
application of the final rule, which
should also help provide certainty to
non-U.S. borrowers and lenders
transacting in securities that are
primarily relevant in non-U.S. markets
about the application of the final rule.
With respect to taking a measured
approach in introducing data reporting
and dissemination into the marketplace,
the Commission is establishing the
specific compliance dates discussed
below in Part VIII. Such compliance
dates should provide adequate time for
covered persons to implement systems
for data reporting and for RNSAs to
implement data dissemination systems.
Another commenter recommended that
the Commission begin with reporting
requirements for loans of U.S. equity
securities because such loans ‘‘mostly
occur on electronic trading platforms,
making the generation of trade data for
these loans more straightforward than
loans of other asset classes.’’ 251 As
discussed above, the Commission has
provided a compliance date that will
provide adequate time for covered
persons to comply with the final rule,
even for loans of securities that may not
occur on an electronic trading platform,
and will not further delay transparency
for OTC investors, which are primarily
retail.252
Some commenters requested a phased
approach to the overall implementation
of the final rule, which is discussed
below, in Part VIII, including a
recommendation that implementation of
the final rule begin with loans of equity
securities.253 However, current lending
systems include data on loans of fixed
income securities.254 Thus, lenders
should generally be accustomed to
providing and analyzing data on loans
of fixed income securities. Further, as
discussed below, in Part VIII, such a
phased approach is not provided for in

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251 BlackRock

Letter, at 9.
252 See Andrew Ang et al., Asset Pricing in the
Dark: The Cross-Section of OTC Stocks, 26 Rev. Fin.
Stud. 2985–3028 (2013).
253 See infra note 688 and accompanying text.
254 See Equilend Letter, at 1 (Data Explorers was
acquired by S&P Global and manages a dataset of
over $37 trillion of global securities from 20,000
institutional funds, and over three million intraday
transactions), available at https://
www.spglobal.com/marketintelligence/en/mi/
products/securities-finance.html.

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the final rule because it would unduly
delay the public availability of Rule
10c–1a information and limit the initial
benefits of the final rule.
One commenter suggested excluding
debt from the proposed rule,
particularly corporate debt and assetbacked securities, which the commenter
described as having small issuance
sizes, diverse characteristics, and a
small number of lending transactions.255
However, information about loans on
such securities will be beneficial to
lenders, investors, and regulators
precisely because of such
characteristics. Data on such loans may
be useful for lenders to assess rates and
for regulators and investors to
understand the lending market for such
securities. For example, market
participants will be able to use the
information made publicly available by
the final rule and pool such information
across debt securities to help market
participants compare the terms of a loan
of one debt security with loans of other
debt securities that have similar
characteristics or time horizons. Thus,
including debt securities in the final
rule will help improve the ability of
market participants to benchmark their
loans of debt securities.
The Commission also received
comment regarding the size of the debt
market. One commenter stated that
‘‘[w]hile the number of publicly traded
equity securities of U.S. issuers is
around 3,600, there are over two million
unique issuances of corporate and
government bonds and asset-backed
securities in circulation.’’ 256 The same
commenter stated that utilization rates
decrease as products become more
individualized and there is only a small
market for shorting bonds.257 Less
liquid markets should benefit from the
increased transparency provided by the
final rule because improving securities
lending transparency, even in the debt
market, can lead to reduced information
asymmetry and increased pricing
efficiency.258
One commenter suggested excluding
government securities from the
proposed rule because ‘‘there is
sufficient liquidity and demand for
these securities on platforms and venues
that have a high degree of
transparency,’’ but did not provide
details regarding the transparency of the
platforms and venues.259 As discussed
below, in Part IX.B.2, there is some
255 See

RMA Letter, at 16.
Letter, at 16.
RMA Letter, at 16.
258 See infra Part IX.C.1 (discussing how the final
rule will affect markets with low lending volume
such as corporate bonds).
259 RMA Letter, at 16.
256 RMA
257 See

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transparency in the government
securities lending market, but some
information may not be as timely or as
robust (i.e., the data may contain
aggregated volume information) as
under the final rule. The final rule
includes loans of U.S. Government
securities between market participants
to help ensure that comprehensive and
timely information about these loans is
made publicly available so that market
participants in the government
securities lending market benefit from
increased transparency.
Some commenters requested
clarification on whether ‘‘crypto assets’’
or as some commenters referred to them,
‘‘cryptocurrencies’’ would be covered by
proposed Rule 10c–1.260 A crypto asset,
which is also sometimes referred to as
a ‘‘digital asset,’’ may meet the
definition of a ‘‘security’’ under the
federal securities laws.261 As defined in
the final rule, paragraph 10c–1a(j)(3)
applies to reportable securities, which
are securities for which transactions are
reported to the CAT, TRACE, and RTRS.
Accordingly, if a crypto asset is a
security that meets one of these same
criteria, the crypto asset is a reportable
security.
One commenter believed that
infrequent lending of debt securities
could result in a ‘‘far greater risk of loss
of anonymity and the use of such data
to anticipate or reverse engineer the
trading of competitors.’’ 262 The final
rule’s requirements for end-of-day
reporting of data elements and loan
modification data elements in
paragraphs (c) and (d) and delaying the
publication of loan amount and
modifications to loan amount in
paragraph (g) should help reduce the
potential to anticipate and reverse
engineer the trading of competitors. In
addition, paragraph (g)(4) of the final
rule requires that following the receipt
of confidential information pursuant to
paragraph (e) ‘‘an RNSA shall keep such
information confidential, in accordance
with the provisions of paragraph (h) of
this section and applicable law.’’ 263
Further, 17 CFR 240.10c–1a(h)(4) (‘‘final
Rule 10c–1a(h)(4)’’) requires that an
RNSA ‘‘[e]stablish, maintain, and
enforce reasonably designed written
260 See, e.g., James J. Angel Letter, at 5; Letter
from Jay Rivera (Mar. 2, 2022); Letter from Treveri
Capital LLC (Dec. 22, 2021) (‘‘Treveri Capital
Letter’’), at 1.
261 See, e.g., Report of Investigation Pursuant to
Section 21(a) of the Securities Exchange Act of
1934: The DAO, Release No. 34–81207 (July 25,
2017) (‘‘DAO 21(a) Report’’), available at https://
www.sec.gov/litigation/investreport/34-81207.pdf.
See also SEC v. W.J. Howey Co., 328 U.S. 293
(1946).
262 RMA Letter, at 16.
263 Final Rule 10c–1a(g)(4).

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policies and procedures to maintain the
security and confidentiality of
confidential information required by
paragraph (e) of this section.’’ 264 Thus,
the only existing RNSA’s experience
with managing nonpublic information,
coupled with the explicit requirements
for protecting confidential information
in paragraphs (g)(4) and (h)(4) of the
final rule, will help ensure that an
RNSA implements data security
measures that will protect anonymity.
E. Scope of Transactions Required To
Be Reported—Rule 10c–1a(j)(2)
Proposed Rule
The Commission proposed that any
person that ‘‘loans a security’’ on behalf
of itself or another person shall provide
Rule 10c–1 information to an RNSA.265
The Commission did not define the term
‘‘loans a security,’’ but requested
comment on whether a definition was
necessary.266 In the Proposing Release,
the Commission stated its preliminary
belief that any person that loans a
security on behalf of itself or another
person should be required to provide
the material terms to an RNSA to ensure
that proposed Rule 10c–1 is
appropriately ‘‘designed to increase the
transparency of information available to
brokers, dealers, and investors, with
respect to the loan or borrowing of
securities.’’ 267
Final Rule
Many commenters requested
clarification of the scope of securities
loan transactions to which the rule’s
reporting requirements would apply.268
One commenter stated that the proposed
rule sought to regulate ‘‘a host of
transactions that do not involve the
‘loan or borrowing of securities.’ ’’ 269
Other commenters recommended that a
definition of the term ‘‘loans a security’’
refer only to lending for a particular
purpose.270 Some of those commenters
expressed concerns about including
data for loans that were not considered
traditional loans in the industry,
particularly loans for which the parties
did not enter into a written contract or
transfer collateral, and that such loans
264 Final

Rule 10c–1a(h)(4).
proposed Rule 10c–1(a).
266 See Proposing Release, 86 FR 69808 (Question
8).
267 See Proposing Release, 86 FR 69807. See also
Public Law 111–203, sec. 984(b), 124 Stat. 1376
(2010).
268 See, e.g., Fidelity Letter, at 2; SIFMA Letter 1,
at 9; Letter from Wim Mijs, CEO, European Banking
Federation (Jan. 17, 2022) (‘‘EBF Letter’’), at 1;
Citadel Letter, at 4.
269 See Citadel Letter, at 12.
270 See, e.g., CASLA Letter, at 2 (recommending
‘‘a definition of ‘securities loan’ . . . based on the
purpose of a loan’’).

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might ‘‘skew the data and negatively
impact the utility of the information
provided.’’ 271 Other commenters
recommended that the final rule include
a defined term for the types of
transactions that are covered by the
rule.272
To address commenters seeking
greater clarity and commenters
recommending a definition as to what
types of transactions are required to be
reported, the final rule includes a
definition of the term ‘‘covered
securities loan’’ to mean ‘‘a transaction
in which any person on behalf of itself
or one or more other persons, lends a
reportable security to another person,’’
with certain exceptions.273 As discussed
below, in this part, the exceptions
remove from the scope of the final rule’s
reporting requirements certain clearing
agency positions 274 and certain uses of
margin securities by a broker or
dealer 275 that are not consistent with, or
traditionally recognized as, securities
lending transactions.
The Commission received a comment
recommending that the term ‘‘loans a
security’’ be limited to lending to
unaffiliated borrowers.276 Other
commenters suggested that information
on securities lending transactions
between affiliates not be disseminated
under the rule,277 with one stating that,
‘‘loans between a broker-dealer and its
affiliates, may not represent the actual
rates available in the securities lending
market and therefore could cause
confusion and lead to misinterpretation
if published.’’ 278 The Commission does
not agree that it would be appropriate to
exclude loans to affiliated borrowers
from the scope of the final rule. Interaffiliate loans may be arms-length
transactions and excepting such loans
271 See,

e.g., BlackRock Letter, at 6–7.
e.g., Fidelity Letter, at 2; Sharegain Letter,
at 3; Letter from Kenneth E. Bentsen, Jr., President
and CEO, SIFMA (Apr. 1, 2022) (‘‘SIFMA Letter 2’’),
at 3; Letter from Lindsey Weber Keljo, Asset
Management Group—Acting Head, SIFMA Asset
Management Group (Jan. 7, 2022) (‘‘SIFMA AMG
Letter’’), at 9; CASLA Letter, at 2; EBF Letter, at 1;
RMA Letter, at 14–15; IIB Letter, at 9; FIF Letter,
at 2–3.
273 See final Rule 10c–1a(j)(2).
274 See final Rule 10c–1a(j)(2)(ii).
275 See final Rule 10c–1a(j)(2)(iii).
276 See SIFMA AMG Letter, at 9 (recommending
a definition of the term ‘‘loans a security’’ to mean
to ‘‘enter into a transaction in which one person,
on behalf of itself or another person . . . will
temporarily lend to an unaffiliated person,’’ among
other things).
277 See, e.g., SIFMA Letter 1, at 15; RMA Letter,
at 15; CASLA Letter, at 2; IIB Letter, at 10.
278 See SIFMA Letter 1, at 15. See also RMA
Letter, at 15 (stating that ‘‘inter-affiliate loans
frequently do not represent market prices and
should be excluded from such dissemination’’).
272 See,

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would result in the loss of data relevant
to the lending market.279
In addition, an exclusion for interaffiliate loans could result in market
practices to circumvent reporting
obligations. For instance, in arranged
financing, a broker or dealer ‘‘may offer
arranged financing programs (sometimes
called ‘enhanced lending’ or ‘short
arranging products’) through which a
customer can borrow shares from the
firm’s domestic or foreign affiliate and
use those shares to close out a short
position in the customer’s account.’’ 280
In describing arranged financing, a
market participant has stated that
‘‘[w]ith respect to . . . arranged
financing/enhanced lending models at
member firms, certain ones may involve
the loan of shares to customers from
domestic affiliates and others may
involve the loan of shares to customers
from foreign affiliates.’’ 281 Thus, if the
broker or dealer agrees to provide a
customer the covered securities loan
through an affiliate, such as a foreign
affiliate, an exclusion for inter-affiliate
loans could exclude the securities loan
entirely. Moreover, one researcher has
observed that ‘‘owners of large
portfolios . . . often conduct their own
lending programs with an affiliated
agent lender . . . .’’ 282 An exclusion for
inter-affiliate loans would not capture
such loans. Therefore, under the final
rule a covered person is required to
report covered securities loans with
affiliates.
Certain commenters recommended
that a definition of the term ‘‘loans a
security’’ refer only to transactions
made pursuant to a written lending
agreement 283 or documented as a
securities loan on the lender’s books
279 To reduce any potential confusion and
misinterpretation of the data, an RNSA could
determine to, if it is able, develop methodologies to
separate or identify such loans.
280 See FINRA Regulatory Notice 21–19 (June 4,
2021), available at https://www.finra.org/rulesguidance/notices/21-19.
281 See, e.g., Robert Toomey, Managing Director,
and Joseph Corcoran, Managing Director, SIFMA,
SIFMA Comment on Short Interest Position
Reporting Enhancements and Other Changes
Related to Short Sale Reporting (FINRA Regulatory
Notice 21–19) (Sept. 30, 2010), available at https://
www.sifma.org/wp-content/uploads/2021/10/
SIFMA-Comments-on-FINRA-RN-21-19-Final.pdf.
282 See, e.g., BIS Working Papers No. 768: Overthe-Counter Market Liquidity and Securities
Lending, Nathan Foley-Fisher, et al., Bank of
International Settlement (Feb. 2019), available at
https://www.bis.org/publ/work768.pdf.
283 See, e.g., SIFMA Letter 1, at 10; SIFMA AMG
Letter, at 9; RMA Letter, at 15; Federated Hermes
Letter, at 2 (recommending to ‘‘limit reporting only
to traditional lending agreements made pursuant to
the Master Securities Loan Agreement’’); S3
Partners Letter, at 10–11.

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and records.284 One commenter stated
that such an approach would ‘‘ensure
consistent reporting and avoid
confusion and misinterpretation of data
by the public.’’ 285 Another commenter
stated that it could avoid ‘‘the public
dissemination of incomplete,
inaccurate, and misleading information
that could have an adverse impact on
the securities lending market.’’ 286 The
Commission disagrees that the
definition of the term ‘‘covered
securities loan’’ should require that the
transaction be agreed to pursuant to a
written securities lending agreement
such as the Master Securities Loan
Agreement, or a transaction documented
as a securities loan on a lender’s books
and records. Such a requirement could
provide an easy way to avoid the
requirement, particularly for
unregulated entities not otherwise
subject to documentation and books and
records requirements. Moreover, such a
requirement could cause competitive
harm to entities that are subject to such
requirements or who follow such
practices as risk management tools.
Requiring the reporting of only
securities loans made pursuant to a
written agreement or subject to a
covered person’s books and records
requirements would create confusion by
introducing such distinctions, which
may be interpreted or applied
differently across the different types of
persons that meet the definition of
‘‘covered person.’’ Additionally, such
requirements would result in data that
excludes reporting by covered persons
that do not use written agreements or
have books and records requirements.
Such gaps in the data could contribute
to the misinterpretation of data by the
public, instead of ameliorating it as the
commenter suggests.287 Thus, the final
rule covers a wide variety of loans
without limitation as to a particular
loan’s design or structure by including
all loans that occur when a covered
person ‘‘agrees to a covered securities
loan.’’ 288
284 See, e.g., SIFMA Letter 1, at 3; SIFMA AMG
Letter, at 9.
285 See SIFMA Letter 1, at 3.
286 SIFMA AMG Letter, at 2.
287 See SIFMA Letter 1, at 3.
288 See final Rule 10c–1a(a). The final rule’s
requirement that a covered person who ‘‘agrees to’’
a covered securities loan must report Rule 10c–1a
information to an RNSA (or rely on a reporting
agent to do so) is designed to be broad regarding
when a securities loan is required to be reported.
This is designed to ensure that differently
structured securities loans are captured by the final
rule to prevent evasion (e.g., by not including
specific characteristics, like a written agreement,
that can be easily avoided), and to prevent undue
delay of reporting (e.g., by not requiring that the
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Some commenters recommended that
the term ‘‘loans a security’’ specifically
refer to the temporary lending of
securities against a transfer of
collateral.289 One of the commenters
stated that such a provision would help
‘‘ensure consistent reporting and avoid
confusion and misinterpretation of data
by the public.’’ 290 Another stated that
defining the term ‘‘loan of securities’’ to
include a transfer of collateral would
‘‘better achieve the Commission’s goals’’
by avoiding ‘‘the public dissemination
of incomplete, inaccurate, and
misleading information.’’ 291 Such a
definition would have been consistent
with the Proposing Release’s statement
that a securities loan is typically a fully
collateralized transaction.292 However,
the proposed rule did not limit the
application of its reporting requirements
to securities loans that were fully
collateralized, as it was designed to
capture all loans of securities and
provide a more complete and timely
picture of trading for securities loans.293
While the provision of collateral is
currently a common industry practice
for securities loans, it is not necessarily
a characteristic of all securities loans.
For example, some lenders may
structure securities loans to include a
bank guaranty, insurance policy, or
other credit enhancement in lieu of
collateral.294 Therefore, limiting the
scope of loans covered by the final rule
to only include lending against a
transfer of collateral could leave certain
loans out of the scope of the final rule’s
reporting requirements. The exclusion
of uncollateralized loans could decrease
the availability of pricing and activity
information in the securities lending
market, resulting in the reporting and
dissemination of incomplete,
inaccurate, and misleading information
for which the commenters voiced
concern.295 Furthermore, the reporting
of uncollateralized loans would provide
additional data to market participants,

and would not result in misleading
duplicative information like other types
of transactions that are discussed below
in this part (e.g., loans arising from
certain clearing agency services).
Additionally, such a restriction could
incentivize market participants to use
credit enhancement mechanisms that
differ from collateral (e.g., bank
guaranties or insurance policies) in
order to avoid the final rule’s reporting
requirements. Therefore, the scope of
final Rule 10c–1a’s reporting
requirements is not limited to only
include loans against a transfer of
collateral.296
One commenter recommended that
the Commission limit the scope of the
rule’s reporting requirements to
securities loans where a lender seeks to
earn compensation or a return from the
transaction.297 The commenter stated
that, ‘‘[l]imiting the scope in such a way
would help focus reporting on primary
transactions of interest, where the
borrower is seeking to ‘gain access to the
security itself,’ and distinguish it from
repurchase and other agreements, which
are ‘typically used for short-term
financing.’ ’’ 298 Another commenter
proposed limiting the scope of securities
loans to transactions in which a
borrower obtains use of the securities
for a fee.299 However, a limitation of the
final rule’s reporting requirements to
only securities loans made by a lender
seeking to earn compensation or a
return from the transaction, or for a fee
could potentially result in evasion, as
securities loans could be structured
(e.g., via over-collateralization, haircuts,
or use of non-cash collateral with
varying maturities, credit ratings, or
income characteristics) to avoid the
identification of a fee. At the very least,
such a requirement could result in
confusion or inconsistent reporting as
market participants may interpret
differently the loan structures that
incorporate a fee or are made by lenders

the material terms of a securities loan have been
agreed to).
289 See, e.g., SIFMA Letter 1, at 16; SIFMA AMG
Letter, at 9; RMA Letter, at 15.
290 See SIFMA Letter 1, at 3.
291 See SIFMA AMG Letter, at 2.
292 See Proposing Release, 86 FR 69804.
293 See Proposing Release, 86 FR 69812.
294 See, e.g., 17 CFR 240.15c3–3(b)(3)(iii) (‘‘Rule
15c3–3(b)(3)(iii)’’) (stating that a broker or dealer
borrowing fully paid or excess margin securities
‘‘[m]ust provide to the lender, upon the execution
of the agreement or by the close of the business day
of the loan if the loan occurs subsequent to the
execution of the agreement, collateral, which fully
secures the loan of securities, consisting exclusively
of cash or United States Treasury bills and Treasury
notes or an irrevocable letter of credit issued by a
bank’’).
295 See SIFMA AMG Letter, at 2; SIFMA Letter 1,
at 3.

296 But see supra note 148 (discussing
requirements for the provision of collateral by
borrowers in the instance of fully paid and excess
margin securities).
297 See, e.g., ABA Letter, at 3 (recommending
‘‘[t]he SEC should define covered securities lending
transactions to those where the lender is seeking to
earn compensation from the transaction’’).
298 See ABA Letter, at 3–4 (quoting the Proposing
Release, 86 FR 69844 n.246). See also infra in this
part, a discussion of final Rules 10c–1a(j)(2)(iii) and
(j)(2)(iii)(A) and the exclusion from the final rule’s
reporting requirements of certain uses of margin
securities by a broker or dealer, which can include
‘‘funding trades,’’ repurchase agreements, and uses
of margin securities that are not a loan to another
person (e.g., rehypothecation).
299 See BlackRock Letter, at 7 (recommending
‘‘the SEC should limit the scope to traditional
securities lending transactions where the parties
have entered into the loan transaction in order for
a borrower to obtain use of the securities for a fee’’).

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seeking to earn compensation or a
return from the transaction. If the final
rule only applied to securities loans
agreed to for compensation, a fee, or for
the purpose of earning a return,
securities loans made to affiliates could
be structured to fall outside the final
rule’s reporting requirement (i.e., made
without an expectation of return or for
no fee), while a loan still would have
occurred, and the affiliate would still
benefit from possession of the loaned
securities. Further, the final rule does
not exclude securities loans based on
the purpose or duration of the loan,
such as for ‘‘short-term financing,’’ in
order to capture a wide variety of loans
regardless of purpose or duration.
Finally, the final rule provides that a
covered securities loan is a transaction
in which a person lends a reportable
security, which distinguishes covered
securities loans from other agreements.
Multiple commenters were concerned
that the proposed rule would require
that short sales or short positions be
reported as securities loans. Such
commenters requested clarification of
whether the proposed rule would treat
short sales as loans of securities.300 To
provide such clarification, under the
final rule covered persons will not be
required to report short sales as defined
300 See Citadel Letter, at 4 (stating that ‘‘[t]he
scope of the Commission’s proposal is unclear’’ and
that ‘‘[c]ustomer short sales . . . are not typically
documented under securities lending agreements,
booked as securities loans, or treated as securities
loans for financial reporting purposes’’); See also
Fidelity Letter, at 3 (stating that ‘‘inclusion of short
positions in the required reporting . . . would be
inappropriate from a securities lending market
perspective, as well as potentially misleading, as it
could result in inaccurate double counting of
loans’’); IHS Markit Letter, at 3 (stating that
securities loans and short sales ‘‘are two separate
and distinct markets with different drivers,
participants, and data points and should not be
conflated’’); SIFMA Letter 1, at 9–12
(recommending that the Commission exclude short
positions from the scope of loans required to be
reported to an RNSA); AIMA Letter 1, at 3–4; Letter
from Jirˇı´ Kro´l, Deputy CEO, Global Head of
Government Affairs, Alternative Investment
Management Association (Apr. 1, 2022) (‘‘AIMA
Letter 2’’), at 3 (short positions would be reported
under the rule proposed by the Commission
pursuant to section 929X of the Dodd-Frank Act);
Letter from Richard Karoly, Managing Director,
Legal, Charles Schwab & Co., Inc. (Jan. 7, 2022)
(‘‘Charles Schwab Letter’’), at 1–2 (short positions
are already reported under other reporting regimes
such as FINRA’s Rule 4560. Short-Interest
Reporting); MFA Letter 3, at 4 (stating that the
Commission should ‘‘distinguish short positions
from stock loans’’). The Commission agrees with
commenters who stated that short positions are not
subject to a written securities lending agreement,
nor carried on a firm’s books and records as
securities loans, nor treated as securities loans for
financial reporting purposes. See, e.g., FIF Letter, at
2–3; See also SIFMA AMG Letter, at 5 (stating that
short positions are ‘‘similar in some respects but are
outside of the securities lending activity’’ targeted
by the proposed rule).

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by 17 CFR 242.200(a) (‘‘Rule 200(a)’’),301
but will be required to report loans that
are used for short sales.
The Commission stated in the
Proposing Release that it was not
proposing to include repurchase and
sale agreements (commonly known as
‘‘repos’’) within the scope of the
proposed rule because section 984 of the
Dodd-Frank Act focuses on the loan or
borrowing of securities.302 The
Proposing Release detailed distinctions
between the typical securities lending
and repo markets, including that repos
typically are primarily used for shortterm financing while other securities
loans typically are used to gain access
to the security itself, and that loans
generally allow the lender to recall the
security on demand while repos do
not.303 Some commenters agreed with
the Commission, recommending that
repos should not fall within the
meaning of the term ‘‘loans a security’’
in the proposed rule.304 One commenter
suggested that loans of a security should
be distinguished from repos.305
However, one commenter stated that
there is ‘‘significant overlap in the
functionality between repos and
securities lending transactions.’’ 306 The
commenter also suggested ‘‘a broad antievasion provision that prohibits any
person from engaging in any practice
intended to evade the rule’s reporting
requirements.’’ 307 The same commenter
recommended defining the term
‘‘securities loan’’ to include repos.308
301 Rule 200(a) provides, ‘‘The term short sale
shall mean any sale of a security which the seller
does not own or any sale which is consummated
by the delivery of a security borrowed by, or for the
account of, the seller.’’
302 See Proposing Release, 86 FR 69803 n.2.
303 See Proposing Release, 86 FR 69843 n.246.
304 See, e.g., SIFMA Letter 1, at 9 (noting that ‘‘the
Commission is not intending to include within the
scope of the Proposed Rule the entry into
repurchase agreements, which we believe is the
proper approach’’); SIFMA Letter 2, at 3; BlackRock
Letter, at 2 (describing securities lending market
trades as ‘‘transactions whereby a lender lends
securities to a borrower in exchange for collateral
but excluding repurchase transactions where the
purpose of the trade is to provide cash financing in
exchange for non-cash collateral’’).
305 See ABA Letter, at 3–4 (stating that ‘‘[t]he SEC
should define covered securities lending
transactions . . . and distinguish it from repurchase
and other agreements’’).
306 See Better Markets Letter, at 10. See also James
J. Angel Letter, at 6–7.
307 See Better Markets Letter, at 10. See also S3
Partners Letter, at 11 (expressing concern with
securities lending transactions being repapered as
repos); James J. Angel Letter, at 7 (stating that ‘‘[t]he
final rule needs to define securities lending in such
a way that it deters such evasion, while not
ensnaring normal repo in the reporting
requirements’’).
308 See Better Markets Letter, at 10 (‘‘Accordingly
the SEC should consider . . . a definition of
‘securities loan’ or ‘securities lending’ that will
ensure sufficient coverage of relevant transactions,

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The Office of Financial Research
(‘‘OFR’’) recently proposed a rule to
collect data on repos.309 Accordingly, at
this time, it is not necessary to include
repos within the scope of the final rule’s
information reporting requirements, as a
potential OFR rule, if adopted, could
address any potential reporting gaps,
thereby reducing the incentives to evade
final Rule 10c–1a.
The Commission also received
comment requesting that the final rule
‘‘make clear that the novation and
processing of a securities lending
transaction by a registered clearing
agency does not give rise to a new loan
or the modification of an existing loan
subject to reporting under Rule 10c–
1.’’ 310 The same commenter also stated
that ‘‘[n]ovation is . . . the legal
mechanism through which NSCC
guarantees to each counterparty the
performance of the obligations under a
transaction that the counterparties
already negotiated and executed away
from the NSCC and that was already
subject to a reporting obligation.’’ 311
Another commenter directly responded
to the Proposing Release’s request for
comment asking whether the
Commission should define what it
means to ‘‘loan a security.’’ 312 The
commenter stated that the definition
should ‘‘expressly exclude loan
positions that result from the central
counterparty novation function that a
clearing agency like OCC provides to
securities loans.’’ 313 The commenter,
which is an SEC-registered clearing
agency, also stated that it ‘‘does not
have access to the majority of
information sought under proposed
Rule 10c–1 . . . and, therefore could not
report such information to an
RNSA.’’ 314 The Commission agrees with
the commenters’ recommendations that
positions that result from central
counterparty services by a clearing
agency, including the novation and
processing of a securities lending
transaction, should not give rise to any
i.e., those where securities are temporarily
transferred from one party to another, for
compensation, with a commitment to return those
securities in the future’’).
309 See, e.g., OFR Factsheet: OFR’s Proposed Data
Collection (Mar. 2023), available at https://
www.financialresearch.gov/data/files/NCCBR_
factsheet.pdf; Office of Financial Research Releases
Proposal to Collect Data on Certain Repo
Transactions (Jan. 5, 2023), available at https://
www.financialresearch.gov/press-releases/2023/01/
05/office-of-financial-research-releases-proposal-tocollect-data-on-certain-repo-transactions.
310 See DTCC Letter, at 3; See also OCC Letter, at
10.
311 See DTCC Letter, at 4.
312 See Proposing Release, 86 FR 69808 (Question
8).
313 See OCC Letter, at 12.
314 See OCC Letter, at 12.

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reporting obligation under the final rule,
including the requirement to report loan
modification data elements under
paragraph (d) of the final rule. As
discussed above, in Part VII.A, clearing
agencies providing the functions of a
central counterparty or central securities
depository do not lend or borrow shares
on their own behalf, but instead novate
or process the loans of lenders and
borrowers (i.e., central counterparty or
central securities depository services)
for the purpose of efficient clearance
and settlement.315 Although novation of
the loan by the clearing agency
technically creates a new loan in which
the clearing agency would step into the
shoes of the counterparties,316 the
clearing agency would not be modifying
the key terms of the loan (other than
changing the identities of the
counterparties to that of the clearing
agency), such as the rate or size, and
requiring clearing agencies to report
such loans would result in the
misleading appearance of additional
loan volume containing otherwise
duplicative loan information.317
Therefore, the final rule excludes from
the ‘‘covered securities loan’’ definition
‘‘a position at a clearing agency that
results from central counterparty
services pursuant to Rule 17Ad–22(a)(2)
of the Exchange Act or central securities
depository services pursuant to Rule
17Ad–22(a)(3) of the Exchange Act.’’ 318
The Commission also received a
comment stating that ‘‘it is not
uncommon for a lending agent to pool
together available supply of a given
security across multiple lenders in their
lending program’’ to satisfy a large loan
of securities and reallocate such loan
among the lenders in the program, as
the inventory of individual lenders
changes, to avoid recalling a loan.319
315 See DTCC Letter, at 1 (stating that the
‘‘processing of a securities loan transaction,
including through novation and netting, does not
constitute a modification or a new transaction for
reporting purposes. Such processing does not
constitute new market activity or modify the
material economic terms of the transaction, which
the parties will have already reported’’ and that
‘‘[n]ovation is simply the legal mechanism through
which NSCC guarantees to each counterparty the
performance of the obligations under a transaction
that the counterparties already negotiated and
executed away from NSCC and that was already
subject to a reporting obligation’’).
316 Under Rule 17Ad–22(a)(2), a clearing agency
performs the functions of a central counterparty
when it interposes itself between the counterparties
to securities transactions, acting functionally as the
buyer to every seller and the seller to every buyer.
317 See final Rule 10c–1a(j)(2)(ii). If a clearing
agency acted on behalf of the beneficial owner of
the loaned security to effect a covered securities
loan, then the clearing agency would be a ‘‘covered
person’’ under paragraph (j)(1)(i) of the final rule.
318 See final Rule 10c–1a(j)(2)(ii).
319 See BlackRock Letter, at 7. See also, SIFMA
AMG Letter, at 10 (stating that ‘‘for bulk loans,

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The commenter also stated that, in such
instances, ‘‘[g]iven no change in the
economics of the trade or any physical
movement of securities, these intraday
record entries are not market trades and
should not be reported as such.’’ 320
However, the proposed rule did not
limit its information reporting
requirements to securities loans arising
from ‘‘market trades’’ or the ‘‘physical
movement of securities,’’ neither of
which the commenter has defined or
described in the context of the securities
lending market. Changing the party or
parties to a covered securities loan,
which is required to be confidentially
reported under 17 CFR 240.10c–1(e)(1)
(‘‘final Rule 10c–1a(e)(1)’’), creates a
new covered securities loan that would
require reporting as a new covered
securities loan to an RNSA under final
Rule 10c–1a(a)(1), and not as a
modification under final Rule 10c–
1a(d). The identity of the lender or
lenders is a material term of a covered
securities loan.321 The identity of the
lender is not made public, but is
important information for regulatory
purposes, such as surveillance of
activity pertaining to the individual
loan.322 Whether the parties to a
covered securities loan change for
purposes of the reporting requirements
under final Rule 10c–1a(e)(1) depends
on how a pool 323 or lending program is
structured (e.g., whether the pool or
lending program itself or the individual
underlying participants are the party or
parties identified as the lender for the
loan). For example, if a lending program
as an individual entity is the party that
is the lender of the covered securities
loan, changes to the underlying
participants, inventory providers, or
customers of that lending program will
not constitute a change to the parties of
the covered securities loan. In that
instance, unlike the lending program,
the individual participants will not be
reporting at the lending agent level rather than the
beneficial owner would reflect the actual market
loan and would avoid the reporting of loan
components which may shift throughout the
allocation process’’).
320 BlackRock Letter, at 7.
321 See final Rule 10c–1a(e)(1).
322 If the covered person is a pool (and thus is a
lender of covered securities), it is the pool that is
required to be confidentially reported as the party
to the covered securities loan pursuant to final Rule
10c–1a(e)(1). See also Proposing Release, 86 FR
69804 (‘‘The data elements provided to an RNSA
. . . are also designed to provide the RNSA with
data that could be used for important regulatory
functions, including facilitating and improving its
in-depth monitoring of member activity and
surveillance of securities markets.’’).
323 The term ‘‘pool’’ is used here in the same
manner it is described by the commenter quoted
above in this paragraph. See BlackRock Letter, at 6–
7 (also using the term ‘‘pooled pass-through
account’’).

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lenders directly to the borrower of the
covered securities loan. In that case,
where a covered securities loan remains
open and the only change that occurs is
a reallocation among the pool’s
underlying constituents, that is not a
change that will require reporting as a
new covered securities loan or as a
modification under paragraph (d)
because there will be no change to a
data element in paragraph (c) of the
final rule.
However, if the multiple, individual
participants are all parties identified as
lenders to the loan, with no lending
program or other entity interposed
between them and the borrower, a
change in their composition (the
removal or addition of a lender) would
constitute an assignment of the loan and
therefore would require reporting as a
new loan pursuant to final Rule 10c–
1a(a)(1). Whether a reallocation of a loan
among participants in a lending
program requires the reporting of a new
covered securities loan depends upon
the facts and circumstances, including
the structure of such lending program.
One commenter recommended a
definition of the term ‘‘loans a security’’
that would apply at a minimum ‘‘any
time the lender loses the right to vote
the securities during the time of the
loan.’’ 324 Voting rights do not provide
an adequate criterion to define what a
securities loan is because not all
reportable securities necessarily carry
voting rights (e.g., some preferred stock,
options, fixed-income securities, and
treasuries). However, the facts and
circumstances, including the loss of
voting rights, may be an indicator as to
whether a transaction is a loan.
The Commission also received
comment letters expressing support for
limiting the reporting required under
the proposed rule to the Wholesale
market 325 of the securities lending
market.326 Some commenters
324 See

Morningstar Letter, at 4.
securities lending and
borrowing transactions have been conducted on a
bilateral basis. Generally, when an end investor
wishes to borrow securities, and its broker-dealer
does not have those securities available in its own
inventory or through customer margin accounts to
loan, the broker-dealer will borrow the securities
from a lending agent with whom it has a
relationship. The broker-dealer will then re-lend the
securities to its customer. Loans from lending
programs to broker-dealers occur in what is referred
to by market participants as the Wholesale market,
while loans from a broker-dealer to the end
borrower occur in what is referred to by market
participants as the Customer market (also known as
the ‘‘retail market’’). See Proposing Release, 86 FR
69805. For purposes of this release, this market is
referred to as the Customer market. See supra Part
II.
326 See AIMA Letter 1, at 2; AIMA Letter 2, at 3;
Citadel Letter, at 11; SBAI Letter, at 2; Letter from
John L. Thornton, Co-Chair, Hal S. Scott, President,
325 Traditionally,

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recommended narrowing the scope of
loans to the Wholesale market due to
what they characterized as potential
negative effects on short selling from
data that could be revealed through
loans in the Customer market.327 One of
the commenters stated that
‘‘immediately publicly disclosing short
selling activity would signal to all other
market participants that a short position
is being established.’’ 328 Such concerns
are largely addressed by requiring that
an RNSA delay public disclosure of the
loan amount by 20 business days. This
modification should significantly
reduce the novelty of the information
disseminated under the final rule
regarding short sellers’ positions, such
that it is less timely than pre-existing
sources of short selling transparency,
such as FINRA’s bimonthly short
interest data.
Another commenter suggested that
retail loans may not be structured as
securities lending, but rather structured
as brokerage agreements, and thus may
not be suitable for standardized data
collection.329 This commenter may be
referring to the use of margin securities
by a broker or dealer in which the
broker or dealer does not lend such
margin securities to another person (e.g.,
a rehypothecation).330 The final rule’s
exclusion of such uses from the
definition of ‘‘covered securities loan,’’
as discussed below, in this part, should
address the commenter’s concern.
A commenter stated that the
Commission had not fully explained
why greater transparency, or
transaction-by-transaction data, in the
Customer market would be valuable.331
R. Glenn Hubbard, Co-Chair, Committee on Capital
Markets Regulation (Jan. 6, 2022) (‘‘CCMR Letter’’),
at 2.
327 See CCMR Letter, at 2; AIMA Letter 1, at 2.
328 See AIMA Letter 1, at 2. See also Letter from
Jirˇı´ Kro´l, Deputy CEO, Global Head of Government
Affairs, Alternative Investment Management
Association (Aug. 11, 2023) (‘‘AIMA Letter 3’’), at
4 (stating that ‘‘[b]y including loans used to effect
short sales in the Securities Lending Proposal, the
Commission will be making it more expensive to
engage in short selling’’).
329 See SBAI Letter, at 2.
330 See also James J. Angel Letter, at 4 (asking
‘‘when and how are loans from customer margin
accounts to be reported?’’).
331 See Citadel Letter, at 9 (using the term ‘‘Retail
Market’’ in place of Customer market). But see
Better Markets Letter, at 4 (stating that ‘‘high short
interest can lead to a destabilizing short squeeze,
which can in turn lead to significant volatility in
the price of the shorted stock, if not the broader
markets . . . If regulators and the public had better
and more timely information about the amount of
shares of . . . meme stocks that had been lent and
borrowed, they may have been able to proactively
head off or mitigate the impact of the destabilizing
events of January 2021 before they occurred’’). See
also infra Part IX.C.2 (discussing the potential
implications of the provision of securities lending
activity to market participants in and around the
market events of January 2021).

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More broadly, limiting data to
Wholesale market loans would
significantly reduce the benefits of the
rule stemming from increased
transparency into the securities lending
market. In the Proposing Release, the
Commission stated that the rule ‘‘is
designed to address . . . inefficiencies
in the securities lending market by
making more comprehensive
information regarding securities lending
transactions publicly available, which
could better protect investors by
eliminating certain information
asymmetries.’’ 332 Data regarding
Customer market loans will, for
example, provide end-borrowers with
valuable information as to the
competitiveness of the rates they are
being charged for their loans. Such data
will also provide information to
customers that have agreed to loan their
fully paid securities as to the
competitiveness of the rates they are
receiving from brokers or dealers
borrowing such securities. Excluding
such a fundamental part of the
securities lending market from the scope
of transactions to which the rule’s
reporting requirements apply is
inconsistent with the Commission’s
stated goal of making comprehensive
information regarding securities loans
publicly available. Therefore, the
definition of ‘‘covered securities loan’’
in the final rule does not distinguish
between the Wholesale market and
Customer market and is not limited to
Wholesale market transactions.
One commenter recommended that
the term ‘‘loans a security’’ specifically
refer to securities loaned ‘‘for a
permitted purpose pursuant to
Regulation T of the Board of Governors
of the Federal Reserve System.’’ 333
However, limiting the final rule’s
reporting requirements to only
securities loans made for permitted
purposes pursuant to Regulation T of
the Board of Governors of the Federal
Reserve System, would be overly
narrow as the principal purpose of
Regulation T is to regulate extensions of
credit by brokers and dealers.334 As the
commenter states, the ‘‘permitted
purposes’’ contemplated under section
220.10(a) of Regulation T are limited to
‘‘allowing the borrower to make delivery
of the borrowed securities in the case of
short sales, failure to receive securities
required to be delivered, or other similar
situations.’’ 335 Regulation T states that
‘‘[i]ts principal purpose is to regulate
332 See

Proposing Release, 86 FR 69807.
SIFMA AMG Letter, at 9.
334 12 CFR 220.10(a) (‘‘Regulation T’’).
335 See SIFMA AMG Letter, at 9 (quoting section
220.10(a) of Regulation T).
333 See

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extensions of credit by brokers and
dealers; it also covers related
transactions within the Board’s
authority under the Act. It imposes,
among other obligations, initial margin
requirements and payment rules on
certain securities transactions.’’ 336
However, the securities loan market
includes lenders other than brokers and
dealers and may involve loans of
securities for purposes other than short
sales, failures to receive securities
required to be delivered, and similar
situations.337 Furthermore, the purpose
of final Rule 10c–1a is to increase the
transparency of information available to
broker, dealers, and investors, with
respect to the loan and borrowing of
securities without limitation to the
purpose of the loan or borrow, whereas
the stated purpose of Regulation T is
regulating extensions of credit. Thus,
Regulation T does not provide an
appropriate framework to limit final
Rule 10c–1a’s information reporting
requirements.
The Commission also received
comment expressing support for a de
minimis threshold for reporting loans of
securities.338 In some contexts,
reporting thresholds may be useful to
reduce burdens on persons required to
report, or to reduce the possibility that
strategies or identities of reporters will
be revealed. However, a de minimis
reporting threshold is not necessary in
light of modifications from the proposed
rule to require end-of-day 339 (versus 15
minute) reporting, as well as the
delay 340 in publication of size
information,341 which are expected to
reduce the possibility that strategies or
identities of reporting entities will be
revealed. Including a de minimis
threshold, which would primarily affect
data for smaller securities loans, could
provide the public with a distorted view
of securities loan activity. For example,
a large volume of relatively small
securities loans could constitute a
significant amount of the overall
lending activity for an individual
security. Alternatively, a single, small
securities loan could constitute the only
outstanding loan for an issuer, and its
336 12

CFR 220.10(a).
example, it is the Commission’s
understanding that securities are borrowed by
banks managing liquidity on their balance sheet and
financial entities obtaining the type of collateral
required by other agreements they are trying to
enter into, and that some investors may lend and
borrow securities to obtain certain tax treatment for
dividends and dividend substitutes. See Proposing
Release, 86 FR 69831.
338 See Federated Hermes Letter, at 2.
339 See, e.g., 17 CFR 240.10c–1a(c)(6) (‘‘final Rule
10c–1a(c)(6)’’).
340 See final Rule 10c–1a(g)(2).
341 See final Rule 10c–1a(c).
337 For

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exclusion would leave market
participants without information about
the lending market for the security. The
Proposing Release stated that ‘‘granular
information about certain material terms
of securities lending transactions would
allow investors, including borrowers
and lenders, to evaluate not only the
rates for such transactions, but also any
signals that such rates provide.’’ 342 The
public disclosure of information for
securities lending transactions of all
sizes will help improve price discovery
in the securities lending market.343
Additionally, providing a de minimis
threshold could result in avoidance of
the final rule’s reporting requirements if
industry participants structure
otherwise reportable securities loans
into smaller tranches in order to fit
below a reporting threshold.
The Commission received a comment
recommending that the final rule not
capture a ‘‘broker-dealer hypothecation
of customer margin 344 securities.’’ 345
Another commenter stated that it
understood the proposed rule to exclude
rehypothecation of a customer’s margin
securities.346 When a broker or dealer
hypothecates (or uses) customer margin
securities, the customer is not loaning
them to the broker or dealer as the
customer has already pledged the
securities in a margin account to the
broker or dealer, as collateral for a
margin loan.347 Accordingly, the final
rule excludes hypothecation of
securities, but provides that the loan of
such customer margin securities by a
broker or dealer to another person is a
covered securities loan.348 Specifically,
the definition of the term ‘‘covered
securities loan’’ under the final rule
includes the provision that, ‘‘the use of
margin securities, as defined in Rule
15c3–3(a)(4) of the Exchange Act, by a
broker or dealer will not be a covered
342 See

also Proposing Release, 86 FR 69804.
infra Part IX.C.1 (stating that ‘‘increased
information will result in benefits in the form of
. . . improved market stability and price discovery
both in the securities lending market and the
market for the underlying security’’). See also
Proposing Release, 86 FR 69804.
344 Margin securities are securities carried for the
account of a customer in a margin account, as well
as securities carried in any other account other than
securities that are fully paid securities. See 17 CFR
240.15c3–3(a)(3) (‘‘Rule 15c3–3(a)(3)’’) and Rule
15c3–3(a)(4) of the Exchange Act defining the terms
‘‘fully paid securities’’ and ‘‘margin securities.’’
345 See SIFMA AMG Letter, at 5.
346 See SIFMA Letter 1, at 9 n.39.
347 This distinction is made only within the
context of a broker or dealer’s hypothecation (or
rehypothecation) of customer margin securities. It
does not imply that a hypothecation or use of
securities in a different context could not constitute
a loan of securities.
348 See final Rule 10c–1a(j)(2)(iii);17 CFR
240.10c–1a(j)(2)(iii)(A) (‘‘final Rule 10c–
1a(j)(2)(iii)(A)’’).

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securities loan for purposes of this
rule.’’ 349 It also provides that ‘‘if a
broker or dealer lends such margin
securities to another person, the loan to
the other person is a covered securities
loan’’ for purposes of the final rule.350
Therefore, should a broker or dealer use
a customer’s margin securities for
purposes other than to lend them to
another person, such a transaction
would not fall within the definition of
the term ‘‘covered securities loan’’
under the final rule. Additionally, if a
broker or dealer borrows fully paid or
excess margin securities from a
customer, that loan is a covered
securities loan,351 and the broker or
dealer borrowing the fully paid
securities is responsible for reporting
the loan to an RNSA.352
The Commission also received
comment recommending that the final
rule not apply to ‘‘funding trades.’’ 353
The commenter further stated its belief
that such transactions, which are
defined as loans of cash against
securities being pledged as collateral,
are not the type of activity that should
be captured through the proposed
rule.354 To the extent that such funding
transactions constitute a use of margin
securities by a broker or dealer pursuant
to paragraph (j)(2)(iii), they would not
fall within the final rule’s definition of
‘‘covered securities loan.’’ Otherwise,
commenters were not specific as to
whether there would be variations of
transactions used to ‘‘fund trades.’’ The
final rule does not specifically exclude
transactions to ‘‘fund trades.’’ Whether
a transaction to ‘‘fund trades’’ is a
349 See

final Rule 10c–1a(j)(2)(iii).
final Rule 10c–1a(j)(2)(iii)(A).
351 A broker or dealer must maintain the physical
possession or control of all fully paid securities and
excess margin securities carried by the broker or
dealer for the accounts of customers. See 17 CFR
240.15c3–3(b)(1) (‘‘Rule 15c3–3(b)(1)’’).
Additionally, a broker or dealer must enter into a
written agreement pursuant to Rule 15c3–3(b)(3) in
order to not be deemed to be in violation of the
provisions of Rule 15c3–3(b)(1) when borrowing
fully paid or excess margin securities from any
person. See Rule 15c3–3(b)(3).
352 See final Rule 10c–1a(j)(1)(iii).
353 See SIFMA AMG Letter, at 5. See also SIFMA
Letter, at 15; BlackRock Letter, at 7 (stating that ‘‘the
SEC should limit the scope to traditional securities
lending transactions where the parties have entered
into the loan transaction in order for a borrower to
obtain use of the securities for a fee, rather than to
provide a lender with cash financing that is
collateralized with non-cash collateral’’).
354 See SIFMA AMG Letter, at 9 (stating that ‘‘[a]
‘non-purpose’ transfer of securities against cash
collateral, economically resembles a borrowing of
cash by the security’s ‘lender’ against a pledge of
securities collateral to the securities ‘borrower.’
However, such transactions are more properly
categorized as ‘funding’ transactions (as loans of
cash against securities being pledged as collateral)
and, therefore, are not the type of activity SIFMA
AMG believes the SEC is, or should be, seeking to
capture through the Proposed Rule.’’).
350 See

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covered securities loan will depend on
the facts and circumstances of each
transaction.355
After considering commenters’
concerns and perspectives regarding the
proposed scope of transactions for
which proposed Rule 10c–1 reporting
would have been required, the final rule
defines the term ‘‘covered securities
loan’’ to mean ‘‘[a] transaction in which
any person on behalf of itself or one or
more other persons, lends a reportable
security to another person.’’ 356 Further,
in paragraph (a) of the final rule, the
term ‘‘loans a security’’ is replaced with
the phrase ‘‘agrees to a covered
securities loan’’ in its reporting
requirement for covered persons.357 In
response to commenters’ request for
clarification as to whether a loan should
be reported before or after it is settled,
the term ‘‘agrees to’’ clarifies that
covered securities loans are required to
be reported after the parties agree to the
loan, which is before settlement.358
For the reasons described above, in
this part, the definition of the term
‘‘covered securities loan’’ in the final
rule further provides that ‘‘a position at
a clearing agency that results from
central counterparty services pursuant
to Rule 17Ad–22(a)(2) of the Exchange
Act or central securities depository
services pursuant to Rule 17Ad–22(a)(3)
of the Exchange Act will not be a
covered securities loan for purposes of
this rule.’’ 359 The final rule also
provides that ‘‘the use of margin
securities, as defined in Rule 15c3–
3(a)(4) of the Exchange Act, by a broker
or dealer, will not be considered a
covered securities loan for purposes of
this rule,’’ provided, however, that ‘‘if a
broker or dealer loans such margin
securities, such loan will be considered
a covered securities loan for purposes of
this rule.’’ 360
The definition of the term ‘‘covered
securities loan,’’ in conjunction with the
definition of the term ‘‘reportable
security,’’ discussed above, in Part
VII.D,361 sets forth the scope of the final
355 See

final Rule 10c–1a(j)(2)(i).
final Rule 10c–1a(j)(2)(i).
357 See final Rule 10c–1a(a).
358 See HMA Letter, at 9 (recommending that
reporting should include effected, but not-yetsettled loans, and stating that ‘‘the Commission and
FINRA rules have long required reporting of
securities orders, modification, and trades, not just
settled transactions, because all of that information
is relevant to understanding the markets’’). But see
Fidelity Letter, at 2 (requesting that the Commission
clarify when a loan can be considered ‘‘effected’’ for
purposes of report, and stating that ‘‘in the
marketplace, a securities loan is not considered
‘effected’ by the parties until the loan has been
contractually booked and settled’’).
359 See final Rule 10c–1a(j)(2)(ii).
360 See final Rule 10c–1a(j)(2)(iii).
361 See final Rule 10c–1a(j)(3).
356 See

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rule and distinguishes ‘‘covered
securities loans’’ from other types of
transactions that are not required to be
disclosed under final Rule 10c–1a. The
final rule’s definition of the term
‘‘covered securities loan’’ will facilitate
the public availability of information
regarding securities lending
transactions. The definition’s scope,
encompassing transactions in which any
person, on behalf of itself or one or more
other persons, lends a reportable
security to another person, is designed
to provide market participants, the
public, and regulators with information
that broadly captures activity in the
securities lending market. The defined
scope of transactions required to be
reported to an RNSA under final Rule
10c–1a will contribute to better
decision-making by investors, reduced
costs of business for brokers or dealers,
improved performance and reduced
costs for lending programs, new
business opportunities for data vendors,
improvements to shareholder
monitoring, and improved market
stability and price discovery in the
securities lending market.362
Additionally, the exceptions to the
definition of ‘‘covered securities loan’’
under the final rule should help prevent
the double counting of securities loans
and support the integrity of publicly
available data by excluding redundant
and potentially misleading information.
F. Information To Be Provided to an
RNSA
To facilitate transparency of the
securities lending market, the
Commission proposed Rules 10c–1(b)
through (e) to require certain loan-level
data elements (i.e., specified material
terms of securities loans) to be provided
to an RNSA.363 Because an RNSA would
be required to implement rules
regarding the format and manner to
administer the collection of
362 See

infra Part IX.C.1.
pricing-related data elements regarding
collateralized loans were included in the loan-level
data elements proposed to be required to be
reported to an RNSA, the proposed rule did not
require that securities lenders or their agents report
information on how they used collateral. Some
commenters stated that because of the potential
threats to financial stability arising from collateral
re-use, the Commission should consider requiring
that securities lenders and their agents report
information on how they use collateral. See, e.g.,
Better Markets Letter, at 7–8. (commenter stating
support for requiring disclosure regarding the type
of collateral); See Sharegain Letter, at 3 (stating that
‘‘[c]ollateral information is essential to
understanding fees—e.g., a loan collateralized with
equities would typically command a higher fee than
a loan collateralized with US treasuries’’); see also
IHS Markit Letter, at 6–7 (recommending that
proposed data elements include reporting of a
‘‘trade reference’’ and ‘‘lending agent trade
indicator’’).

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363 While

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information,364 proposed Rule 10c–1
lists the data elements that persons
would be required to provide to an
RNSA, but does not specify granular
instructions for data elements or the
formatting required for submission of
the information to an RNSA.365
1. Loan Data Elements—Rule 10c–1a(c)
Proposed Rule
To facilitate transparency in the
securities lending market, the proposed
rule required certain loan transaction
data elements to be provided to an
RNSA, on a transaction-by-transaction
basis, within 15 minutes of the loan
being effected, followed by an RNSA
assigning each loan a unique transaction
identifier, and then making such
information publicly available as soon
as practicable. The proposed rule
included twelve transaction data
elements required to be provided to an
RNSA.366
In proposing the list of loan data
elements required to be provided to an
RNSA, the Commission explained that
the data elements in paragraphs (b)(1)
through (b)(5) of the proposed rule,
which include the legal name and legal
entity identifier (‘‘LEI’’) of the issuer;
ticker symbol, International Securities
Identification Number (‘‘ISIN’’), CUSIP,
or Financial Instrument Global
Identifier (‘‘FIGI’’) or other security
identifier; date and time loan was
effected; and platform or venue loan
was effected, identify each loan of
securities.367 In particular, the
Commission explained, they contain
material terms that are not negotiated
between the parties but are elements
that would provide important
proposed Rule 10c–1(f).
proposed Rule 10c–1(b). See also
Proposing Release, 86 FR 69813. This is done in
order to allow an RNSA the necessary flexibility to
propose and implement rules regarding the format
and manner with respect to the collection of
information. One commenter stated that the
proposed rule does not ‘‘provide any details as to
the format of such data, whether it would be
presented loan-by-loan, the manner in which rates
would be presented, whether the loan had its
inception as an open-ended loan or a term loan,
whether the loan was the subject of a portfoliobased auction, or whether it was part of a conduit
lending program.’’ See Sharegain Letter, at 3.
Consistent with the Proposing Release, the
Commission is not specifying the details as to the
format of the required data, the manner in which
rates would be presented, or other detailed
information requested, to give an RNSA the
discretion to structure its systems and processes as
it sees fit and propose rules accordingly, provided
they are consistent with the final rule as adopted
as well as other requirements of the Exchange Act
applicable to an RNSA. See, e.g., Proposing Release,
86 FR 69816 n.104.
366 See Proposing Release, 86 FR 69813–14,
69851–52 (describing each of the proposed
transaction data elements).
367 See Proposing Release, 86 FR 69813.

75667

information to allow market participants
and regulators to track, understand, and
perform analyses on the negotiated
terms contained in paragraphs (b)(6)
through (b)(12) of the proposed rule,
which include the amount of security
loaned; securities lending fee or rate (or
any other fee or charges); type of
collateral used; rebate rate (or any other
fee or charges); percentage of collateral
to value of loaned securities;
termination date of loan; and, whether
the borrower is a broker/dealer/
customer/clearing agency/bank/
custodian/other person.368 The
Commission also explained that the
proposed data elements in paragraphs
(b)(1) through (b)(5) of the proposed rule
would provide an RNSA with enough
information to create a unique
transaction identifier as required by the
proposed rule.369
In proposing the negotiated data
elements in paragraphs (b)(6) 370
through (b)(12) of the proposed rule, the
Commission explained that, because the
data elements reflect material terms that
are negotiated when securities loans are
arranged, increasing the transparency of
information will provide market
participants with meaningful data that
could be used when structuring, pricing,
or evaluating loans of securities.371 The
Commission also explained that
increasing transparency would allow
market participants to analyze signals
obtained from the securities lending
market when considering investment or
trading decisions for a security; and,
would also permit an RNSA to perform
in-depth monitoring and surveillance of
securities lending transactions to

364 See
365 See

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368 See

Proposing Release, 86 FR 69814.
Proposing Release, 86 FR 69813. As stated
by the Commission in the Proposing Release,
‘‘[p]aragraphs (1) and (2) of proposed Rule 10c–1
identify the particular security being lent.
Paragraph (1) is designed to provide information on
the issuer, and paragraph (2) is designed to provide
information on the particular security. These
paragraphs are designed to be flexible and
comprehensive so that every security that can be
loaned is able to be identified. In particular, with
respect to paragraph (b)(1), the Commission
preliminarily believes that an issuer that lacks an
LEI would have a legal name. With respect to
paragraph (b)(2), the Commission preliminarily
believes that securities usually would have at least
one of the items listed assigned to it. If not, the
RNSA could require an ‘‘other identifier’’ for further
flexibility under paragraph (2).’’ Id.
370 See Proposing Release, 86 FR 69814. In
proposing the data element in paragraph (b)(6) ‘‘the
amount of the security loaned’’—the Commission
did not specify the parameters of ‘‘the amount of
the security’’ in order to allow an RNSA flexibility
to propose rules that identify, for different types of
securities, what information constitutes the
‘‘amount of the security.’’
371 See Proposing Release, 86 FR 69814.
369 See

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identify trends and any anomalous
market patterns.372

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Final Rule
The Commission sought comment
with respect to each of the proposed
transaction data elements.373 In
response, commenters were generally
supportive of the Commission’s stated
goals of increasing transparency and
price discovery in the securities lending
market by increasing the amount and
availability of data in the market.374 For
example, one commenter stated in
support of the proposed rule that,
‘‘certain data elements [should be made]
publicly available, thereby increasing
transparency of the securities lending
market and reducing competitive
advantages that may exist in the
marketplace.’’ 375 Another commenter
also stated in support that the proposed
public dissemination of securities
lending information will, among other
things, improve price discovery in the
securities lending market, reduce
information asymmetries, close data
gaps, and increase market efficiency.376
Another commenter stated that,
‘‘Proposed Rule 10c–1 represents a
properly-tailored way to bring more
transparency to this dark area of the
market.’’ 377 According to this
commenter, ‘‘[t]he Proposal would
establish a system for the reporting and
dissemination of the material terms of
372 See Proposing Release, 86 FR 69814.
Additionally, the Commission explained that the
data element in proposed paragraph (b)(11),
regarding termination date, is intended to provide
market participants with an understanding of the
potential future demand and supply of securities;
whereas proposed paragraph (b)(12), which requires
the borrower type for each transaction, is intended
to provide context for evaluating, and also enhance
the transparency provided by, the other data
elements.
373 The language ‘‘transaction data elements’’ in
proposed Rule 10c–1(b) has been revised to
‘‘covered securities loan data elements’’ in final
Rule 10c–1a(c) to be consistent with the use of the
newly defined term ‘‘covered securities loan,’’ to
which the elements refer, in the final rule.
374 See, e.g., SBAI Letter, at 1 (agreeing with the
Commission’s assessment of the important role of
the securities lending market, as well as supporting
the Commission’s objective to increase transparency
in this area).
375 Nasdaq Letter, at 3.
376 See FINRA Letter, at 1 (stating that the
proposed rule will provide the Commission and
other regulators with data that would be used for
important regulatory, i.e., monitoring and
surveillance, functions); see also AFREF Letter 1, at
1, 3 (stating ‘‘[t]here is an urgent need to require
securities lenders to provide greater details of their
loans to an RNSA as outlined by the proposed
changes to Rule 10c–1 . . . market participants and
regulators alike will greatly benefit from the greater
transparency that comes from reporting every
securities lending transaction as a result of the
proposed changes to Rule 10c–1.’’).
377 Letter from Hope M. Jarkowski, General
Counsel, NYSE Group, Inc. (Jan. 6, 2022) (‘‘NYSE
Letter 1’’), at 2.

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securities lending transactions without
attribution, providing issuers, investors,
and regulators the necessary data . . .
while protecting the identity and
intellectual property of any individual
market participant.’’ 378 Another
commenter expressed support for the
proposed rule’s inclusion of standards
as part of the proposed data elements to
be reported, as well as the Commission’s
efforts to include the LEI in the data
elements for the identification of issuers
and parties to a lending transaction.379
Another commenter supported the
proposal allowing a choice in use of
identifiers, such as the [FIGI], as a
possible required data element to be
collected and disseminated by an
RNSA.’’ 380 Another commenter, in
response to the Commission’s specific
request for comment, stated that retail
investors/borrowers without LEIs
should not be required to obtain a LEI
as ‘‘[r]egulators can easily identify who
we are by going to our brokers.’’ 381
Another commenter suggested that the
Commission should modify the
proposal to require ‘‘lending agent’’ be
a reported field (instead of requiring the
lender’s LEI to be disclosed) ‘‘to avoid
378 NYSE

Letter 1, at 1–2.
Letter from Stephen Wolf, CEO, Global
Legal Entity Identifier Foundation, at 3 (stating that
the Commission and an RNSA may benefit from the
data that accompanies an LEI, i.e., company legal
name can be retrieved automatically or verified
from a LEI record).
380 See Bloomberg L.P. Letter, at 1; see also HMA
Letter, at 9 (agreeing with using publicly available
methods to identify financial instruments beyond
CUSIPs). Consistent with the proposed rule, the
data elements required in paragraphs (b)(1) and
(b)(2) of the proposed rule are designed to be
flexible as well as comprehensive so that every
loaned security is able to be identified. See
Proposing Release, 86 FR 69813. In the Proposing
Release, the Commission stated with respect to
paragraph (b)(1), that it ‘‘preliminarily believes that
an issuer that lacks an LEI would have a legal name.
With respect to paragraph (b)(2), the Commission
preliminarily believes that securities usually would
have at least one of the items listed assigned to it.
If not, the RNSA could require an ‘‘other identifier’’
for further flexibility under paragraph (2).’’ See
Proposing Release, 86 FR 69813. Thus, consistent
with the Proposing Release, the Commission is not
determining whether and how all of the items in
paragraph (c)(2) in the final rule must be reported,
to give an RNSA the discretion to structure its
systems and processes as it sees fit and propose
rules accordingly, provided they are consistent with
the final rule as adopted as well as other
requirements of the Exchange Act applicable to an
RNSA. See id.
381 See James J. Angel Letter, at 7 (expressing
strong support for the proposed rule but encouraged
the Commission not to micromanage the contractual
terms between the reporting agents and an RNSA).
As this commenter explained, ‘‘let FINRA work out
the details, as they have the experience, resources,
and capability to do a good job and the flexibility
to update terms based on experience.’’ Id. at 7. In
response, the final rule, as modified to streamline
and clarify rule text, and the modifications to
update or modernize the reporting requirements as
needed are responsive to the commenter.
379 See

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the potentially confusing appearance of
tens or even hundreds of individual
loans that are, in reality, part of the
same overall loan transaction negotiated
between a borrower and a lending agent
or third-party intermediary on behalf of
the underlying lender(s) for an aggregate
notional amount.’’ 382
With regard to the proposed ‘‘rebate
rate or any other fee or charges’’ data
element for cash collateralized loans,383
several commenters pointed out that the
relevant data point is actually the
lending spread to the reference rate
(most commonly the Overnight Bank
Funding Rate or ‘‘OBFR’’) as the rebate
rate will change daily based on the
current level of the reference rate, even
as the negotiated lending spread
remains fixed.384 Thus, commenters
requested that the Commission clarify
(where applicable) that pricing data may
be reported as a spread to a benchmark
rate and, as discussed below in Part F.2,
that such pricing data element does not
need to be updated for changes in the
value of the benchmark rate.385
Another commenter expressed
concern that fee and rebate data could
be misleading in the absence of
additional contextual information,
stating that ‘‘[f]ee/rebate data, without
consideration of firm(s) collateral
requirements, counterparty/asset
exposure(s), applied lending restrictions
or jurisdictional obligations, may create
an unrealistic and misleading portrayal
382 See, e.g., BlackRock Letter, at 3–4; see also FIF
Letter, at 9 (stating that reporting an LEI is
duplicative and likely not useful).
383 See proposed Rule 10c–1(b)(9).
384 See ICI Letter 1, at 5 n.19 (providing this as
another example of how the SEC’s understanding of
the securities lending market structure appears to
be inaccurate); see also BlackRock Letter, at 2
(recommending that, to improve the transaction
level data collected, the transaction record for cash
collateralized loans should include the name of the
reference rate used and the spread to that reference
rate instead of reporting the rebate rate). According
to this commenter, while there is a market
convention of using the OBFR as the reference rate,
this is a negotiable term between the parties to the
lending transaction. See id. Moreover, according to
this commenter, the price negotiation centers on the
spread to that reference rate, not the rebate, and the
rebate will fluctuate daily as the reference rate
value changes. See id. See also MFA Letter 3, at 5
(recommending that the SEC pare back several of
the granular reporting elements that would be
difficult to apply and/or misleading, such as
pricing, stating that ‘‘the Proposed Securities
Lending Rule’s requirements, for example, requires
the rebate rate to be reported in the pricing field,
even though the rebate rate will fluctuate
potentially daily, as the reference rate—typically
the OBFR—changes, and as such would be subject
to frequent amendment that could be confusing to
market participants’’).
385 See, e.g., BlackRock Letter, at 2; RMA Letter,
at 4; see also FIF Letter, at 9 (stating that ‘‘[f]or
securities loans that are priced based on a spread
to a benchmark, the Commission should provide
reporting parties the option to report pricing by
reference to the benchmark and the spread’’).

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of prevailing rates.’’ 386 The final rule
requires pricing information in 17 CFR
240.10c–1a(c)(8) (‘‘final Rule 10c–
1a(c)(8)’’) and 17 CFR 240.10c–1a(c)(9)
(‘‘final Rule 10c–1a(c)(9)’’) because
pricing is a material term of a covered
securities loan. Further, paragraph (g)(5)
of the final rule requires that an RNSA
will make a distribution of loan rates for
each reportable security publicly
available to help market participants
compare the pricing of their covered
securities loan against the pricing of
other covered securities loans.
Information about the distribution of
loan rates recognizes that the cost-toborrow securities can be influenced by
a number of factors and can give market
participants information to help
compare the pricing of their loan against
other loans. Another commenter
requested clarification that only one
identifier for a security is required to be
reported under the rule (i.e., ticker or
ISIN or CUSIP or FIGI) rather than all of
them.387 The final rule permits a
covered person to determine which
identifier to report, or if it prefers, it
may also report multiple identifiers, but
one identifier is required to be reported.
Further, the final rule also permits the
covered person to report a different
identifier than the ticker symbol, ISIN,
CUSIP, or FIGI. In addition, this
commenter requested further
clarification on what type of system
would represent a ‘‘platform or venue’’
for purposes of proposed paragraph
(b)(5).388 The final rule does not specify
386 Letter from Adrian Dale, Head of Regulation,
Digital & Market Practice, ISLA (Jan 7, 2022) (‘‘ISLA
Letter’’), at 2 (suggesting that such fee/rebate data
could not be relied upon to support price discovery
in the same manner as other markets).
387 See, e.g., FIF Letter, at 9. Consistent with the
Proposing Release, paragraph (b)(2) in the final rule
states, ‘‘securities usually will have at least one of
the items listed assigned to it. If not, the RNSA will
be able to require an ‘other identifier’ for further
flexibility under paragraph (2).’’ See Proposing
Release, 86 FR 69813. As such, the Commission is
not providing further details concerning the
required data elements in order to give an RNSA the
discretion to structure its systems and processes as
it sees fit and propose rules accordingly, provided
they are consistent with the rule as adopted as well
as other requirements of the Exchange Act
applicable to an RNSA. See also supra notes 369
and 380. See Letter from Robert Toomey, Head of
Capital Markets, Managing Director & Associate
General Counsel, SIFMA (May 15, 2023) (‘‘SIFMA
Letter 3’’), at 4–5 (stating that ‘‘[m]any of the
granular reporting elements for securities loan
transactions proposed by the SEC are not applicable
to short positions, or do not apply to short positions
in the same way as they apply to securities loans,
and would necessarily lead to incomplete,
inaccurate, and misleading data (e.g., percentage of
collateral to value of loaned securities required to
secure the loan, type of collateral, and lending fee/
rebate fee)’’).
388 See FIF Letter, at 10 (stating that FIF members
request further clarification on what type of system
would represent ‘‘a platform or venue’’ for purposes
of proposed paragraph (b)(5)’s data element).

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what type of systems are a ‘‘platform or
venue’’ for purposes of the data
elements required to be reported under
17 CFR 240.10c–1a(c)(5) (‘‘final Rule
10c–1a(c)(5)’’). The terms are intended
to capture a wide variety of potential
vehicles that covered persons might use
to transact securities loans. Further, an
RNSA has discretion to determine,
pursuant to rules that would be subject
to the section 19(b) and Rule 19b–4
process, whether to categorize such
vehicles (e.g., on-line venue, exchange,
OTC).
Many commenters suggested that the
proposed transaction-by-transaction
reporting requirement be replaced with
an aggregated-only requirement (i.e.,
with some of the commenters wanting
both the reporting and publishing of the
data elements to be on an aggregated
basis only, while other commenters
were supportive of reporting to an
RNSA on a transaction-by-transaction
basis, but then any dissemination to the
public must be made by an RNSA on an
aggregated-only basis).389 For instance,
one commenter recommended
‘‘transaction-by-transaction data be
389 Although it seems as though the terms
‘‘reporting’’ and ‘‘dissemination’’ (or ‘‘disclosure’’)
are used interchangeably by some of the
commenters, there appears to be agreement by
commenters that it is the public disclosure of the
data elements by an RNSA that should be required
on an aggregated-only basis (rather than requiring
disclosure on a transaction-by-transaction basis).
See, e.g., ICI Letter 1, at 11 (although the commenter
states, for confidentiality reasons, that the
Commission should only require ‘‘reporting’’ on an
aggregated basis at the end of the day (and to avoid
front running risks and other predatory trading
practices), from the context of the letter, it appears
to be the case that concern is focused on
information being disclosed to the public/market);
SBAI Letter, at 2; AIMA Letter 1, at 5; RMA Letter,
at 18; See also Letter from Matthew R. Cohen, CEO,
Provable Markets LLC (Jan. 7, 2022) (‘‘PM Letter 2’’)
(while highly supportive of the proposal’s objective
to increase transparency of information available to
brokers, dealers, and investors, commenter
expressed concerns that the Commission carefully
consider and describe the context of the
information provided publicly to the market, and
the underlying benefits of each category published
to the proposed consolidated tape (similar
reproduction of data) to the market). However, one
group of commenters disfavored any public
dissemination of information (i.e., before a study of
the collected data are conducted by the Commission
and the Commission consults stakeholders before
making any determinations about the specifics of a
public dissemination regime) and stated the
concern that the ‘‘proposals could compromise the
[rule’s] objectives by revealing sensitive and
potentially misleading information to the public
. . . [and that the Commission should] adopt an
approach that requires reporting solely for
regulatory purposes.’’ See Letter from Members of
the U.S. House of Representatives Frank D. Lucas,
David Scott, Blaine Luetkemeyer, Bill Foster, Glenn
‘‘GT’’ Thompson, Alma S. Adams, Ph.D., Bill
Huizengia, Vicente Gonzalez, Andy Barr, Josh
Gottheimer, Ann Wagner, Wiley Nickel, and Bryan
Steil (July 12, 2023) (‘‘Letter from Representative
Lucas, et al.’’), at 1. See infra Part VIII regarding the
implementation period for the final rule.

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reported to an RNSA and made
available to regulators, but that the
RNSA analyze and normalize the
reported transaction data to provide
aggregated and, where appropriate,
averaged transaction terms that do not
expose firm and customer investment
strategies, and that better reflect the
transaction terms available to lenders
and borrowers in the securities lending
market.’’ 390 Another commenter stated
that the Commission should narrow the
scope of transaction data information to
be reported to an RNSA (and thereafter
made public by an RNSA) to only
aggregated transaction data.391 Some of
the comments appeared to be focused
on an RNSA’s publication or
dissemination obligations when they
stated that the final rule should require
an RNSA to publish aggregated pricing
and volume data (rather than
transaction-by-transaction data).392
However, this was not always clear as
many of the comments received were
less specific in that their comments on
aggregated disclosure were phrased in
reference to the proposed rule’s
reporting requirement 393 or ‘‘reveal
short selling trading strategies’’ 394 or
disclosing all individual customer short
selling positions on a transaction-bytransaction basis.395
The requirements in paragraph (b) of
final Rule 10c–1a are limited in scope
to the reporting agent’s obligation to
provide certain specified data elements
to an RNSA on behalf of a covered
person. As such, the discussion in this
part is limited to the reporting agent’s
provision of the Rule 10c–1a
information directly and solely to an
RNSA, which does not involve or
require any public disclosure or public
dissemination of such information. By
contrast, the dissemination or disclosure
of the required information is the
obligation of an RNSA, and paragraph
(g) of the final rule, and Part VII.J below,
discuss an RNSA’s responsibilities with
respect to disseminating certain Rule
10c–1a information to the public.
After considering the comments
received recommending that the final
rule require only aggregated pricing and
volume data to be publicly disclosed
(discussed below in Part VII.J), the
390 See

SIFMA Letter 2, at 4.
SIFMA AMG Letter, at 6–7.
392 See, e.g., RMA Letter, at 4; IIB Letter, at 10;
EBF Letter, at 2 (commenters use the terms ‘‘public
dissemination’’ or ‘‘publicly disseminating’’ when
referring to aggregated information or transaction
data).
393 See generally Letter from Jennifer Han,
Executive Vice President, Chief Counsel & Head of
Regulatory Affairs, Managed Funds Association
(Apr. 1, 2022) (‘‘MFA Letter 2’’).
394 See SIFMA AMG Letter, at 7.
395 See CCMR Letter, at 5.
391 See

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Commission has determined not to
modify the proposed transaction-bytransaction reporting requirement with
respect to the provision of Rule 10c–1a
information to an RNSA. Such a
modification to paragraph (c) of the final
rule is unnecessary because the
requirement involves reporting of the
information directly and only to an
RNSA (and not to the public). As such,
the reporting requirement does not
present the concerns raised by
commenters that would warrant
requiring the reporting of the data
elements on an aggregated-only basis, as
was suggested by some commenters.396
Likewise, another commenter suggested
that, to decrease the likelihood that
published data will be potentially
misleading or confusing or that it could
reveal short trading strategies that could
prompt short sellers to exit the market,
the Commission should adjust the
information that is made publicly
available by an RNSA to be only
aggregated securities lending data,
including, among other things, a
volume-weighted average borrowing fee
aggregated across all firms, for each
security loaned.397 Similarly, for the
same aforementioned reasons, it is
unlikely that providing data information
directly and solely to an RNSA will
reveal such short trading strategies or
mislead or confuse the public to warrant
such a modification to the final rule.
Instead, because paragraph (c) of the
final rule only requires the reporting of
information to an RNSA (rather than to
disclose the information to the public),
the risk of revealing short trading
strategies or confusing the public is not
applicable. Moreover, an RNSA’s
responsibilities with respect to the
subsequent publication of certain Rule
10c–1a information are subject to the
requirements and limitations set forth in
paragraph (g) of the final rule,398 which
are discussed below, in Part VII.J.399
396 See infra Part VII.J, for discussion regarding
the responsibilities of an RNSA with respect to the
dissemination of certain Rule 10c–1a information
(particularly with respect to the amount, such as
size, volume, or both of the reportable securities
loaned) that an RNSA receives.
397 See SIFMA Letter 1, at 18–19. The commenter
further stated that it does not object to the proposal
to report by the end of the day information on
‘‘securities on loan.’’ See id.
398 See final Rule 10c–1a(g).
399 Some commenters stated that requiring public
disclosure of securities lending activity on a
transaction-by-transaction basis, especially within
the proposed 15-minute timeframe, would reduce
overall short selling activity by inhibiting and
increasing the cost of building short positions and,
thus, negatively affect market liquidity and pricing
efficiency (i.e., by making it more costly to build
short positions and thus inhibit market participants
from doing so). See, e.g., SIFMA AMG Letter, at 5–
7; see also CCMR Letter, at 5 (stating the disclosure
of such activity would increase the costs associated

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Thus, the Commission is adopting the
proposed requirement to report Rule
10c–1a information, on a transaction-bytransaction basis, directly and solely to
an RNSA.400
In addition, the Commission is
adopting, essentially unchanged, the
twelve data elements originally set forth
in paragraphs (b)(1) through (b)(12) in
the proposed rule, except the
Commission is making the following
non-substantive changes to the language
of some of the proposed data
elements.401 Specifically, the
Commission is modifying the language
of the ‘‘the amount of the security
loaned’’ data element in paragraph (b)(6)
of the proposed rule (i.e., by adding the
language ‘‘such as the size, volume, or
both)’’ so that it instead reads, as
adopted, ‘‘the amount, such as size,
volume, or both, of the reportable
securities loaned.’’ 402 This change will
help ensure the compliance and
accuracy of the Rule 10c–1a information
submissions to an RNSA, by specifying
in the final rule that the term ‘‘amount’’
means ‘‘size, volume, or both.’’ 403
with establishing a short position through
information leakage and slippage; or lead to copycat
short selling activity, which could also increase the
cost to borrow the security due to increased
demand or could facilitate ‘‘short squeezes’’).
However, as discussed above, modifying the
required timeframe for reporting the data elements
to an RNSA, and an RNSA’s dissemination of such
information to the public, as discussed below, in
Part VII.J, should help to address the disclosurerelated concerns raised by the commenters.
400 See also infra Part VII.J regarding the
responsibilities of an RNSA, particularly with
respect to the dissemination of Rule 10c–1a
information (including with respect to the amount,
such as size, volume, or both, of the reportable
security loaned) an RNSA receives, keeping
together in the release the various RNSA-related
provisions.
401 The proposed time periods for reporting the
specified information to an RNSA are discussed
below, in Part VII.G.
402 With respect to the covered securities loan
data element in paragraph (c)(6) of the final rule,
the amount of the security loaned or borrowed,
other than to add the clarifying language ‘‘such as
size, volume, or both’’ the Commission is not
‘‘specifying the parameters of ‘the amount of the
security’ to allow an RNSA flexibility to propose
rules that identify for different types of securities
what information constitutes the ‘amount of the
security.’ For example, an RNSA could propose
rules that require the number of shares be provided
for equity securities and the par value of debt
securities to accommodate differences in the
markets for these securities.’’ See Proposing
Release, 86 FR 69814.
403 See final Rule 10c–1a(c)(6) (requiring
reporting of ‘‘the amount, such as size, volume, or
both, of the reportable security loaned.’’). Modifying
this loan data element to clarify that the ‘‘amount’’
means ‘‘size, volume, or both’’ helps to address the
concern raised by a commenter that had suggested
a ‘‘unit’’ field to accompany the proposed ‘‘amount’’
data element in paragraph (b)(6) of the proposed
rule so as to allow the ‘‘amount’’ to be defined
‘‘unambiguously as a quantity, a notional value or
similar as appropriate.’’ See Letter from Jim Kaye,
Americas Regional Director, FIX Trading

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The Commission also is modifying
proposed paragraph (b)(6) by changing
‘‘security’’ to ‘‘securities’’ (thus, making
it plural, consistent with the term
‘‘securities’’ in paragraph (b)(10)); and,
also modifying both proposed
paragraphs (b)(6) and (b)(10) by adding
the term ‘‘reportable’’ to each, so that
they are both consistent with the final
rule’s newly defined term, ‘‘reportable
securities.’’ The Commission also is
modifying language in proposed
paragraph (b)(1) by changing the term
‘‘active LEI’’ to ‘‘non-lapsed LEI’’ for
accuracy (i.e., by focusing more
precisely on the status of the application
for the LEI-indicator, rather than on the
entity itself).404 The Commission has
modified proposed paragraph (b)(2) by
providing the full names of specified
security identifiers and retaining the
corresponding abbreviations within a
parenthetical with quotes to 17 CFR
240.10c–1a(c)(2) (‘‘final Rule 10c–
1a(c)(2)’’).
The required pricing data, ‘‘[f]or a
loan collateralized by cash, the rebate
rate or any other fee or charges,’’ in
paragraph (c)(8) of the final rule
generally should include when the
pricing data element is negotiated or
agreed-to as a spread to an identified
benchmark or reference rate.405 The
Commission recognizes that the pricing
data element is a material term of the
loan that is often negotiated or agreed to
between the parties. Consistent with
paragraph (b)(9) of the proposed rule, as
well as the final rule, this benchmark
type of pricing, as described by the
commenter, will be captured by the
final rule text language ‘‘the rebate rate
or any other fee or charges.’’ 406 For the
aforementioned reasons, negotiated or
agreed-to pricing data, including as a
spread to an identified benchmark or
reference rate, is required to be reported
to an RNSA pursuant to the rule as
adopted.407 This requirement should
generally help to address commenters’
concerns that may stem from an overly
narrow application of the pricing data
element in paragraph (b)(9) of the
Community (Jan. 4, 2022) (‘‘FIX Trading Letter’’), at
2 (requesting further clarification on and the use of
common standards for details of the data to be
published, similar to the technical standards used
by ESMA and SFTR, and a ‘‘security id’’ filed to
accompany ‘‘security identifier’’ as certain crypto
assets do not have ISINs so the list of eligible
securities identifier types needs to allow for this,
i.e., support ISO standards for digital token
identifiers).
404 See 17 CFR 240.10c–1a(c)(1) (‘‘final Rule 10c–
1a(c)(1)’’).
405 See proposed Rule 10c–1(b)(9).
406 See final Rule 10c–1a(c)(8).
407 See final Rule 10c–1a(c)(8).

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
proposed rule.408 However, because
there are various pricing terms or
arrangements that can be negotiated or
agreed to by parties to a securities loan,
the final rule does not specify or
endorse one particular pricing method
over another and, thus, is adopting the
sufficiently broad pricing data element
rule text for purposes of the final rule
without modification from the proposed
rule text.409 An RNSA, nevertheless,
could address in its rules details
regarding the manner in which pricing
data must be reported, such as further
clarifying how lending cost information
is to be reported. As such, an RNSA has
the necessary flexibility and discretion
to structure its systems and processes as
it determines, consistent with its
obligations under the final rule as well
as other applicable provisions of the
Exchange Act.
2. Loan Modification Data Elements—
Rule 10c–1a(d)
Proposed Rule
Subject to terms agreed to by the
parties, covered securities loans may be
modified after they are made. To ensure
that the loan data elements reported
pursuant to proposed Rule 10c–1(b)
would accurately reflect currently
outstanding covered securities loans
and to prevent evasion, proposed Rule
10c–1(c) required that certain loan
modification data elements be provided
to an RNSA within 15 minutes after
each loan is modified if the
modification resulted in a change to
information required to be provided to
an RNSA under paragraph (b) of the
proposed rule (and then for an RNSA to
make such information available to the
public as soon as practicable).410 More
specifically, the proposed loan
modification data elements in
paragraphs (c)(1) through (c)(3) of the
proposed rule required the following
data elements to be provided to an
RNSA: (1) the date and time of the
modification; (2) a description of the
modification; and (3) the unique
transaction identifier of the original
loan.411
In the Proposing Release, the
Commission explained that it
preliminarily believed the proposed

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408 See

supra note 385 (citing commenters who
requested that the Commission clarify, where
applicable, that pricing data may be reported as a
spread to a benchmark rate).
409 See supra note 385 and accompanying text
(commenters requesting the Commission to clarify,
where applicable, that pricing data may be reported
as a spread to a benchmark rate, and that such
pricing does not need to be updated for changes in
the value of the benchmark rate).
410 See proposed Rule 10c–1(c).
411 Proposed Rule 10c–1(c).

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loan modification data elements in
proposed paragraph (c) are necessary to
allow an RNSA to identify which loan
was being modified, categorize the type
of modification, and make information
about the modification publicly
available.412 In addition, as proposed,
the requirement to provide the loan
modification information to an RNSA
was conditioned on the modification
resulting in a change to the Rule 10c–
1 information required to be provided to
an RNSA under paragraph (b) of the
proposed rule.413
Final Rule
The Commission is adopting the loan
modification data elements substantially
as proposed.414 However, the final rule
includes a change to the loan
modification data elements requirement
in response to commenters.415 Other
commenters sought clarification as to
when loan modifications should be
reported, which is discussed below. In
addition, the final rule has been
modified to address comments
regarding loans that pre-exist the
reporting date.
Paragraphs (d)(1)(i) through (iii) of the
final rule set forth the data elements that
a covered person must report by the end
of the day on which a covered securities
loan is modified. Paragraph (d)(1)(i)
requires covered persons to report ‘‘[t]he
date and time of the modification;’’
paragraph (d)(1)(ii) requires covered
persons to report ‘‘[t]he specific
412 See

Proposing Release, 86 FR 69815.
Proposing Release, 86 FR 69815.
Consistent with the Proposing Release, an example
of a modification that will trigger a reporting
requirement under paragraph (d) of the final rule
includes: the termination of an open-ended loan
that results in a reduction of the quantity of the
securities initially provided to an RNSA for that
loan under paragraph (c)(6)’s data element—i.e.,
amount of the security loaned. See also Proposing
Release, 86 FR 69815. An example of a modification
that will not trigger the loan modification data
element reporting requirement in paragraph (d) of
the final rule is if a borrower posts additional
collateral in response to an increase in the value of
the loaned securities. Id. Under such circumstance,
information about this change will not be required
to be reported under paragraph (d) because, while
paragraph (c)(11) requires the covered person to
provide the percentage of collateral to value of
loaned securities required to secure such loan, it
does not require information about the value of
collateral posted in dollar terms. See also id. at
n.96.
414 See 17 CFR 240.10c–1a(d)(1)(i) (‘‘final Rule
10c–1a(d)(1)(i)’’); 17 CFR 240.10c–1a(d)(1)(ii)
(‘‘final Rule 10c–1a(d)(1)(ii)’’); 17 CFR 240.10c–
1a(d)(1)(iii) (‘‘final Rule 10c–1a(d)(1)(iii)’’).
415 The Commission also received comments that
relate to the two loan modification data elements
in paragraphs (d)(1)(i) and (d)(1)(iii) of the final
rule. These comments are addressed separately
below, in Parts VII.G.2 and VII.J, with respect to the
timing modifications to paragraph (d) in the
proposed rule, and regarding an RNSA’s obligations
with respect to assigning the unique identifiers in
compliance with the final rule.
413 See

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75671

modification and the specific data
element in paragraph (c) of this section
being modified; and paragraph (d)(1)(iii)
requires the covered person to report
‘‘[t]he unique identifier assigned to the
original covered securities loan under
paragraphs (g)(1) or (g)(3) of this
section.’’ 416
With respect to paragraph (d)(1)(ii), to
help ensure the provision of relevant
and useful loan modification reports to
an RNSA, the Commission has revised
this loan modification data element
from the proposed requirement by
removing the phrase ‘‘[a] description of’’
and, instead, adding both ‘‘the specific
modification’’ as well as ‘‘and specific
data element in paragraph (c) being
modified’’ (i.e., with respect to the loan
modification data element being
reported to an RNSA). The revised
language ‘‘the specific modification’’
makes explicit that the actual
modification must be reported (e.g., the
amount of the security loaned increased
by 200 shares), not a vague description
of the modification (e.g., the amount of
the security loaned was increased). The
Commission is making this change
because it will result in the collection of
more accurate and useful information
concerning the modification being
reported. The Commission is also
modifying paragraph (d)(1)(iii) to
require the reporting of a previously
assigned unique identifier whether
assigned at the time of execution of the
loan, or, with respect to a pre-existing
securities loan as discussed below in
this section, at the time of the
modification. As a result, the
Commission is adopting paragraph
(d)(1)(iii) of the final rule, with a slight
modification from the proposal such
that the rule text of (d)(1)(iii) will
require the unique identifier assigned to
the original covered securities loan
under paragraphs (g)(1) or (g)(3) of this
section.’’ 417
The Commission also received
comment seeking clarity regarding how
to report various modifications to a
loan.418 Other commenters who
discussed the loan modification data
elements discussed the different types
of modifications that can occur
frequently throughout the day,419 or
416 See

final Rules 10c–1a(d)(1)(i) and (d)(1)(iii).
final Rules 10c–1a(d)(1)(i) and (d)(1)(iii).
418 See FIX Trading Letter, at 3. The commenter
provided hypotheticals, including: (1) as a result of
a corporate action, a loan is closed and two or more
loans are created; (2) a consolidation of multiple
loans with the same counterparty and for the same
security into one loan; and (3) the splitting of a
single loan into multiple loans where the lender
requires the return of some of the shares.
419 Comments received by the Commission that
focus primarily on the proposed 15-minute timing
417 See

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sought further information on what
types of modifications would likely
trigger a loan modification reporting
obligation under the final rule.420 One
commenter stated that, in the context of
cash collateralized loans, the rebate will
fluctuate daily as the reference rate
value changes, but suggested that loans
where the selected reference rate and
spread to that reference rate do not
change should be deemed out of scope
of the required loan modification
reporting.421 As an example, this
commenter stated that, where a loan is
collateralized by cash and the
negotiated pricing data element is a
spread to a benchmark rate, such pricing
does not need to be updated for changes
in the value of the benchmark rate (i.e.,
not a reportable loan modification for
purposes of the final rule).422 The same
commenter stated more generally that
certain modifications to loan
information that has already been
provided to an RNSA pursuant to
proposed Rule 10c–1 should not be
required to be provided to an RNSA,
claiming that could make data that was
already made public potentially
misleading.423 As discussed above, in
Part VII.F.1, the pricing data elements
required to be reported by paragraph
(c)(8) include benchmark pricing, such
as a reference to the OBFR in a manner
determined by an RNSA. Paragraph (d)
of the final rule, requiring reporting of
modifications to a paragraph (c) data
element, including pricing in paragraph
(c)(8), will also capture benchmark
pricing. The extent to which the
commenter’s concern is realized will be

determined by how an RNSA chooses to
structure the reporting of this variable.
For instance, if an RNSA chooses to
allow market participants to report a
spread and a benchmark, then no
modifications will be required to be
reported from day to day unless there
were a change in the negotiated spread
or benchmark. However, if an RNSA
chooses to require market participants
to report the total fee, then market
participants will be required to report
changes to the fee if the benchmark
changes, which can require daily
revisions.424 However, the Commission
does not expect that this will cause
confusion. The Commission
understands that market participants
know that rebates can change regularly
and, thus, revisions would not be
unexpected. Further, gathering loan
modification data is important to
facilitate the accurate computation of
statistics regarding the cost to borrow by
an RNSA and other market participants.
One commenter suggested that the
termination of a loan should be reported
based on the return of securities by the
borrower.425 Under the final rule, if a
borrower returns a portion of loaned
shares, the reduction in the amount of
shares remaining on loan will be
reported as a modification.426 Similarly,
under the final rule, a termination of a
covered securities loan is a modification
for which information, including the
termination date and the reduction of
the loaned shares (if any), is required to
be reported to an RNSA.427
Events such as consolidations and
splitting of loans are required to be

requirement for reporting required loan
modification information—including commenters’
recommendations with respect to the final rule’s
timing requirement—are discussed separately,
below, in Part VII.G.1.
420 See, e.g., Pirum Letter, at 2 (discussing that for
modifications to previously reported loan
transactions, a significant number of these will
typically happen in ‘‘batch’’ processes at specific
times throughout the day, stating one of the most
common modifications is the daily marked-tomarket exercise whereby the price of the loan (loan
value and required collateral value) and potentially
the associated collateral amounts are adjusted to
reflect market value changes in the underlying
security on loan).
421 See BlackRock Letter, at 2.
422 See BlackRock Letter, at 2.
423 See BlackRock Letter, at 7. According to this
commenter, open loans are commonly marked-tomarket to the closing price of the relevant security
from the previous business day, plus margin and
rounding. See id. As a result, the actual
modification of open loans tends to happen across
all positions the next day and at relatively common
times across the market. See id. The Commission
recognizes that, subject to terms agreed to by the
parties, covered securities loans may be modified
after they are made or are often not finalized until
the end of the day. The end-of-day timing
modifications to the final rule, as discussed below,
in Part VII.G, will help to reduce these concerns
raised by the commenters.

424 See infra Part IX.C.1 (discussing an RNSA’s
discretion with respect to benchmark pricing).
425 See FIF Letter, at 10 (stating ‘‘termination of
a securities loan should be reported based on the
return of securities by the borrower against the
return of the collateral by the lender. The same
approach as proposed for reporting new loans and
loan terminations should apply for reporting loan
modifications.’’).
426 Under the final rule, a reduction (or increase)
in the loan amount is required to be reported to an
RNSA under paragraph (d) of the final rule as a
modification to the loan amount in paragraph (c)(6).
If the parties to the covered securities loan regard/
treat the reduction as termination of the covered
securities loan, that is also required to be reported
to an RNSA under paragraph (d) of the final rule
as a modification to the termination date of the
covered securities loan in 17 CFR 240.10c–1a(c)(11)
(‘‘final Rule 10c–1a(c)(11)’’). Moreover, if the parties
to the covered securities loan terminate their loan
and such termination involves a reduction in the
loan size, this would qualify as a reportable
modification under paragraph (d) of the final rule
as a modification resulting in a change to the
amount or size data element in paragraph (c)(6).
427 See also Proposing Release, 86 FR 69815
(stating ‘‘a termination of a loan would be a
modification for which information would need to
be provided to an RNSA . . . because the
termination would result in a reduction of the
quantity of securities initially provided to an RNSA
for that loan under paragraph (b)(6)’’).

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reported. A consolidation would be
reported as the termination (and
therefore modification) of existing loans
and entry into a new loan, including the
reporting of all required data elements
for those modifications and for the new
loan. Similarly, the splitting of an
existing loan into separate loans could
be reported as a modification and
termination of the original loan and
entry into multiple separate loans.428
However, that there may be certain lifecycle events in the course of an openended loan that some market
participants may view as a modification
to an existing loan that other market
participants might view as a termination
of an existing loan and the entry into a
new loan. For example, when all
outstanding loaned securities are
returned to the lender and additional (or
the same) shares are subsequently lent
under an open-ended loan, one lender
may view that event as a termination
(and therefore a modification) of an
existing loan and a creation of a new
loan, whereas another lender may view
a similar transaction as two
modifications (the return of, and
subsequent loan of, securities under the
same open-ended loan). In such cases,
the lender (or lending agent or reporting
agent) may elect to report the required
information as either a modification
(and termination), or as two
modifications to an open-ended loan.
Reporting of Data Elements for PreExisting Securities Loans
The Commission also received
comment seeking clarification on what
some commenters called day-one loans,
or loans that are agreed to prior to the
reporting date of the final rule.429 One
commenter described the day-one
problem and stated, ‘‘we suggest the
Commission find a solution to ensure
these loans do not go unreported under
a new reporting regime.’’ 430 Other
commenters stated that the Commission
428 In addition, to help reduce concerns about
potential confusion and misinterpretation of the
data, an RNSA could determine to develop
methodologies to identify events as a consolidation
or the splitting of existing covered securities loans.
429 See BlackRock Letter, at 3, 9; AIMA Letter 1,
at 5; ICI Letter 1, at 13 n.45 (stating that, given the
difficulties the EU faced with ‘‘day one’’ issue
regarding implementation of SFTR, ICI recommends
that the SEC or FINRA provide clarity regarding
applicability of any final rule to securities loans
that are outstanding on the rule’s implementation
date); FIX Trading Letter, at 3 (stating ‘‘It is not clear
how the rule handles loans created prior to the rule
coming into effect but modified after the rule comes
into effect . . . . We recommend some wording be
added to the rule to clarify a) whether loans already
in existence prior to the rule coming into effect
need to be reported, b) how modifications should
be handled for such loans.’’).
430 AIMA Letter 1, at 5.

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should consider ways to report and
identify such loans.431
Certain commenters stated that many
loans are open-ended and continuously
modified,432 and sought clarity
regarding the treatment of loans in
existence prior to the final rule’s
reporting date for covered persons that
are subsequently modified, which
commenters characterized as the dayone problem.433 For example, one
commenter stated that the proposal does
not consider a key implementation
question regarding the day-one problem
for reporting existing loans, specifically,
that ‘‘most loans are open-ended
without a set termination date.
Accordingly, loans are continually
resized and rerated until either the
lender or the borrower recalls or returns
all shares, respectively. Given the
longevity of the average loan, there will
be a substantial number of loans that
exist prior to the implementation date of
the reporting requirements, and such
loans will likely continue to be
modified as long as they remain
outstanding.’’ 434 This commenter
provided three possible paths for
handling such day-one loans: ‘‘(1) report
each loan the first time it is modified
after the implementation date as if it
were a new loan, (2) provide all existing
loans with an identifier on the day of
implementation, or (3) exclude all
existing loans from all reporting
obligations, including reporting of
modifications made to those loans after
implementation date.’’ 435
The commenter’s first alternative for
reporting each ‘‘day-one’’ loan the first
time it is modified provides an
appropriate means of on-boarding data
for such loans, as discussed below.436
431 See, e.g., Letter from JD Cumpson (Mar. 14,
2022), at 1 (stating ‘‘[t]his should be required to be
back-dated for all current lending; no hidden
‘legacy’ deals that are underreported’’); BlackRock
Letter, at 3 (stating ‘‘the Commission should
consider ways to report and identify open securities
loans initiated before the first day any new
requirements are effective; this is the ‘day-one
problem’ . . . either the Commission or the
designated RNSA will need to devise a solution for
appropriately incorporating them into the data
set’’).
432 See, e.g., BlackRock Letter, at 9; AIMA Letter
1, at 5.
433 See, e.g., BlackRock Letter, at 9; AIMA Letter
1, at 5; ICI Letter 1, at 13.
434 BlackRock Letter, at 9.
435 BlackRock Letter, at 9.
436 See infra note 974 (stating that the
Commission does not expect significant additional
costs to result from this requirement as it is not
expected to impact the need for reporting agents to
develop and maintain systems for reporting
securities lending information but will simply
require the inclusion of some additional data
transfers that occur largely around the reporting
date. Since the cost of individual transmissions are
expected to be small, this aspect of the final rule
is expected to have a small impact on the

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As discussed below, in Part IX.C.1, the
lack of information about these loans
would harm data quality because it
would render the data less complete and
would thus limit market participants’
ability to determine conditions in the
lending market. Accordingly, paragraph
(d)(2) of the final rule provides that if a
modification is made to a covered
securities loan for which reporting
under paragraph (a) of the final rule was
not required on the date the loan was
agreed to or last modified (a ‘‘preexisting covered securities loan’’) and
results in a change to any of the data
elements in paragraph (c) of the final
rule, there is an obligation to report each
of the data elements in paragraph (c) of
the final rule as of the date of the
modification.437 Paragraph (d)(2) will
provide a snap shot of a pre-existing
covered securities loan the first time it
is modified on or after the reporting
date. If, for example, under the final
rule, a pre-existing covered securities
loan is first modified two months after
the reporting date and the modification
results in a change to a data element in
paragraph (c) of the final rule, the
covered person must provide each of the
data elements under paragraph (c) to an
RNSA, including the date and time the
pre-existing covered securities loan was
effected pursuant to 17 CFR 240.10c–
1a(c)(3) (‘‘final Rule 10c–1a(c)(3)’’) and
17 CFR 240.10c–1a(c)(4) (‘‘final Rule
10c–1a(c)(4)’’), which will indicate that
this is a pre-existing covered securities
loan. Reporting of the date and time that
the pre-existing covered securities loan
was originally effected will provide
market participants and regulators with
a more complete picture as to the
duration of the outstanding loan that is
being modified.
In addition to the date and time that
the pre-existing covered securities loan
was effected (i.e., information in
paragraphs (c)(3) and (c)(4)), the covered
person must also provide information in
paragraphs (c)(1), (c)(2), and (c)(5)
compliance costs of the final rule). See also infra
note 1029 (The requirement to report information
once a loan modification occurs after that loan
qualifies for reporting will further support the
benefits of the final rule, including reduced
information asymmetries and enhanced price
competition, by helping to ensure a level playing
field during the earlier phases of implementation.
This provision will prevent lenders, that have a
higher number of long-term loans that did not
initially qualify for final Rule 10c–1a reporting,
from gaining a competitive advantage by being able
to see the loans of other market participants without
disclosing the terms of their own loans).
437 See final Rule 10c–1a(d)(2). This approach
also responds to the various requests from
commenters, including ICI and BlackRock,
requesting that the SEC or FINRA provide clarity
regarding the applicability of the final rule to dayone loans (i.e., securities loans that are outstanding
on implementation data).

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75673

through 17 CFR 240.10c–1a(c)(12)
(‘‘final Rule 10c–1a(c)(12)’’) as of the
date of the modification. The date and
time of the modification will provide
market participants with specificity and
context regarding the terms of the
modifications, including the rates
available for modification at that date
and time (which may be different than
rates available for new loans). Including
the date and time will be important
because it will indicate if a report of a
modification is not filed in a timely
fashion.
If, for example, a pre-existing covered
securities loan is first modified, either
on or after the reporting date, and it is
a modification to the loan amount, the
covered person will be required to
report the number of shares as modified
under paragraph (c)(6) of the final rule
to an RNSA, as well as each of the other
data elements in paragraph (c),
including the date and time the preexisting covered securities loan was
effected, by the end of the day on which
such loan was modified. In that same
example, the date and time of the
modification will be required to be
reported. Recognizing that a unique
identifier will not yet exist for the loan
and no data about the loan was
previously reported or made publicly
available under the final rule, the data
elements in (d)(1)(ii) and (d)(1)(iii) will
not be required to be reported for such
pre-existing covered securities loans.438
However, any subsequent modifications
going forward will be subject to the
modification reporting requirements
under paragraph (d)(1) of the final rule
such that only the information in
paragraphs (d)(1)(i) through (iii) of
paragraph (d) will be required to be
reported to an RNSA. Pre-existing
covered securities loans that do not
have a modification to a data element in
paragraph (c) will not be subject to the
reporting obligation under paragraph
(d)(2) of the final rule.439
The Commission is not adopting the
commenter’s alternative of requiring
reporting of all pre-existing covered
securities loans on the first reporting
date. Such an alternative would result
in costs and burdens for an RNSA to
build out the capacity to handle a much
larger number of reports on the first
reporting date. The Commission is also
not adopting the commenter’s
alternative of omitting all pre-existing
covered securities loans, as the data
regarding such loans will be useful to
investors as well as regulators and the
on-boarding of data for such loans when
modified will help reduce information
438 See
439 See

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final Rule 10c–1a(d)(2).
final Rule 10c–1a(d)(2).

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asymmetries.440 These modifications to
the final rule address the concerns of
other commenters seeking certainty
regarding such day one loans.
The commenter also recommended
‘‘provid[ing] all existing loans with an
identifier on the day of
implementation.’’ 441 However, simply
providing an identifier to a pre-existing
loan without data about the loan would
not provide transparency about the
terms of the loan. Instead, the final rule
requires that an RNSA assign a unique
identifier to the pre-existing covered
securities loan when it is reported to an
RNSA.
Specifically, 17 CFR 240.10c–1a(g)(3)
(‘‘final Rule 10c–1a(g)(3)’’) requires that
an RNSA assign a unique identifier to a
pre-existing covered securities loan that
is reported to it pursuant to paragraph
(d)(2). Consistent with covered
securities loans, an RNSA is also
required to make publicly available the
data elements in paragraphs (c) and
(d)(1)(i) reported to it, other than loan
amount data element in paragraph
(c)(6), not later than the morning of the
business day after the covered securities
loan is modified.442 In addition, an
RNSA is required to make the loan
amount publicly available on the
twentieth business day after the preexisting covered securities loan is
modified.443 These requirements for
pre-existing covered securities loans
that are modified after the reporting date
are necessary so that the data reported
regarding these modified loans are also
made publicly available in a manner
similar to loans that are covered
securities loans under paragraph (g) of
the final rule.
3. Confidential Data Elements—Rule
10c–1a(e)

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Proposed Rule
The Commission also proposed
certain material transaction data
elements to be provided to, and retained
by, an RNSA, but not made public
(‘‘confidential data elements’’). As
proposed, the confidential data
elements provision of the rule is
designed to have certain data
information used solely by regulators to
better understand securities lending,
including interest in short selling and
price discovery for securities lending,
yet without identifying market
participants or revealing sensitive
440 See supra note 436 (discussing costs that
result from the requirement to report information
once a loan modification occurs after the loan
qualifies for reporting).
441 BlackRock Letter, at 9.
442 See final Rule 10c–1a(g)(3)(i).
443 See final Rule 10c–1a(g)(3)(ii).

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information about their internal
operations to the rest of the market.
Paragraph (d) of the proposed rule also
required the confidential data elements
to be provided to an RNSA within 15
minutes after each securities loan was
effected (and then an RNSA would be
required to keep such information
confidential, subject to the provisions of
applicable law).
As proposed, the confidential data
elements included:
(i) The legal name of each party to the
securities loan; where applicable, CRD
or IARD Number, MPID, and the LEI of
each party to the transaction, and
whether such person is the lender/
borrower/intermediary between the
lender and the borrower (if known); 444
(ii) If the person lending securities is
a broker or dealer and the borrower is
its customer, to report whether the
security is loaned from a broker’s or
dealer’s securities inventory to a
customer of such broker or dealer; 445
and
(iii) If known, whether the securities
loan is being used to close out a fail to
deliver either pursuant to 17 CFR
242.204 (‘‘Rule 204’’) of Regulation SHO
or outside of Regulation SHO.
Final Rule
The Commission sought and received
comment regarding the proposed
provision that would require lenders or
their agents 446 to provide the
confidential data items to an RNSA
within 15 minutes after each loan is
effected.447 Commenters stated that the
Commission should impose explicit
confidentiality obligations on FINRA so
444 In

proposed Rule 10c–1(d)(1), the Commission
stated its preliminary belief that provision of this
first data element to an RNSA would allow
regulators to understand buildups in risk at market
participants. It would also provide an RNSA with
information that would be required to administer
the collection of all data elements provided to it
under paragraphs (b) and (d) of proposed Rule 10c–
1, such as ensuring the completeness of
submissions, contacting persons that have errors in
their provided data, and troubleshooting personspecific technical issues. See Proposing Release, 86
FR 69815.
445 In proposed Rule 10c–1(d)(2), the Commission
stated its preliminary belief that this second data
element would provide regulators with information
on the strategies that broker-dealers use to source
securities that are lent to their customers. The
Commission also explained that this data element
would not apply to lenders that are not brokerdealers. The Commission also stated that it
preliminarily believed that making this information
available to the public would be detrimental
because it may reveal confidential information
about the internal operations of a broker-dealer. See
Proposing Release, 86 FR 69815–16.
446 The term ‘‘lenders or their agents’’ in proposed
Rule 10c–1 is replaced in the final rule by the term
‘‘covered person’’ (as defined in final Rule 10c–
1a(j)). See also discussion of ‘‘covered person’’
above, in Part VII.A.
447 See proposed Rule 10c–1(d).

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as to protect the confidential securities
lending information that would be
reported.448 Paragraph (h)(4) of the final
rule requires that an RNSA establish,
maintain, and enforce reasonably
designed written policies and
procedures to maintain the security and
confidentiality of the collected
information, which should enhance
protection of the confidential data that
it collects under the final rule.
One commenter suggested that the
final rule include masking or further
additional redactions to better protect
an individual’s personal non-public
information.449 Another commenter
stated that a retail client has increased
confidentiality concerns compared to an
institutional client.450 These concerns
appear to arise primarily from the
potential identification of a broker or
dealer’s individual fully paid customers.
Paragraph (e)(1) of the final rule
specifies that a broker or dealer is not
required to provide the legal name of (or
otherwise make identifiable) the
customer when reporting loans of fully
paid excess margin securities pursuant
to Rule 15c3–3(b)(3). Thus, a broker or
dealer may redact or mask such
information prior to submitting the
information to an RNSA.
Another commenter supported the
Commission’s proposed requirement
that lenders provide to an RNSA the
identities of borrowers of securities
loans (although they would not be
publicly disclosed), explaining that this
information is essential for effective
market oversight, and failure to collect
this information would materially
448 ICI Letter 1, at 11 (stating that, ‘‘to protect the
confidential securities lending information that
would be reported to FINRA under proposed rule
10c–1, the SEC should impose explicit
confidentiality obligations on FINRA . . . [and]
should also ensure that FINRA implements
adequate data security measures, given that FINRA
will serve as a repository of a large amount of
sensitive and non-public securities lending data.’’).
See also Federated Hermes Letter, at 2 (stating that
it fully endorses and supports the ICI’s comments,
particularly ICI’s proposal to protect confidential
data, which, as described includes imposing
explicit confidentiality obligations on FINRA and
ensuring that FINRA implements adequate data
security measures, given that FINRA will serve as
a repository of a large amount of sensitive and nonpublic securities lending data); ISLA Letter, at 2
(expressing concern that if there is too much
disclosure of information it could lead to less
securities lending activity, particularly if the
required data are disproportional or considered
unreasonable); MFA Letter 3, at 8 (recommending
‘‘that the Commission exercise its regulatory
oversight of FINRA to ensure that FINRA
implements adequate data security measures’’). See,
e.g., IIB Letter, at 3 (recommending that the final
rule require RNSAs to adopt certain data security
measures, including masking or encryption);
Charles Schwab Letter, at 2.
449 See Charles Schwab Letter, at 2; see also FIF
Letter, at 7.
450 See Charles Schwab Letter, at 2.

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weaken the efficacy of the rule.451
Under the final rule, the names and
identities of lenders (other than
customers in a fully paid lending
arrangement) will be required to be
reported to an RNSA. This data will be
fully captured by the final rule requiring
a broker or dealer (as the ‘‘borrower’’
under the ‘‘fully paid’’ exception) to
report such loans. With regard to fully
paid arrangements, the final rule
requires the broker or dealer to report
such loans as the borrower. Although
brokers or dealers will not be required
to report the customer names to an
RNSA, the brokers or dealers will be
required to retain such information and
make it available to the Commission and
its representatives 452 and will be
required to retain per RNSA rules.453
Another commenter suggested that, to
make the rule more useful to investors,
in addition to loan characteristics, there
should also be a requirement to publicly
disclose the legal names of the parties
to the loan (in contrast to keeping that
information confidential).454 In fact,
multiple retail investor commenters
stated that real reform for securities
lending must include notifying the
public about who is borrowing and
lending shares (not just which
company’s shares are being borrowed or
lent).455 One commenter stated that
451 See, e.g., HMA Letter; NYSE Letter 1, at 2
(supporting the proposed confidential treatment of
the proposed confidential data elements,
particularly the parties to each transaction and
further stating that ‘‘[p]roposed Rule 10c–1(c)(3)
guards against this concern by providing that all
identifying information about lending agents,
reporting agents, and other persons using reporting
agents, will not be made publicly available and the
RNSA will be required to keep such information
confidential. Thus, the investment strategies of
market participants will be appropriately protected
through reporting and dissemination of securities
lending transactions on an unattributed basis.’’).
452 See, e.g., 15 U.S.C. 78q (section 17(b) of the
Exchange Act; see also 17 CFR 240.17a–4(j) (‘‘Rule
17a–4(j)’’) (requiring a broker-dealer to furnish
records promptly to the Commission); Rule 15c3–
3(b)(3) (requiring a broker-dealer to enter into a
written agreement with each fully paid lending
customer); 17 CFR 240.17a–4(b)(7) (‘‘Rule 17a–
4(b)(7)’’) (requiring the broker-dealer to retain
written agreements relating to its business as
broker-dealer).
453 See, e.g., FINRA Rule 4511 (regarding
preservation of records), available at https://
www.finra.org/rules-guidance/key-topics/booksrecords.
454 See Morningstar Letter, at 3. However, if the
Commission decides not to require public
disclosure of legal names to the public, this
commenter suggested, as an alternative, the
Commission require detailed information about the
fund type and borrower type be provided to the
public by an RNSA. See Morningstar Letter, at 3.
455 See, e.g., Letter from Susanne Trimbath, STP
Advisory Services (Dec. 3, 2021) (whose remarks/
comments have been extensively quoted/
paraphrased by a multitude of commenters on the
Proposing Release, i.e., Form A Letters and Form B
Letters) (‘‘Trimbath Letter’’).

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there is no reason for any of the
information that is proposed to be
provided to an RNSA to be restricted
from public view and, thus, it should be
made public.456 However, making this
information available to the public
could be detrimental because it could
identify specific market participants or
reveal confidential information about
the internal operations or investment
decisions of specific market
participants.457
Others commented more generally on
the importance of the securities lending
disclosure requirements not adversely
impacting the market (e.g., by revealing
investors’ short selling strategies). To
avoid such adverse impacts, these
commenters stated that there should be
more prescriptive measures (than
requiring policies and procedures, for
instance) to prevent an RNSA, or the
reporting agent, from releasing any of
the confidential transaction data that are
provided, under the final rule.458
Paragraph (h)(4) of the final rule sets
forth a multi-part requirement that
mandates: (1) written policies and
procedures; (2) that such policies and
procedures must be reasonably
designed; and (3) that an RNSA
establishes, maintains, and enforces
such policies and procedures. This
approach is intended to provide
flexibility to an RNSA to tailor policies
and procedures that will appropriately
maintain the security and
confidentiality of the confidential
information required by paragraph (e) of
the final rule, based on its experience
with the multiple types of sensitive and
confidential trading data that it
456 See

Letter from Jimit Raithatha (Oct. 11, 2022).
Proposing Release, 86 FR 69815.
458 See, e.g., Letter from Managed Funds
Association (Jan. 7, 2022) (‘‘MFA Letter 1’’), at 4
(suggesting the Commission explicitly require an
RNSA to maintain strict confidentiality and
information security standards. While the
commenter applauded the Commission’s efforts to
ensure that FINRA has policies and procedures in
place to protect the confidentiality of information
that is submitted to it, the commenter believes that
the Commission should require, among other
things, more prescriptive measures similar to Rule
613 of Regulation NMS (consolidated audit trail) to
ensure the security and confidentiality of
information, as well as information barriers,
information security systems, user confirmation,
and access audits.); MFA Letter 3, at 3. Given the
confidential and proprietary nature of some of the
information that an RNSA will be collecting, this
commenter stated it is imperative that the
Commission ultimately ensure that FINRA adopt
more prescriptive confidentiality and information
security in connection with any final rule. As
discussed above, the requirements of paragraph
(h)(4) of the final rule provide an appropriate level
of flexibility to an RNSA regarding specific
prescriptive measures to use to maintain the
security and confidentiality of the confidential
information required by paragraph (e) of the final
rule while, at the same time, placing strict
requirements around such choices.
457 See

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75675

routinely handles as an RNSA. Policies
and procedures generally are regularly
monitored, tested, reviewed, and, if
needed, updated to ensure that they
remain continuously effective and, thus,
should be particularly useful in helping
to ensure that an RNSA adjusts to everchanging technologies intended to
circumvent data safeguards. Further, an
RNSA’s policies and procedures are
subject to Commission oversight.459
Some commenters expressed concerns
about reporting agents maintaining
confidential data received from covered
persons.460 Consistent with the
proposed rule, a covered person has the
option of whether or not to entrust its
confidential information with a
reporting agent or to report such
information directly to an RNSA.
Further, paragraph (a)(2)(i) of the final
rule requires that a covered person who
relies on a reporting agent to fulfill its
reporting obligations under the final
rule must enter into a written agreement
with such reporting agent. Such
agreement could be used by the covered
person and reporting agent to
memorialize any measures that they
agree to regarding the protection of the
covered person’s Rule 10c–1a
information. Further, registered brokers
and dealers and registered clearing
agencies are subject to provisions such
as section 15(g) of the Exchange Act and
thus, have experience with
implementing, maintaining, and
enforcing policies and procedures and
other means of protecting and
preventing the misuse of information.461
One commenter recommended that
the proposed rule be modified to permit
an RNSA to confidentially provide
regulatory-related information to SROs
that are not RNSAs, such as NYSE
Regulation, without first obtaining a
Commission order.462 Under the final
459 See also ICI Letter 1, at 11 (suggesting a
proposal to protect confidential data to include
imposing explicit confidentiality obligations on
FINRA and ensuring that FINRA implements
adequate data security measures, given that FINRA
will serve as a repository of a large amount of
sensitive and non-public securities lending data);
ISLA Letter, at 2 (expressing concern that if there
is too much disclosure of information it could lead
to less securities lending activity, particularly if the
required data are disproportional or considered
unreasonable).
460 See S3 Partners Letter, at 12; IHS Markit
Letter, at 4; Pirum Letter, at 5; BlackRock Letter, at
9.
461 See 15 U.S.C. 78o.
462 See, e.g., NYSE Letter 2, at 1–3; Nasdaq Letter,
at 3–4 (supporting regulators having access to
information that is not publicly available and
advocating for the SEC to make non-public
information available to other regulators). See also
paragraph (h)(2) of final Rule 10c–1a regarding an
RNSA making certain information available to the
Commission; or other persons as the Commission

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rule, an RNSA is required to establish,
maintain, and enforce policies and
procedures specifically tailored to
protect the confidential information
enumerated in the final rule. To address
commenters’ concerns regarding the
potential market impact of loan
information required to be provided to
an RNSA by the final rule, the
Commission may designate by order
upon a demonstrated regulatory need,
dissemination to persons other than an
RNSA. Thus, as discussed further
below, in Part VII.K, it is appropriate to
provide such information to persons
(other than the Commission) by order,
on a case-by-case basis, upon a
demonstrated regulatory need. Such
case-by-case determination strikes the
proper balance between protecting
confidential information and facilitating
the regulatory function, such as those of
an SRO. Another commenter requested
that the Commission clarify whether the
‘‘if known’’ parenthetical, included at
the end of paragraph (d)(1) of the
proposed rule, was meant to apply to
each of the confidential data elements
(i.e., CRD, IARD, MPID) in that
paragraph.463 In reviewing this
provision, the Commission recognizes
that the proposed rule text, by locating
the ‘‘if known’’ language at the end of
paragraph (d)(1) in the proposed rule
(rather than at the beginning as was
done with other ‘‘if known’’ language
that was used for the confidential data
elements in paragraph (d)(3) of the
proposed rule), the scope of this ‘‘if
known’’ language with respect to the
individual confidential data elements in
paragraph (d)(1) was not entirely clear.
Thus, the placement of the ‘‘if known’’
language similarly at the beginning of
the paragraph (e)(1) of the final rule
clarifies that each piece of information
enumerated in that paragraph (i.e.,
following the ‘‘if known’’ language) is
required to be reported only to the
extent that piece of information is
known by the covered person. To clarify
this intent, it is appropriate to modify
proposed paragraph (d)(1) by moving
the placement of the ‘‘if known’’
language that is currently proposed at
the end of paragraph (d)(1) (in the
proposed rule), and relocating it to the
beginning of paragraph (e)(1) in the final
rule, consistent with the same ‘‘if
known’’ language at the beginning of 17
CFR 240.10c–1a(e)(3) (‘‘final Rule 10c–
1a(e)(3)’’).
To the extent the data elements of
final Rule 10c–1a(e)(1) are known,
providing these data elements to an
may designate by order upon a demonstrated
regulatory need.
463 See OCC Letter, at 9.

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RNSA will allow regulators to
understand buildups in risk at market
participants and may otherwise assist an
RNSA in monitoring and surveilling the
security markets. The data elements will
also provide an RNSA with the
necessary information to administer the
collection of all the other data elements
provided to it under final Rules 10c–
1a(c) and (d), such as ensuring the
completeness of submissions, contacting
persons that have errors in their
provided data, and troubleshooting
person-specific technical issues.464
The Commission also proposed
requiring that information be reported
(but not publicly disclosed) on whether
the securities loan is being used to close
out a fail to deliver pursuant to Rule 204
of Regulation SHO 465 or to close out a
fail to deliver outside of Regulation
SHO. Rule 204 of Regulation SHO
generally requires closing a firm’s fail to
deliver position in equity securities at a
registered clearing agency by purchasing
or borrowing securities of like kind and
quantity. Accordingly, under the final
rule, this data element will provide
regulators with information both about
the loans used by brokers or dealers to
close out fails to deliver as required by
Regulation SHO, as well as additional
insight into the use of loans, particularly
the extent that loans are used to cover
account-level fail to deliver positions in
reportable securities.
Several commenters were supportive
of this confidential data element, as
proposed, with one commenter noting
the benefits of such data for regulatory
oversight,466 and yet other commenters
requested that this data element be
required to be publicly reported.467
464 See, e.g., Proposing Release, 86 FR 69815
(regarding information collected pursuant to
paragraphs (c) through (e) of the final rule available
to the Commission; or other persons as the
Commission may designate by order upon a
demonstrated regulatory need).
465 17 CFR 242.204.
466 See FINRA Letter, at 2 n.4 (stating that fail to
deliver data in particular ‘‘would significantly
enhance FINRA’s Regulation SHO surveillance
programs’’). This commenter stated that it agrees
that the proposed rule will provide the
Commission, FINRA, and other regulators with data
that could be used for important regulatory
functions, including facilitating and improving
FINRA’s in-depth monitoring of members’ activity
and surveillance of the securities markets in stating,
‘‘this additional data would facilitate better
surveillance by FINRA for regulatory compliance by
its members’’ and improve FINRA’s ability to
enforce relevant regulations. See id. at 1–2. More
specifically, ‘‘the additional data, including in
particular the identification of whether a loan will
be used to close out a fail to deliver, would
significantly enhance FINRA’s Regulation SHO
surveillance programs.’’ Id. at 4.
467 See, e.g., Hindley Letter (‘‘In my opinion, this
data not being made publicly available is wrong.’’);
Errick R. Letter (‘‘I believe the terms . . . should
also be made public.’’).

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Final Rule 10c–1a(e)(3), adopts this data
element as proposed. The Commission
has elected to adopt without
modification (i.e., not requiring public
dissemination) this specific data
element in paragraph (d)(3) of the
proposed rule because, as a commenter
stated,468 such information could be
abused and is designed to be primarily
useful for regulatory purposes.469 As the
Commission has stated, fails to deliver
may result from long sales as well as
short sales, and may be closed out by
either purchasing or borrowing shares.
Fails to deliver can occur for various
reasons, such as ‘‘human or mechanical
errors or processing delays can result
from transferring securities in custodial
or other form rather than book-entry
form, thereby causing a fail to deliver on
a long sale.’’ 470 Such data will be useful
to regulators in determining both the
extent of the use of securities loans for
fails to deliver, as well as how and
when fails to deliver are being
addressed by securities loans. However,
the Commission agrees with the
commenter that such information, if
made public, could be abused. For
example, market participants that
become aware of fails to deliver may
seek to short squeeze the security
knowing that the person failing to
deliver has a time-sensitive need to
cover its short position.
Another commenter stated that, in
addition to the data elements in
paragraph (d)(1) of the proposed rule, it
will not have knowledge of whether the
loan was used to cover a fail to deliver
at the time of providing the confidential
report to an RNSA, as would be required
by paragraph (d)(3) of the proposed
rule.471 The final rule adopts as
proposed the requirement that such
information must be reported if
known.472
As non-substantive changes to the
rule, the Commission is replacing the
word ‘‘person’’ with the defined term
‘‘covered person’’ as discussed above, in
Part VII.A. Thus, as adopted, paragraph
(e) of final Rule 10c–1a requires,
consistent with the Proposing Release,
that ‘‘[i]f required by paragraph (a) of
this section, a covered person directly,
468 See

Citadel Letter, at 11.
FINRA Letter, at 1–2.
470 Amendments to Regulation SHO, Release No.
34–60388 (July 17, 2009); 74 FR 38266, 38271 (July
31, 2009) (Adopting Release).
471 See OCC Letter, at 9 (stating that OCC does not
know the CFT, IARD, MPID, or LEI of the lending
or borrowing clearing members or whether the
lending or borrowing clearing members are acting
as intermediaries—and does not know if the loan
is being used to close out a fail to deliver pursuant
to SEC Regulation SHO or otherwise). See also
BlackRock Letter, at 5.
472 See final Rules 10c–1a(e)(1) and (e)(3).
469 See

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or indirectly using a reporting agent
shall provide the following information
to an RNSA, if applicable, by the end of
the day on which a covered securities
loan is effected.’’ 473 As non-substantive
changes to the rule, the Commission is
replacing the word ‘‘person’’ with the
defined term ‘‘covered person’’ as
discussed above, in Part VII.A. Thus, as
adopted, paragraph (e) of final Rule
10c–1a requires, consistent with the
Proposing Release, that ‘‘[a] covered
person shall provide the following
information to an RNSA, if applicable,
by the end of the day on which a
covered securities loan is effected.’’ 474
4. Removal of Securities Available to
Loan Data Element
Proposed Rule
Among the securities lending data
elements required to be reported to an
RNSA, the Commission included in the
proposed rule a requirement to report
the total amount of each security that is
not subject to legal or other restrictions
that prevent it from being lent
(‘‘available to lend’’).475 The
Commission also required that certain
identifying information, including the
legal name of the security, and the ticker
symbol or other identifier, be reported
with the available to lend data.476 The
Commission stated in the Proposing
Release that it designed the securities
available to loan data elements to allow
for the calculation of a ‘‘utilization rate’’
for each security.477 The utilization rate,
which could be calculated by dividing
the total number of shares on loan by
the total number of shares available for
loan, could then be used by market
participants to evaluate whether the
security will be difficult or costly to
borrow.478

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Final Rule
The Commission received numerous
comments regarding the ‘‘available to
lend’’ data element 479 of the proposed
rule. Certain commenters expressed
473 See final Rule 10c–1a(e) (referring to
‘‘Confidential data elements’’ in paragraphs (e)(1)
through (3)).
474 See final Rule 10c–1a(e) (referring to
‘‘Confidential data elements’’ in paragraphs (e)(1)
through (3)).
475 See proposed Rule 10c–1(e)(1)(iii).
476 See proposed Rules 10c–1(e)(1)(i) and (ii).
477 See Proposing Release, 86 FR 69817.
478 See Proposing Release, 86 FR 69817.
479 The term ‘‘available to lend data’’ refers to
both the ‘‘total amount of each security that is not
subject to legal or other restrictions that prevent it
from being lent’’ information proposed to be
reported by a lending agent under proposed Rule
10c–1(e)(1)(iii), and the ‘‘total amount of each
specific security that is owned by the person and
available to lend’’ information proposed to be
reported by persons that do not use a lending agent
under proposed Rule 10c–1(e)(2)(iii).

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concern that such data could be
inaccurate,480 with some highlighting a
variety of limitations on securities
lending that could make the data
unreliable.481 Commenters expressed
concern that the available to lend data
could be underreported if it omitted
data from persons that were not
required to provide information to an
RNSA or that did not have an open
securities loan.482 One commenter
stated that ‘‘data would be particularly
misleading for large international
banking organizations with substantial
operations outside of the United
States.’’ 483 Other commenters expressed
general concern that the proposed
‘‘available to lend’’ data element could
discourage securities lending.484 Two
480 See RMA Letter, at 11; IIB Letter, at 8; SIFMA
Letter 1, at 15; ICI Letter 1, at 8–9; SIFMA AMG
Letter, at 8; State Street Letter, at 4–5; Fidelity
Letter, at 4; ABA Letter, at 4; CASLA Letter, at 2;
Federated Hermes Letter, at 2; S3 Partners Letter,
at 11–12; Sharegain Letter, at 3; Linklaters Letter,
at 5; MFA Letter 3, at 6–7; EBF Letter, at 2
(expressing general support for comments from
SIFMA and IIB addressing the reporting of
‘‘available to lend’’ data).
481 See, e.g., State Street Letter, at 4 (‘‘Although
clients who participate in securities lending
programs generally agree to lend all portfolio assets,
or categories of assets, securities lending
authorization agreements typically place limits on
both portfolio and counterparty exposure.
Furthermore, the actual supply of available
securities may be impacted by additional client
instruction resulting from various idiosyncratic or
market events, as well as discretionary transfers in
and out of investment portfolios.’’). See also IIB
Letter, at 8 (‘‘Portfolio limits, concentration limits
and simple lending preferences and strategies may
substantially limit both the individual securities
that a party may be willing to lend and the amount
of lending that they are willing to provide on
aggregate.’’); ICI Letter 1, at 2 n.8 (‘‘A fund may not
have on loan at any time securities representing
more than one-third of the fund’s total value.’’
Further stating that ‘‘[t]his restriction stems from
section 18 of the Investment Company Act.’’); SBAI
Letter, at 2 (‘‘However, funds managed under 1940
Act regulations have restrictions on their approach
to securities lending (e.g., limit on lending: A fund
may not have on loan at any time securities
representing more than one-third of the fund’s total
value), thereby not allowing an accurate calculation
of ‘securities available to lend’ on an individual
security basis.’’); RMA Letter, at 12 (‘‘. . . securities
lending in a portfolio provided to a Lending Agent
by a beneficial owner may be limited by (i)
negotiated or legal portfolio limits that impact the
amounts and types of securities that may be lent,
(ii) ad hoc or periodic beneficial owner instructions
to limit lending in particular ways based on
idiosyncratic preferences . . . or external factors
and (iii) discretionary transfers in and out of
custody accounts unrelated to securities lending
interest, and other factors.’’); Linklaters Letter, at 5;
James J. Angel Letter, at 4.
482 See, e.g., IIB Letter, at 8. See also RMA Letter,
at 11.
483 See IIB Letter, at 8.
484 See, e.g., State Street Letter, at 5 (stating that
‘‘[i]n our experience, the prospect of being obligated
to disclose, even in aggregate form, all portfolio
holdings may be enough to drive certain clients out
of the securities lending market, with important
implications for liquidity’’). See also ICI Letter 1, at
8; IIB Letter, at 8–9; RMA Letter, at 13; IHS Markit

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commenters recommended replacing
the ‘‘available to lend’’ metric for the
calculation of a utilization rate with
publicly available information on the
issuer’s total share float.485 However,
other commenters supported the
reporting of ‘‘available to lend’’ data.486
One of the Commission’s goals in
proposing the ‘‘available to lend’’ data
requirements was ‘‘to allow for the
calculation of a ‘utilization rate’ for each
particular security,’’ which in turn
‘‘could be used by market participants
to evaluate whether the security will be
difficult or costly to borrow.’’ 487 The
Commission stated in the Proposing
Release that ‘‘the information provided
under paragraph (e) [of the proposed
rule] should allow market participants
to calculate a utilization rate that is
likely to be reliable.’’ 488 However, many
commenters expressed concerns that
there may be significant challenges to
the accurate reporting of ‘‘available to
lend’’ data.489 One commenter stated,
before highlighting barriers to obtaining
accurate ‘‘available to lend’’ data, that
the ‘‘[c]alculation of the utilization rate
requires an accurate measure of the
‘securities available to lend’ for all
market participants.’’ 490
Upon consideration, the Commission
agrees with commenters’ concerns with
the potential for underreported or
inaccurate ‘‘available to lend’’ data
being reported. Therefore, final Rule
10c–1a has been amended from the
proposed rule to remove the reporting of
‘‘available to lend’’ data, as described
under proposed Rules 10c–1(e)(1)(iii)
and (e)(2)(iii), and to remove the
Letter, at 11 (stating that ‘‘[b]eneficial owners,
especially sovereign wealth funds and other
sensitive investors, may have policies that could
force them to withdraw from securities lending if
they are required to submit available to lend data
to a broker-dealer’’).
485 See State Street Letter, at 4; IHS Markit Letter,
at 7, 9 (responding to Questions 25 and 49).
486 See HMA Letter, at 7 (stating that such
information ‘‘is essential to building a
comprehensive view of the markets’’); FINRA
Letter, at 2 (stating that ‘‘the information subject to
reporting under the Proposal regarding the
aggregate quantity of shares . . . available to loan
would provide useful information in monitoring the
levels of short selling activity occurring in a
security and determining when a security is hard
to borrow’’); ASA Letter, at 3.
487 See Proposing Release, 86 FR 69817 (stating
that the utilization rate ‘‘would be calculated by
dividing the total number of shares on loan by the
total number of shares available for loan’’).
488 See Proposing Release, 86 FR 69817 n.113.
489 See, e.g., ICI Letter 1, at 8–9; Federated
Hermes Letter, at 2; ABA Letter, at 4; RMA Letter,
at 11; State Street Letter, at 4–5; IIB Letter, at 8;
SBAI Letter, at 2; Sharegain Letter, at 3.
490 See SBAI Letter, at 2 (stating that ‘‘funds
managed under 1940 Act regulations have
restrictions on their approach to securities lending
. . . thereby not allowing an accurate calculation of
‘securities available to lend’ on an individual
security basis’’).

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corresponding requirement that an
RNSA make such information publicly
available, as described under proposed
Rule 10c–1(e)(3). Additionally, final
Rule 10c–1a removes the reporting
requirements for the identifying
information (e.g., legal name of the
security, LEI of the issuer, ticker
symbol, ISIN, CUSIP, FIGI, or other
identifier) of such ‘‘available to lend’’
securities, as listed under proposed
Rules 10c–1(e)(1)(i) and (ii) and 10c–
1(e)(2)(i) and (ii). Therefore, final Rule
10c–1a does not include a requirement
that ‘‘available to lend’’ data be reported
to an RNSA, by a lending agent, a
person that does not employ a lending
agent, or otherwise. The elimination of
this requirement from the proposed rule
responds to commenter concerns, will
limit the burden of the final rule’s
reporting requirements on covered
persons, and will preempt the potential
for inaccurate or unreliable data to be
made publicly available to market
participants.

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5. Removal of Securities On Loan Data
Element
Proposed Rule
The Commission proposed a
requirement that, by the end of each
business day that a lending agent was
required to provide Rule 10c–1
information to an RNSA or had an open
securities loan about which it was
required to provide information to an
RNSA, the lending agent shall provide
to an RNSA the total amount of each
security on loan that has been
contractually booked and settled
(‘‘security on loan’’).491 The proposed
rule also required that by the end of
each business day that a person that
does not use a lending agent provides
Rule 10c–1 information to an RNSA, or
had an open securities loan about which
it was required to provide information
to an RNSA, the person shall also
provide to an RNSA the total amount of
each security on loan that has been
contractually booked and settled
(‘‘security on loan’’).492 The
Commission also proposed that ‘‘[f]or
each security about which the RNSA
receives [such] information . . . . The
RNSA shall make available to the public
only aggregated information for that
security.’’ 493
The Commission stated its
preliminary belief that securities on
loan data could help market participants
plan their borrowing activity.494 The
Commission also stated that it designed
491 See

proposed Rule 10c–1(e)(1)(iv).
proposed Rule 10c–1(e)(2)(iv).
493 See proposed Rule 10c–1(e)(3).
494 See proposed Rule 10c–1(e)(3).
492 See

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the proposed securities on loan data
element to allow for the calculation of
a ‘‘utilization rate’’ for each particular
security.495 The utilization rate could
then be used by market participants to
evaluate whether the security will be
difficult or costly to borrow.496
Final Rule
Commenters provided differing views
on the proposed reporting requirement
for the securities on loan data element.
Certain commenters supported or did
not object to the requirement to report
securities on loan data 497 in the
proposed rule.498 One commenter
recommended that more granular
securities on loan data be made
available, including that the ‘‘total
number of shares of each stock on loan
[should be] disaggregated by lender.’’ 499
Multiple commenters supported the
proposed requirement for an RNSA to
make securities on loan data publicly
available on an aggregate basis,500 with
one recommending that ‘‘[f]or each
security, FINRA could disseminate the
total volume of securities on loan by
shares or principal value (as applicable)
and as a percentage of the shares or
principal value (as applicable) of all
securities that are outstanding.’’ 501
Another commenter disapproved of the
proposed securities on loan data
reporting requirement, expressing
concerns that the data ‘‘may be
misleading,’’ and recommended
removing it.502 The commenter stated
that some brokers use approaches to
calculating securities on loan data that
495 See

Proposing Release, 86 FR 69817.
Proposing Release, 86 FR 69817.
497 The term ‘‘securities on loan data’’ refers to
both the ‘‘total amount of each security on loan that
has been contractually booked and settled’’
information proposed to be reported by lending
agents under proposed Rule 10c–1(e)(1)(iv), and the
‘‘total amount of each specific security that is
owned by the person’’ information proposed to be
reported by persons that do not use a lending agent
under proposed Rule 10c–1(e)(2)(iv).
498 See SIFMA Letter 1, at 4 n.9; SIFMA AMG
Letter, at 11; FINRA Letter, at 2 (stating that ‘‘the
information subject to reporting under the Proposal
regarding the aggregate quantity of shares on loan
. . . would provide useful information in
monitoring the levels of short selling activity
occurring in a security and determining when a
security is hard to borrow.’’); Better Markets Letter,
at 6.
499 See Letter from Americans for Financial
Reform Education Fund, at 3 (Apr. 1, 2022)
(‘‘AFREF Letter 2’’).
500 See FIF Letter, at 11; ICI Letter 1, at 11.
501 See FIF Letter, at 11.
502 See S3 Partners Letter, at 12 (stating that
‘‘prime brokers often use their own internal
inventory of shares which means no actual
‘borrowing’ takes place. By failing to take this
‘internalization’ into account, approaches that use
‘securities on loan’ routinely misrepresent the true
number of borrowed shares.’’).
496 See

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‘‘routinely misrepresent the true number
of borrowed shares.’’ 503
Similar to the concerns described
above, in Part VII.F.4, about the
proposed securities available to loan
data element, the Commission agrees
with the commenters that there may be
challenges to the collection of accurate
securities on loan data.504 Additionally,
aggregated information similar to the
proposed securities on loan data will be
made available by RNSAs, without the
additional, potentially duplicative,
reporting requirements of proposed Rule
10c–1(e)(1)(iv) and (e)(2)(iv).505 Under
the final rule, RNSAs will be required
to design and provide not only
information pertaining to the aggregate
transaction activity 506 for each
reportable security, but also distribution
of loan rates for each reportable
security.507 These requirements should
provide market participants with
information to help plan their
borrowing activity, while avoiding
potentially duplicative reporting
obligations. Such aggregated data would
be consistent with some commenters’
support for requiring RNSAs to make
‘‘securities on loan’’ data available on an
aggregated basis.508 Additionally,
RNSAs will be required to make the
disaggregated ‘‘amount of the security
loan’’ data publicly available,509
comparable to the disaggregated
‘‘securities on loan’’ data recommended
by one commenter.510 However, as
discussed below, in Part VII.J, such
disaggregated data will only be publicly
available on a delayed basis, on the
twentieth business day after the covered
securities loan is effected, in order to
protect the sensitive nature of
individual securities lending ‘‘amount’’
information (e.g., such as size or
volume).511 Furthermore, for the reasons
described above, in Part VII.F.4, final
Rule 10c–1a will not require the
reporting of an available to loan data
element, which therefore would not be
available to pair with the proposed
securities on loan data element in order
503 See

S3 Partners Letter, at 12.
FIF Letter, at 10; S3 Partners Letter, at 11–
12; Linklaters Letter, at 5–6.
505 See final Rule 10c–1a(c).
506 See final Rule 10c–1a(g)(5). The term
‘‘aggregate transaction activity’’ used in the final
rule refers to information pertaining to the absolute
value of transactions such that net position changes
could not be discerned in the data. The addition of
the term ‘‘aggregate transaction activity’’ in the final
rule limits the possibility of publishing proprietary
information while still providing volume
transparency to market participants.
507 See final Rule 10c–1a(g)(5).
508 See SIFMA Letter 1, at 18–19; SIFMA AMG
Letter, at 10.
509 See final Rule 10c–1a(g).
510 See AFREF Letter 2, at 3.
511 See final Rule 10c–1a(g)(2).
504 See

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to calculate a ‘‘utilization rate’’
metric.512 Therefore, while certain
benefits derived by market participants
from the reporting and disclosing of
securities available to lend data and
securities on loan data elements
together may not be realized, market
participants may benefit from the public
availability of aggregate transaction
activity and distribution of loan rates.513
For the foregoing reasons, final Rule
10c–1a has been changed from the
proposed rule to remove the reporting of
securities on loan data, as described
under proposed Rule 10c–1(e)(1)(iv) and
(e)(2)(iv), and to remove the
corresponding requirement that an
RNSA make such information publicly
available, as described under proposed
Rule 10c–1(e)(3). Therefore, final Rule
10c–1a does not include a requirement
that a lending agent or other covered
person report securities on loan data to
an RNSA.
G. Timing of Required Reporting to an
RNSA

received by the Commission from larger
institutional market participants
strongly opposed the proposed rule’s
requirement that the specified data
elements be reported to an RNSA within
15 minutes after a loan is effected (i.e.,
in addition to the data being publicly
disseminated on a transaction-bytransaction basis). For example, most of
these larger market participants
explained that the terms of securities
loans change during the day and are
generally not finalized until the end of
the day.515 These changes include
reallocations of securities loans among
lenders, re-pricings, and changes in
collateral.516 As a result, the
commenters stated that requiring
transaction-by-transaction reporting,
particularly on a 15-minute/intraday
basis, would result in significant
unintended negative consequences,
including the public dissemination of
incomplete or misleading information,
which could adversely impact the
securities/lending markets.517 Another
commenter also stated that the proposed

1. Timing of Reporting of Loans
Proposed Rule
As discussed above, in Part VII.F.1,
paragraph (b) of the proposed rule
would have required certain loan
transaction data elements to be reported
to an RNSA, on a transaction-bytransaction basis, within 15 minutes of
the loan being effected, followed by an
RNSA assigning each loan a unique
transaction identifier and then making
such information publicly available as
soon as practicable. As part of the
proposed rule, the Commission sought
specific comment as to the proposed 15minute requirement for reporting
specified data elements to an RNSA.

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Final Rule
While the proposed 15-minute
reporting requirement received some
support,514 most of the comments
512 See Proposing Release, 86 FR 69817 (‘‘The
utilization rate, which would be calculated by
dividing the total number of shares on loan by the
total number of shares available for loan, could be
used by market participants to evaluate whether the
security will be difficult or costly to borrow.’’).
513 See Proposing Release, 86 FR 69817.
514 Some commenters did express support for the
proposed 15-minute reporting requirement. These
commenters were primarily smaller retail investors
who stressed the benefits of real-time intraday
reporting. See, e.g., Letter from Nick Morgan (May
4, 2023) (advocating for transaction-by-transaction
reporting and the 15-minute reporting requirement,
as well as promoting transparency in securities
lending, which will benefit retail investors and
strengthen the SEC’s ability to fulfill its mandate
while also guarding against economic fragility and
potential national security threats). See also Letter
from Edwin Liew (May 4, 2023) (supporting the 15minute reporting requirement saying the cost and
effort are justified to prevent fraud and prevent

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hiding in loopholes). In fact, one commenter stated
that at a minimum ‘‘the final rule should
significantly shorten the 15-minute reporting
timeframe.’’ Better Markets Letter, at 8. This
commenter urged the Commission to finalize the
proposed rule without undue delay and without
diluting the proposal in any way absent credible,
specific evidence that such dilution will not have
an impact on the utility of the data reported. See
id. This commenter also stated that ‘‘the SEC should
also shorten the required timeframes for the
reporting’’ and identified ‘‘potential shortcomings
of these timeframes, including how they hamper
real-time regulatory oversight or allow manipulative
activity based on information leakage or other
means of exploiting the 15-minute reporting delay
. . . for public disclosure.’’ Id. Other commenters
expressed support for the proposed rule and
specifically noted that it is a leading provider of
data and analytics in the securities lending market
and is currently able to do intraday reporting. See,
e.g., Equilend Letter; see also Morningstar Letter, at
4 (stating its support for the proposed 15-minute
reporting requirement). The Commission
acknowledges the above benefits stated by these
commenters regarding the proposed 15-minute
reporting requirement and has considered the
comments that argued in favor of end-of-day
reporting. As discussed below, in this part, the
Commission has determined to replace the
proposed intraday 15-minute reporting requirement
with an end of day requirement that will allow
covered persons additional time in which to collect
and report their Rule 10c–1a information in
compliance with final Rule 10c–1a’s requirements.
515 See Fidelity Letter, at 2–3 (stating that ‘‘[t]he
reporting timeframe for transactions should be no
earlier than end of day’’). See also MFA Letter 1,
at 8; MFA Letter 2.
516 See FIF Letter, at 3.
517 See, e.g., SIFMA AMG Letter, at 3 (stating that
the proposed 15-minute requirement would lead to
the reporting of superfluous information benefitting
neither market transparency nor regulatory
oversight). See also SIFMA Letter 1, at 13–14;
SIFMA Letter 2, at 5. See also State Street Letter,
at 2–3 (stating the 15-minute reporting requirement
will result in incomplete or error prone information
because it ignores that loans are usually finalized
by the end of day). See also AIMA Letter 1, at 4;
ICI Letter 1, at 6.

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15-minute reporting requirement is
impractical and logistically challenging
and would ‘‘create noise and misleading
information in the market.’’ 518 In
addition commenters stated that there
would be costs to participants to create
and maintain an entirely new
infrastructure for loan data reporting
and dissemination.519
Other commenters stated that the
proposed 15-minute reporting time
period would exponentially increase the
number of execution (and modification)
reports that would be required to be
filed.520 Another commenter stated that
requiring reporting every 15 minutes
gives away too much proprietary
information to the market regarding
closely guarded trading strategies,
risking exposures to short squeezes,
front running, reverse-engineering—
particularly with hard-to-borrow
securities.521 Another commenter raised
the concern that a 15-minute reporting
requirement may be unnecessarily
frequent and that there did not appear
to be any stated rationale in the
Proposing Release for how a 15-minute
reporting interval would be helpful to
market participants or why this
frequency is appropriate.522
518 See, e.g., CCMR Letter, at 5 (stating that
disclosing securities loan activity on a transactionby-transaction basis as soon as 15 minutes after they
are effected would likely signal to the market that
a short selling position is being actively established
in that security, which could have potential
negative effects on short sellers, increase costs
associated with establishing a short position
through information leakage and slippage; or lead
to ‘‘short squeezes’’). See also SBAI Letter, at 2;
AIMA Letter 1, at 3–4 n.11; RMA Letter, at 18.
519 See MFA Letter 1, at 3.
520 See also RMA Letter, at 9.
521 See AIMA Letter 1, at 4–5 (stating that in
response to the proposed rule market participants
may adjust their trading strategies or exit the
borrowing market when they otherwise would be
active participants thereby reducing liquidity and
increasing volatility).
522 See Letter from Tom Quaadman, Executive
Vice President, Center for Capital Markets
Competitiveness, U.S. Chamber of Commerce (Jan.
7, 2022) (‘‘Chamber of Commerce Letter’’). But see
Nasdaq Letter, at 3 (stating ‘‘the data reported
should be made available to investors within a
reasonable timeframe to utilize the information
effectively to make informed investment decisions.
To that end, it is unclear whether the fifteen-minute
timeframe for reporting certain data is optimal and
is supported by sufficient research or other
justification. When compared to the speed at which
markets operate, the fifteen-minute delay may be
excessive and, on the other hand, there may be little
benefit to investors in receiving such information
after a fifteen-minute delay as opposed to a longer
period, such as the end of the day. . . .’’). See also
RMA Letter, at 9 (stating that ‘‘[r]equiring reporting
on an intraday basis as proposed would be
operationally impractical in many respects and
would provide little to no incremental value
compared to end-of-day reporting’’). See also
Federated Hermes Letter, at 1 (stating that ‘‘the
requirement to report securities loans within 15
minutes of ‘being effected’ or modified does not

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To address these concerns,
commenters offered possible
modifications for the final rule. Many of
the commenters who suggested an
alternative approach favored an ‘‘end-ofday’’ reporting requirement.523 They
explained that end-of-day reporting
would make more sense and result in
more worthwhile information being
reported as it takes into account that
most securities loan trades are not
finalized until end of day.524 One of the
commenters explained how most
securities loan market participants
already use/rely on ‘‘end-of-day’’ data
because they view it as the most
relevant and reliable measurement of
market activity.525 This commenter also
stated that, even though intraday data
may already be available from service
providers, it is still widely seen as
indicative in nature and subject to
frequent correction.526
Other commenters suggested
reporting by end of the next day (i.e., on
a T+1 basis similar to what the EU/UK’s
Securities Financing Transactions
appear to reflect the reality that the terms of
securities loans are fluid and frequently modified
throughout a business day’’). Thus, the commenter
states it is difficult to identify a particular intraday
point that a given loan has been ‘‘effected.’’ See id.
According to the commenter, even if it were
possible to determine such an intraday point, 15
minutes is too short of a timeframe to collect and
accurately report the required transaction data.
Thus, the commenter stated that given the
imprecision of defining the exact intraday moment
at which a lending transaction is effected, and the
frequency with which the transaction’s details are
modified, new reporting requirements will be
expensive and operationally difficult to implement.
See id. See also IHS Markit Letter, at 2 (opposing
the proposed 15-minute reporting requirement and
stating ‘‘the frequency with which loans would be
reported and disseminated would be both an
immense hurdle and costly burden for the industry
and could also lead to reduced market liquidity and
participants withdrawing from lending altogether’’).
523 See, e.g., FIF Letter, at 4 (stating that reporting
should be end of day; however, the letter still
discusses implementation challenges for brokerdealers and complexity in requiring even end of day
reporting).
524 See SIFMA Letter 1, at 3; see also ASA Letter,
at 2–3 (stating an ‘‘end-of-day requirement to report
securities lending transactions would be
appropriate and provide investors with sufficient
transparency regarding the terms of these
transactions’’); ICI Letter 1, at 6 (claiming any
information reported within 15 minutes risks being
misleading to investors and ‘‘noise’’ as it would not
reflect the parties’ final terms); Sharegain Letter, at
4 (stating its support for a longer reporting time
period than 15 minutes, ‘‘[i]n our view, decreasing
the frequency of reporting to twice a day, or endof-day reporting, would render compliance with the
timing requirement much more reasonable’’).
525 See IHS Markit Letter, at 5.
526 See IHS Markit Letter, at 2 (stating that
‘‘[i]ntraday data is also difficult to ingest and
analyze and therefore accessible to only the largest
and most sophisticated participants in the securities
lending market’’); see also ICI Letter 1, at 6 n.22
(stating ‘‘it is well understood by market
participants . . . that intraday data may be
incomplete and is subject to change’’).

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Regulation (‘‘SFTR’’) reporting regime
requires).527 For example, one
commenter stated it did not believe
there is any additional value to
investors in providing intraday data,
given the nature of pricing for securities
lending transactions, the potential for
intraday data to confuse investors, and
the unnecessary costs and burdens it
would pose to market participants.528
Another commenter who favored next
day reporting maintained that it was a
way to avoid the operational challenges,
disproportionate costs, and compliance
complexities associated with the
proposed 15-minute reporting
requirement.529 Another commenter
asked the Commission to amend the 15minute reporting requirement in favor of
end-of-day reporting on a next day (T+1)
basis and stated that the 15-minute
reporting requirement would be
impractical, and that a T+1 standard
would address transparency, reduce
implementation costs, and align with
the existing SFTR securities loan
reporting regime.530 Another
commenter suggested that the proposed
rule be modified to allow the lending
agent to have until the following
business day to make the required
report to avoid reporting errors.531
527 See, e.g., SIFMA AMG Letter, at 3 (suggesting
‘‘end of next day, T+1, or at least no more
frequently than by the end of each business day’’);
See also BlackRock Letter, at 2–3 (requesting a T+1
reporting requirement); see also IIB Letter, at 2
(suggesting ‘‘end-of-day’’ reporting on a T+1 basis
instead of intraday reporting); ABA Letter, at 4
(suggesting ‘‘until the following business day’’);
RMA Letter, at 3 (suggesting ‘‘end-of-day reporting
on a next day, T+1 basis’’ instead of a 15-minute
reporting requirement because it aligns with the
existing SFTR securities loans reporting regime); S3
Partners Letter, at 3 (stating the Commission should
revise the proposed rule to require aggregate, not
transaction level, reporting on T+1). See also EBF
Letter, at 2 (stating that it supports IIB’s and
SIFMA’s EOD and T+1 reporting comments);
Citadel Letter, at 2 (referencing the significant costs
associated with transaction-by-transaction reporting
and the Commission’s conclusion [albeit in another
SEC release] that aggregated and delayed disclosure
of short sale positions was preferable to transactionby-transaction and intraday disclosure). See also
MFA Letter 3, at 5 (stating ‘‘the SEC’s proposal to
require the reporting of the material terms of a
securities loan within 15 minutes of a loan ‘‘being
effected’’ is unworkable in a securities loan
context’’). According to this commenter, securities
loans do not involve an outright purchase or sale
but may be on-loan for extended periods, can be
returned at any time, and may subsequently be relent. The terms of a securities loan are typically
negotiated throughout the day and often not
finalized until the end of the day or the next day.’’
Id at 5. See also Morningstar Letter, at 2–4 (stating
support for loan-level data to be made publicly
available by next business day in order to provide
investors with a more transparent and complete
depiction of a fund’s lending activities).
528 See BlackRock Letter, at 2–4.
529 See Pirum Letter, at 2.
530 See RMA Letter, at 3.
531 See ABA Letter, at 4.

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Commenters also stated that next day
or T+1 reporting would provide more
appropriate flexibility for developing
systems and processes for reporting at
substantially lower cost.532 Some
commenters expressed support for
modifying the reporting requirement to
require next business day (i.e., on T+1
basis) but also for an earlier reporting
requirement (i.e., end of the same day)
provided that the Commission provides
clarity regarding the precise time period
for such reporting (e.g., the exact point
in time that will constitute ‘‘end of day’’
for purposes of the final rule) so that
market participants will have the clarity
and certainty they will need to comply
and report accurately.533
After reviewing and considering the
public comments and recommendations
regarding the proposed 15-minute
reporting requirement, the Commission
is adopting final Rule 10c–1a(c),
substantially as proposed, but with
targeted modifications to the proposed
rule’s reporting period to address
commenters’ concerns about the
proposed timing requirement being
unworkable and overly burdensome by
replacing the proposed 15-minute
reporting period with end-of-day
reporting, as well as bringing the
different regulatory regimes in closer
alignment with the final rule’s public
dissemination requirements. Adopting
the final rule with an end-of day
reporting requirement will help reduce
the concerns raised by the commenters,
while still furthering the underlying
objectives of the final rule.534
As modified, the final rule’s end-ofday reporting requirement will help
prevent an excessive number of
incomplete or slightly modified reports
that otherwise would occur throughout
the day yet without providing any
incremental value. Thus, in modifying
the final rule to include an end-of-day
reporting requirement, rather than
requiring frequent intraday reporting,
the Commission understands the
frequency with which parties to a
securities loan may agree to some of the
532 See, e.g., RMA Letter 1, at 11 (stating next-day
reporting would provide more appropriate
flexibility for developing systems and processes for
reporting at substantially lower cost).
533 See ICI Letter 1, at 6 (stating that for anything
earlier than T+1, the SEC should provide clarity
regarding the timeframe for such reporting to ensure
it is feasible).
534 Consistent with the proposed rule, the
Commission is not specifying the time that will be
the ‘‘end of each business day’’ or what holidays are
a ‘‘business day’’ to give an RNSA the discretion to
structure its systems and processes as it sees fit and
propose rules accordingly, provided they are
consistent with the rule as adopted. See also
Proposing Release, 86 FR 69816 n.104. See supra
note 72 (regarding an example for times set by an
RNSA for other reporting regimes).

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basic terms initially, but that some or
many of the securities loan terms may
not be agreed to (or may be updated
throughout the day and, thus, not
finalized) until the end of the day.535
Nonetheless, whether or not a loan has
been effected is a legal/factual question
and a delay in settlement (or if one of
the agreed to loan terms is modified the
next day) does not impact the initial
requirement to report all loans (and
modifications) within the required
timeframes under the final rule.536
As adopted, paragraph (c) of the final
rule requires a covered person (directly,
or indirectly using a reporting agent) to
provide the Rule 10c–1a information, if
applicable, to an RNSA ‘‘by the end of
the day on which a covered securities
loan is effected.’’ 537 By replacing the
proposed 15-minute reporting
requirement with a more flexible end-ofday (or ‘‘EOD’’) reporting requirement in
final Rule 10c–1a(c), the Commission
recognizes that many covered securities
loans are not likely to be finalized
within that 15-minute time period or
until the end of the day. Unlike SFTR
in Europe, final Rule 10c–1a’s reporting
requirement (i.e., to an RNSA) will not
extend until the next day, on a T+1
basis. While final Rule 10c–1a and the
SFTR both deal with securities lending,
they are two unique and different
regulatory regimes, with differences in
their underlying objectives and scope of
regulations. Final Rule 10c–1a,
however, does allow an RNSA until the
morning of the next business day (thus
on T+1, the same as SFTR) to
disseminate the Rule 10c–1a
information it receives the night before.
This allows an RNSA sufficient time it
needs between receipt of the Rule 10c–
1a information and its dissemination to
the public, which necessitates the Rule
535 See RMA Letter, at 10 (expressing the concern
that, ‘‘data reported during the course of the day
would fluctuate substantially, would be incomplete
in many respects and would likely include
meaningful levels of exception reporting, outcomes
that could be mitigated by giving borrowers and
lenders the ability to conduct reconciliations at the
end of the day prior to reporting’’). According to
this commenter, most market participants would
prefer (trust) verified data with a time delay, which
the commenter believed would likely be more
accurate than real-time data. See id.
536 Under final Rule 10c–1a, in those instances
where a covered securities loan is not settled or
finalized until the next day, i.e., T+1, a covered
person will still be required to report the covered
securities loan by the end of the day on which such
covered securities loan is effected by the parties. It
will not need to be reported again when it does
settle the next day, on T+1—unless the reported
covered securities loan is modified the next day, on
T+1, when it does settle. See final Rules 10c–1a(c)
and (d).
537 Final Rule 10c–1a(c). See also infra note 541
and accompanying text.

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10c–1a information being collected no
later than the night before.
2. Timing of Reporting of Loan
Modification
Proposed Rule
As discussed above, in Part VII.F.2,
paragraph (c) of the proposed rule
would have required that certain loan
modification data elements be provided
to an RNSA within 15 minutes after
each loan is modified if the
modification results in a change to the
Rule 10c–1 information that is already
required to be provided to an RNSA
under paragraph (b) of the proposed rule
(and for an RNSA to make such
information available to the public as
soon as practicable).538 In issuing the
proposed rule, the Commission sought
comment specifically regarding the
proposed timing requirement in
paragraph (c), which would have
required specified loan modification
data elements to be reported to an RNSA
within 15 minutes after a loan is
modified.
Final Rule
Most of the comments received by the
Commission on the proposed loan
modification data elements in paragraph
(c) of the proposed rule were focused on
the proposed 15-minute loan
modification reporting requirement,
with many of the commenters
suggesting that it be replaced with endof-day reporting (i.e., similar to the endof-day timing modification discussed
above with respect to the securities loan
data elements information originally
reported to an RNSA).
In addition to the comments
discussed above, in Part VII.F.2,
commenters opposing the proposed 15minute reporting requirement also
raised concerns that new trades can be
executed for market delivery at any time
during the day before the close of
settlement at DTC and, as a result, that
some market participants will book
trades in ‘‘batches’’ or at their
discretion, as opposed to individually
when agreed.539 Some commenters
stated that other reporting regimes do
not require intraday reporting, as certain
activity reported intraday might
538 See

proposed Rule 10c–1(c).
e.g., Pirum Letter, at 2 (explaining the
batch process and how the majority of the data are
processed and received in batches and, thus, endof-day reporting, rather than the proposed 15minute reporting requirement, will thereby allow
sufficient time for necessary control processes to
take place to ensure the accuracy of data
submissions).
539 See,

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75681

ultimately not result in an executed
trade.540
Reporting the loan modification data
elements for each covered securities
loan that is modified is important to
ensure that data elements previously
reported to an RNSA accurately reflect
currently outstanding covered securities
loans and to prevent evasion of the rule.
However, in response to commenters’
concerns, particularly with respect to
operational difficulties associated with
the proposed 15-minute loan
modification reporting requirement and
uncertainties as to the scope of its
intended application, the Commission is
adopting the loan modification data
elements provision in paragraph (d) of
the final rule, substantially as proposed,
but with a modification as to the timing
of the reporting period and some
clarifying changes to the proposed rule
text.
More specifically, to promote the
integrity and consistency of the
reporting under the final rule, the
Commission has determined to remove
the proposed requirement to report loan
modification data elements to an RNSA
within 15 minutes after each loan is
modified and to replace it with the same
end-of-day reporting the Commission is
requiring for the original loan data
elements under paragraph (c) of the
final rule.541 For the same reasons
discussed above, in Part VII.F.1,
allowing covered persons until the end
of the day to report any required loan
modification data information to an
RNSA is appropriate because it will
help to address commenters’ concerns
and operational difficulties with
frequent intraday reporting while still
furthering the transparency objectives of
the final rule.
As modified, the final rule requires
the specified loan modification data
elements to be provided by the covered
person (directly or indirectly using a
reporting agent) to an RNSA, by the end
of the day on which a covered securities
loan is modified.542 By replacing the
proposed 15-minute reporting
requirement with a more flexible end-ofday reporting requirement in final Rule
10c–1a(d), the timing modification
should help reduce the concerns raised
by commenters, that is, by allowing
covered persons and reporting agents
540 See, e.g., SIFMA Letter 1, at 14; SIFMA Letter
2, at 5 (supporting concerns raised in the SIFMA
Letter 1, at 14); ICI Letter 1, at 6; RMA Letter, at
9; MFA Letter 1, at 9; Fidelity Letter, at 3; IIB Letter,
at 6–7; IHS Markit Letter, at 10.
541 See final Rules 10c–1a(c) through (e) (as
modified, and for consistency, all three data
elements paragraphs require end-of-day reporting,
rather than the proposed 15-minute reporting
requirement).
542 See final Rule 10c–1a(d).

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additional time (until the end of each
day, rather than just within 15 minutes),
to report any required loan modification
information to an RNSA and also to
help reduce the overall implementation
cost for market participants, and allow
such participants to better manage the
flow of data in line with the existing
internal processes for reporting.543
3. Timing of Reporting of Confidential
Data Elements
Proposed Rule
As discussed above, in Part VII.F.3,
the Commission also proposed that
certain confidential data elements
would be provided to, and retained by
an RNSA,544 but not made publicly
available by an RNSA.545 Such
confidential data was intended to
provide regulators with specific
information about the loan (such as the
identity of the parties to the loan) that
would be kept confidential due to
concerns about potential misuse of such
information. The Commission proposed
that such information be reported to an
RNSA within 15 minutes after the loan
is effected.
Final Rule

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The Commission is modifying the
proposed timing requirement for
reporting the confidential data elements,
as adopted in paragraph (e) of the final
rule, similar to the timing revisions the
Commission made with respect to the
proposed loan and loan modification
data elements adopted in paragraphs (c)
and (d) of the final rule (i.e., by
replacing the proposed 15-minute
reporting requirement with the similar
end-of-day reporting period). As
modified, and otherwise consistent with
the rule as proposed, paragraph (e) of
the final rule will continue to require
that any confidential data elements be
reported to an RNSA; 546 however, an
RNSA will be required to keep such
information confidential, ‘‘in
accordance with the provisions of
543 See, e.g., Proposing Release, 86 FR 69815 n.96
(providing an example of a modification that would
not trigger as the requirement in paragraph (c) of the
proposed rule (i.e., when a borrower posts
additional collateral in response to an increase in
value of the loaned securities). Information about
this change would not have needed to be provided
under proposed paragraph (c) because, while
proposed paragraph (b)(10) requires the Lender to
provide the percentage of collateral to value of
loaned securities required to secure such loan, it
did not require information about the value of
collateral posted in dollar terms. See also supra
note 413 (discussing an example of a non-qualifying
modification).
544 See proposed Rule 10c–1(c).
545 See proposed Rule 10c–1(g).
546 See final Rules 10c–1a(e)(1) through (e)(3).

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paragraph (h) of this section and
applicable law.’’ 547
H. Definition of Registered National
Securities Association—10c–1a(j)(5)
Proposed Rule
The Commission proposed that any
person that loans a security on behalf of
itself or another person shall provide to
an RNSA certain specified
information.548 However, the
Commission did not include a
definition of the term ‘‘RNSA.’’ The
Proposing Release stated that the only
existing RNSA has experience
establishing and maintaining systems
that are designed to capture transaction
reporting, similar to the requirements of
final Rule 10c–1a.549
Final Rule
The Commission received comments
stating that FINRA, as the only existing
RNSA, is best positioned for such a
role.550 To provide additional clarity
regarding the regulatory body that Rule
10c–1a information must be reported to,
the final rule defines the term ‘‘RNSA’’
to mean ‘‘an association of brokers and
dealers that is registered as a national
securities association pursuant to 15
U.S.C. 78o–3 (‘section 15A’) of the
Exchange Act.’’ 551 This definition
applies to any association of brokers and
dealers that is registered as a national
securities association pursuant to
section 15A of the Exchange Act now or
in the future.552
I. RNSA Rules To Administer the
Collection of Information—Rule 10c–
1a(f)
Proposed Rule
The Commission proposed that ‘‘[t]he
RNSA shall implement rules regarding
the format and manner to administer the
collection of information in paragraphs
547 See final Rule 10c–1a(g)(4). Similar to the
other data element provisions under the final rule,
modifying paragraph (e)’s reporting time period in
this manner will not only help to ensure market
participants’ compliance with final Rule 10c–1a’s
confidential transaction data requirements but will
respond to many of the concerns raised by
commenters regarding a more frequent and
burdensome intraday timeframe, as was originally
proposed.
548 See proposed Rule 10c–1(a)(1).
549 See Proposing Release, 86 FR 69808.
550 See, e.g., OCC Letter, at 12 (stating that
‘‘FINRA is currently best positioned to serve in this
role given FINRA’s experience and expertise to date
in administering other trade reporting systems’’).
See also HMA Letter, at 7; Nasdaq Letter, at 3–4;
IHS Markit Letter, at 1; FINRA Letter, at 2; AFREF
Letter 1, at 4 (stating that FINRA ‘‘is the only RNSA
that exists now, and the Commission should rely on
FINRA to aggregate and disseminate the additional
data on the securities lending market’’).
551 See final Rule 10c–1a(j)(5).
552 See 15 U.S.C. 78o–3.

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(b) through (d) of [the proposed rule]
and distribute such information in
accordance with the rules approved by
the Commission pursuant of section
19(b) of the Exchange Act and Rule 19b–
4 thereunder.’’ 553 In the Proposing
Release the Commission stated its
preliminary belief that permitting an
RNSA to implement rules regarding the
administration of the collection of
securities lending transactions would
enable an RNSA to maintain and adapt
potential technological specifications
and any changes that might occur in the
future.554 The Commission also affirmed
that it would retain oversight of an
RNSA’s adoption of rules to administer
the collection of information under
proposed Rule 10c–1.555
Final Rule
The Commission asked in the
Proposing Release whether Rule 10c–1
should require that lenders provide
material information to an entity other
than an RNSA.556 One commenter
stated that FINRA, the only existing
RNSA, is best positioned to serve in
such a role due to its expertise and
experience in administering trade
reporting rules.557 Other commenters
also supported the role of RNSAs in
collecting and distributing information
under the proposed rule,558 with one
specifically stating that the format and
manner through which information will
be provided to an RNSA should be
defined by an RNSA and should not be
specified in proposed Rule 10c–1.559
The Commission agrees with the
commenters that an RNSA is well
positioned to define, consistent with
section 19(b) and Rule 19b–4 of the
Exchange Act as well as an RNSA’s own
internal business requirements and
systems designs, the format and manner
in which it collects Rule 10c–1a
information.
Alternatively, another commenter
recommended that the Commission
should eventually transition the
collection and dissemination of the data
collected under proposed Rule 10c–1 to
an internal process at the Commission
to enhance enforcement of the proposed
rule and allow the Commission to share
553 See

proposed Rule 10c–1(f).
Proposing Release, 86 FR 69819.
555 15 U.S.C. 78s(b).
556 See Proposing Release, 86 FR 69809 (Question
13).
557 See OCC Letter, at 12 (stating that it ‘‘believes
that FINRA is currently best positioned to serve in
this role given FINRA’s experience and expertise to
date in administering other trade reporting
systems’’).
558 See HMA Letter, at 7. See also Nasdaq Letter,
at 3–4.
559 See IHS Markit Letter, at 11.
554 See

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
relevant data.560 However, in addition
to providing securities lending
information to the public, the final rule
is intended to provide additional tools
to RNSAs to enhance RNSAs’
surveillance over the securities markets.
An RNSA is appropriately suited for
collecting and analyzing such data for
such surveillance purposes.
Some commenters expressed concerns
or provided recommendations for an
RNSA’s administration of information
collected under the final rule. One
commenter stated the importance of
RNSAs’ compliance with section 19(b)
and Rule 19b–4 of the Exchange Act
when implementing RNSA rules
required by final Rule 10c–1a.561
Consistent with the proposed rule,562
any proposed changes to an RNSA’s
rules required by final Rule 10c–1a,
including its Rule 10c–1a information
collection and dissemination practices,
will also be subject to notice, public
comment, and Commission review
pursuant to section 19(b) and Rule 19b–
4 prior to implementation. This
requirement, including the notice and
opportunity for public comment, will
help the Commission ensure that the
direct reporting to an RNSA by covered
persons is logistically feasible, prior to
the effectiveness and implementation of
such RNSA rule, and that its
methodology helps ensure the accuracy
and quality of the reported data.
Another commenter expressed
concern that the proposed rule ‘‘would
provide no mechanism for quality
assurance.’’ 563 An RNSA could choose
to include mechanisms for quality
assurance in its rules to implement the
system under the final rule. Further, all
RNSA rules implementing the system
under the final rule will be subject to
notice, public comment, and
Commission review under section 19(b)
and Rule 19b–4.
Another commenter stated that the
Commission ‘‘should ensure that direct
reporting to the RNSA is logistically
feasible for entities that are not brokerdealers.’’ 564 The final rule permits such
entities to enter into agreements with
reporting agents that are brokers,
dealers, or registered clearing agencies
to fulfill their reporting obligations on
their behalf, should they determine that

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560 See

AFREF Letter 1, at 4.
Bloomberg L.P. Letter, at 4 (stating ‘‘the
importance of RNSAs’ compliance with section
19(b) of the Exchange Act and Rule 19b–4
thereunder when implementing rules pertaining to
the securities lending data’’).
562 See Proposing Release, 86 FR 69819 n.116.
563 See S3 Partners Letter, at 5.
564 See BlackRock Letter, at 3.
561 See

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direct reporting is not the most
appropriate choice for them.565
One commenter recommended that
the collection, maintenance, and
publication of securities lending data,
which an RNSA was required to
perform under the proposed rule, be
subject to a competitive bidding process
to select a technology vendor or vendors
to provide such services.566 However,
the oversight that the Commission
maintains over RNSAs, including
oversight of their rules to administer the
collection of Rule 10c–1a information
pursuant to section 19(b) and Rule 19b–
4, would not apply to the more general
population of ‘‘technology vendors’’ that
the commenter proposes should
participate in a competitive bidding
process to collect, maintain, and
distribute Rule 10c–1a information.567
The commenter’s proposed approach
would not be appropriate in the absence
of such oversight. The Commission
agrees with one commenter’s statement
that the existing RNSA is well
positioned to serve in this role under
final Rule 10c–1a given its expertise in
administering other trade reporting
systems.568
Having considered commenters’
submissions, for the foregoing reasons,
the Commission is adopting the
requirement that an RNSA shall
implement rules regarding the format
and manner to administer the collection
and dissemination of certain
information, substantially as proposed.
The final rule includes minor changes to
reflect that the relevant Rule 10c–1a
information paragraphs have been
renumbered to align with the format of
the final rule,569 to provide citations to
the statutory provision and regulation
that such rules must be promulgated
pursuant to, the term ‘‘distribute such
information’’ has been modified to
‘‘make publicly available such
information’’ to more accurately reflect
an RNSA’s responsibilities for the
publication of data under final Rule
10c–1a(g), and the term ‘‘approved by
the Commission’’ has been modified to
‘‘promulgated’’ to more accurately
reflect the process by which RNSA rules
are implemented pursuant to section
19(b) and Rule 19b–4 of the Exchange
Act.
565 See

final Rule 10c–1a(a)(2).
S3 Partners Letter, at 12–13.
567 See S3 Partners Letter, at 12–13.
568 See OCC Letter, at 12.
569 See final Rule 10c–1a(g). References to the
relevant collected information in paragraphs (b)
through (e) of the proposed rule have been amended
to reference paragraphs (c) through (e) of the final
rule.
566 See

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75683

J. RNSA Publication of Data—10c–1a(g)
Proposed Rule
The proposed rule would have
required an RNSA to make available to
the public the information required by
proposed paragraph (b), including the
legal name of the security issuer, and
the LEI of the issuer, if the issuer has an
active LEI,570 and the ticker symbol,
ISIN, CUSIP, or FIGI of the security, if
assigned, or other identifier.571 In
addition, modifications that resulted in
a change to the data elements required
to be provided to an RNSA under
paragraph (b) of the proposed rule
would also have been made public by
an RNSA.572 An RNSA would have also
provided identifying information for
each security for which aggregate
information would be made public.573
Paragraph (e)(3) of the proposed rule
further required that an RNSA keep
identifying information about lending
agents, reporting agents, and other
persons using reporting agents
confidential, subject to applicable
law.574 In addition, the confidential data
elements in proposed Rules 10c–1(d)(1)
through (3) would be kept confidential
so as to not identify market participants
or reveal information about the internal
operations of market participants.575
The proposed rule also required an
RNSA to assign a unique transaction
identifier to each loan.576
Final Rule
The Commission received many
comments that expressed support for
increasing transparency and price
discovery in the securities lending
market by increasing the amount and
availability of data to the public.577
Commenters were generally supportive
of the requirement that an RNSA be
responsible for making reportable data
publicly available.578
The proposed rule combined
reporting requirements with RNSA
570 See

proposed Rule 10c–1(b)(1).
proposed Rule 10c–1(b)(2).
572 See proposed Rule 10c–1(c).
573 See proposed Rule 10c–1(g).
574 See proposed Rule 10c–1(e)(3).
575 See Proposing Release, 86 FR 69812 n.85.
576 See proposed Rule 10c–1(b).
577 See, e.g., FINRA Letter, at 1 (stating that it
‘‘agrees with the Commission that the public
dissemination of securities lending information
under the Proposal will, among other benefits,
improve price discovery in the securities lending
market.’’); Nasdaq Letter, at 3; AFREF Letter 1, at
3; Better Markets Letter, at 4–7; Bloomberg L.P.
Letter, at 1 (‘‘[w]e appreciate the Commission’s
endeavor to improve the transparency and
efficiency of the securities lending market by
increasing the availability of information regarding
securities lending transactions’’); ASA Letter, at 1;
Letter from N. Abanes (Aug. 15, 2023); Letter from
Brandon Smith (Aug. 15, 2023).
578 See, e.g., HMA Letter, at 7.
571 See

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publication requirements, which
resulted in commenters addressing
these respective requirements in
conjunction with one another.579 The
Commission did not intend to conflate
the requirements. The final rule
separates an RNSA’s publication
responsibilities from a covered person’s
reporting requirements to improve the
structure of the final rule. Therefore,
final Rule 10c–1a is modified to
separate the requirements of an RNSA
from the reporting requirements
applicable to covered persons and
reporting agents. Final Rule 10c–1a now
places an RNSA’s publication of data
elements into new paragraph (g).
In response to the comments received
that the disclosure of reported
information by an RNSA on a
transaction-by-transaction basis could
increase the risk of revealing short sale
strategies,580 final Rule 10c–1a
bifurcates paragraph (g) requirements
such that certain data elements will be
made publicly available on a
transaction-by-transaction basis and
aggregate transaction activity and
distribution of loan rates) will also be
made publicly available in an
aggregated format for each reportable
security. With respect to aggregated
data, the final rule includes a new
requirement for an RNSA to make
‘‘information pertaining to the aggregate
transaction activity and distribution of
loan rates for each reportable security
and the security identifier(s) under
paragraphs (c)(1) or (2) of the final rule
for which an RNSA determines is
appropriate to identify’’ publicly
available ‘‘as soon as practicable, and
not later than the morning of the
business day after the covered securities
loan is effected or modified.’’ 581 The
term ‘‘aggregate transaction activity,’’ as
used in the final rule, refers to
information pertaining to the absolute
value of transactions such that net
position changes should not be
discernable in the data, and is intended
to help ensure that only aggregate
information about net positions
changes, rather than individualized
information, is provided to the public.
The addition of the term ‘‘aggregate
transaction activity’’ responds to
commenters’ concerns about the
potential exposure of proprietary
information, while still providing
volume transparency to market
participants. Providing information
579 See,
580 See,

e.g., proposed Rule 10c–1(b).
e.g., supra note 399 and accompanying

text.
581 See

final Rule 10c–1a(g)(5).

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about the distribution of loan rates 582
for each security recognizes that the
cost-to-borrow for loans of securities is
influenced by a number of factors (e.g.,
counterparty-creditworthiness) and,
thus, information about loan rates on a
transaction-by-transaction basis may not
facilitate a perfect comparison of such
rates between loans of the same
security. Consequently, knowing the
distribution of loan rates for a given
security can give market participants
information to help market participants
compare the pricing of their covered
securities loan against the pricing of
other covered securities loans. This can
facilitate conversations between
beneficial owners and their lending
agents or end borrowers with their
brokers or dealers regarding the terms of
their loan.
Additionally, the final rule delays an
RNSA’s publication of loan amount, on
a transaction-by-transaction basis in
paragraph (c)(6), to the twentieth
business day after the covered securities
loan is effected along with the loan and
security identifying information
specified in paragraphs (g)(1)(i)(A) and
(C) of this section.583 The final rule also
delays an RNSA’s publication of a
modification to loan amount, on a
transaction-by-transaction basis, in
paragraph (c)(6), to the twentieth
business day after the covered securities
loan is modified with the loan and
security identifying information
specified in paragraphs (g)(1)(i)(A) and
(C).584
For purposes of compliance with the
final rule, the countdown to the
‘‘twentieth business day’’ starts the day
after the covered securities loan is
effected. For example, if a covered
securities loan were effected at 4:00
p.m. on a Wednesday, and the
applicable Rule 10c–1a information is
received by an RNSA by the end of that
day, that Thursday after the Wednesday
on which the covered securities loan is
effected will start the 20-business day
period, assuming that Thursday is not a
holiday.
The final rule contains requirements
for an RNSA to make data elements
other than loan amount publicly
available as soon as practicable, and not
later than the morning of the business
582 ‘‘Loan rate’’ refers to aggregate fee and rebate
information provided to an RNSA in final Rule 10c–
1a(c)(8) and final Rule 10c–1a(c)(9). The loan rate
for a security is reported differently depending on
whether the securities loan is cash or non-cash
collateralized. For cash-collateralized loans, the
‘‘loan rate’’ is indicated by the rebate rate (as
reflected in final Rule 10c–1a(c)(8)); for non-cashcollateralized loans, the ‘‘loan rate’’ is the lending
fee (as reported in final Rule 10c–1a(c)(9)).
583 See final Rule 10c–1a(g)(2).
584 See final Rule 10c–1a(g)(3).

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day after the covered securities loan is
effected.585 Similarly, the final rule
requires an RNSA to make loan
modifications, excluding modifications
to loan amount, publicly available, as
soon as practicable, and not later than
the morning of the business day after
the covered securities loan is
modified.586 The final rule also requires
that an RNSA make the data elements in
paragraph (c) of the final rule, other
than loan amount, publicly available as
soon as practicable, and not later than
the morning of the business day after
the covered securities loan is effected, if
a securities loan is modified when such
covered securities loan is a pre-existing
covered securities loan (i.e., a covered
securities loan for which reporting
under paragraph (a) was not required on
the date the loan was agreed to or last
modified).587 This requirement is
designed to provide transparency for
covered securities loans that have not
been previously reported to an RNSA
prior to having a data element of
paragraph (c) modified. As discussed
above, in Part VII.F.2, the final rule also
requires that an RNSA make publicly
available the data elements in paragraph
(c) of the final rule for pre-existing
covered securities loans. The final rule
also contains a requirement for an
RNSA to keep confidential data
elements confidential, in accordance
with subparagraph (h) and consistent
with applicable law.588 Final Rule 10c–
1a also contains updated terminology
from the proposed Rule 10c–1,
including that the ‘‘unique transaction
identifier’’ is updated to ‘‘unique
identifier;’’ and references to ‘‘loan’’ are
updated to ‘‘covered securities loan.’’ 589
Revisions to final Rule 10c–1a(g) are
updated with the relevant paragraphs
renumbered to align with the format of
the final rule.590
Final Rule 10c–1a requires an RNSA
to assign each covered securities loan a
unique identifier in paragraphs
(g)(1)(i)(A) and (g)(3). The final rule
makes a revision to terminology by
replacing the term ‘‘unique transaction
identifier’’ assigned by an RNSA to the
original loan, as used in the proposed
rule, with ‘‘unique identifier’’ assigned
by an RNSA to the original covered
securities loan. The removal of
‘‘transaction’’ is to avoid confusion with
the defined term ‘‘covered securities
loan,’’ which is the accurate description
585 See

final Rule 10c–1a(g)(1).
final Rule 10c–1a(g)(3).
587 See final Rule 10c–1a(g)(3)(i).
588 See final Rule 10c–1a(g)(4).
589 See final Rule 10c–1a(g).
590 See final Rules 10c–1a(g)(3)(i) and (ii).
586 See

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of what the ‘‘unique identifier’’
represents.
While the final rule continues to
require an RNSA to ‘‘assign each
covered securities loan a unique
identifier,’’ a general theme received
from commenters was about the
operational efficiency of allowing
market participants to create and submit
their own unique identifiers.591 In
response to the Proposing Release, one
commenter stated that ‘‘beneficial
owners or those reporting on their
behalf should have flexibility to
generate their own Transaction
Identifiers provided they meet
minimum standards for integrity and
identification’’ and that ‘‘this
Transaction Identifier [be used] in
connection with any loan modification
reporting in connection with the
relevant loan.’’ 592 Another commenter
recommended that ‘‘allowance is made
for the UTI to be provided to the RNSA
by the reporting party, with an onreceipt issuance model only available
should firms have no existing UTI for a
reportable transaction.’’ 593 Another
commenter agreed that firms should be
allowed to internally assign UTIs and
report them to an RNSA, but
alternatively suggested that if the UTI is
required to be assigned by an RNSA
then an RNSA should return this
internal identifier to the reporting firm
along with an RNSA-assigned UTI in
order to link a modification to the
original reported loan.594 This
commenter also recommended that,
under either approach, UTIs should be
different in the U.S. and other
jurisdictions, as applicable.595 Another
commenter stated that under the final
rule, if there was a loan that was
reported to both an RNSA and the
SFTR, the loan would have an identifier
for each system and prevent global
aggregation.596
The Commission understands that for
many reporting entities, obtaining a
unique identifier from an RNSA on a
post-trade basis and then tagging it to
the trade for accurate reporting may add
complication and expense and
introduces operational risk for posttrade errors in aligning trades with
transaction identifiers (particularly if a
trade has been modified during the
course of intraday trade reporting).
According to one commenter, ‘‘the
objective of a Transaction Identifier is to
591 See,

e.g., State Street Letter, at 6; ABA Letter,

at 4.
592 See

RMA Letter, at 1, 19.
593 Pirum Letter, at 4.
594 See FIF Letter, at 8–9.
595 See FIF Letter, at 9.
596 See Pirum Letter, at 4.

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uniquely identify a particular
transaction; so long as that objective is
satisfied, the SEC should be neutral as
to the manner in which the Transaction
Identifier is produced.’’ 597 Doing so, the
commenter suggests, ‘‘would [provide]
the flexibility to an RNSA to allow
reporting parties to provide their own
Transaction Identifiers [which] would
likely materially reduce costs for any
such parties.’’ 598 According to the
commenter, this approach has been
successfully deployed in Europe, under
the SFTR, and the U.S. in connection
with security-based swap reporting
rules.599 Accordingly, this commenter
urged the Commission to permit the
reporting agent to generate the
transaction identifiers prior to reporting
to an RNSA, with an RNSA available to
provide Transaction Identifiers as a
back-up for those reporting parties who
are unable, for whatever reason, to
generate their own transaction
identifiers.600 Another commenter
stated that while the data elements
required to be reported are sufficient to
allow for an RNSA to identify loans and
to create a unique transaction identifier,
the Commission should specify how
such identifier will be shared with the
reporter.601
Having a unique identifier assigned to
each covered securities loan is
necessary for an RNSA to easily track
the loan and facilitate the identification
and reporting of any subsequent
modifications to a particular covered
securities loan. The Commission agrees
with the comment that the objective is
to have a unique identifier for tracking
and that the Commission should be
neutral as to the manner in which the
unique identifier is produced,602 and
that it is appropriate to allow
administrative details of the process to
be left to the discretion of an RNSA,
rather than dictated by the
Commission.603 It is appropriate to
require an RNSA to assign a unique
identifier to the loan, even if such loan
already has an identifier that is reported
to the SFTR, for consistency with an
RNSA’s rules and systems. Further, the
final rule requires an RNSA to create a
system capable of generating unique
identifiers, but does not preclude
market participants from creating their
597 RMA

Letter, at 19.
Letter, at 19.
599 See RMA Letter, at 19.
600 See RMA Letter, at 19.
601 See IHS Markit Letter, at 8.
602 See RMA Letter, at 19.
603 See OCC Letter, at 12 (stating that ‘‘FINRA is
currently best positioned to serve in this role given
[its] experience and expertise to date in
administering other trade reporting systems.’’).
598 RMA

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75685

own unique identifiers when submitting
information to an RNSA.
The Commission agrees that FINRA,
as the sole existing RNSA, has the
experience and controls to implement
an appropriate system for market
participants, including, if appropriate,
how an identifier will be shared with a
reporter. Structuring the final rule to
provide an RNSA with flexibility to
accept unique identifiers and/or use an
RNSA assigned unique identifier to
publish data is operationally practical.
Accordingly, final Rule 10c–1a(g)
maintains that an RNSA shall assign a
unique identifier to the covered
securities loan and make publicly
available as soon as practicable, and not
later than the morning of the business
day after the covered securities loan is
effected.604
K. RNSA Data Retention, Availability,
Fees, and Security
1. Data Retention—Rule 10c–1a(h)(1)
Proposed Rule
Under the proposed rule the
Commission required that RNSAs retain
the information collected pursuant to
paragraphs (b) through (e) of the
proposed rule in a convenient and
usable standard electronic data format
that is machine readable and text
searchable without any manual
intervention for a period of five years.605
In the Proposing Release, the
Commission stated that requiring an
RNSA to retain records for five years
was consistent with other retention
obligations of records that Exchange Act
rules impose on an RNSA.606 As
examples, the Commission identified
Rule 17a–1 607 and 17 CFR 242.613(e)(8)
(‘‘Rule 613(e)(8)’’) of Regulation NMS,
both of which require RNSAs to keep
documents for a period of not less than
five years.
Final Rule
The Commission received limited
comments concerning this element of
the proposed rule. One commenter
stated that a retention period of six
years plus the current year would
simplify GDPR and UK tax
compliance.608 The Commission
recognizes the importance of
compliance with other regulatory
regimes; however, requiring RNSAs to
retain records for not less than five years
is consistent with other record retention
obligations that Exchange Act rules
604 See

final Rule 10c–1a(g).
proposed Rule 10c–1(g)(1).
606 See Proposing Release, 86 FR 69819.
607 See 17 CFR 240.17a–1.
608 See Letter from Andrew Robinson (Jan. 7,
2022) (‘‘Robinson Letter’’), at 12.
605 See

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impose on RNSAs.609 Including a
retention period that is consistent with
other rules applicable to RNSAs could
reduce the burden for an RNSA to
comply with the retention requirements
in proposed Rule 10c–1 because RNSAs
will have developed experience and
controls around administering similar
record retention programs.610 Therefore,
the Commission is adopting RNSA data
retention requirements as proposed (i.e.,
in a convenient and usable standard
electronic data format that is machine
readable and text searchable without
any manual intervention for a period of
five years), with the relevant paragraphs
renumbered to align with the format of
the final rule.611
2. Data Availability to the Public—Rule
10c–1a(h)(3)

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Proposed Rule
The Commission proposed that
RNSAs make certain data 612 available to
the public in a convenient and usable
standard electronic data format on its
website or similar means of electronic
distribution, without charge and
without use restrictions, for at least a
five-year period.613 The Commission
stated its preliminary belief that
requiring an RNSA to provide certain
information to the public would further
the direction by Congress in section
984(b) of the Dodd-Frank Act for the
Commission to promulgate rules that are
designed to increase the transparency of
information to brokers-dealers and
investors, with respect to the loan or
borrowing of securities.614 The
Commission acknowledged that
establishing and maintaining a system
to provide public access to Rule 10c–1
information is not without cost, and
expressed the preliminary belief that
such costs should be borne by an RNSA
in the first instance and be permitted to
be recouped by an RNSA from market
609 See Proposing Release, 86 FR 69819. Rule
17a–1 requires RNSAs to keep documents for a
period of not less than five years. Similarly, Rule
613(e)(8) of Regulation NMS, on which the
retention period for proposed Rule 10c–1 is
modeled, requires the central repository to retain
information in a convenient and usable standard
electronic data format that is directly available and
searchable electronically without any manual
intervention for a period of not less than five years.
610 See Proposing Release, 86 FR 69819.
611 See 17 CFR 240.10c–1a(h)(1) (‘‘final Rule 10c–
1a(h)(1)’’). References to the relevant collected
information in paragraphs (b) through (e) of the
proposed rule have been updated to accurately
reflect their place in paragraphs (c) through (f) of
the final rule.
612 See proposed Rule 10c–1(g)(3) (specifically
including the information collected under
paragraphs (b) and (c) of the proposed rule and the
aggregate of the information provided pursuant to
paragraph (e) of the proposed rule).
613 See proposed Rule 10c–1(g)(3).
614 See Proposing Release, 86 FR 69819.

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participants who report securities
lending transactions to an RNSA.615 The
Commission also stated its belief that
any restrictions on how the publicly
available Rule 10c–1 information is
used could impede the utility of such
information and limit the ability of
investors, commercial vendors, and
other third parties, such as academics,
from developing uses and analyses of
the information.616
Final Rule
It is appropriate to remove the phrase
‘‘without charge’’ from an RNSA’s
availability of information requirements
in final Rule 10c–1a(h)(3). Some
commenters supported the Commission
making certain securities lending
information available without charge, as
proposed.617 One commenter stated
generally that it would be extremely
helpful to have freely available data.618
The Commission agrees that having
access to securities lending data without
charge will benefit market participants.
As discussed below, in Part VII.K.3, the
Commission received comment
recommending that RNSAs be permitted
to charge fees to entities other than
lending agents and beneficial owners.619
After considering commenter input, the
Commission is removing the ‘‘without
charge’’ requirement from the final rule
to provide RNSAs with greater
flexibility to structure reasonable fees.
As discussed below, in Part VII.K.3, and
as proposed,620 any such fees will have
to be filed with the Commission
pursuant to section 19(b) of the
Exchange Act and Rule 19b–4, and
would be published for notice and
public comment. Additionally,
consistent with the Proposing
Release,621 and the provisions that
govern RNSAs under the Exchange
Act,622 the final rule requires that
RNSAs may only establish and collect
fees that are reasonable.623 Furthermore,
as proposed, the final rule prohibits use
restrictions on the publicly available
information.624 Any restrictions on how
the publicly available Rule 10c–1a
information is used could impede its
utility and limit the ability of investors,
commercial vendors, and other third
615 See

Proposing Release, 86 FR 69819–20.
Proposing Release, 86 FR 69820.
617 See James J. Angel Letter, at 3; Morningstar
Letter, at 4 (stating that an ‘‘RNSA’s free and
unrestricted disclosures to the public increase
transparency’’).
618 See James J. Angel Letter, at 2.
619 See ABA Letter, at 2–3.
620 See Proposing Release, 86 FR 69820.
621 See proposed Rule 10c–1(h).
622 See 15 U.S.C. 78o(b) (section 15A(b) of the
Exchange Act).
623 See final Rule 10c–1a(i).
624 See final Rule 10c–1a(h)(3).
616 See

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parties, such as academics, from
developing uses and analyses of the
information.625
The Proposing Release included a
request for comment asking if a period
of five years is the appropriate length of
time for an RNSA to make information
available to the public.626 One
commenter responded, stating that,
‘‘transparency is a good thing, and
lessons can be learned from history, ‘in
perpetuity’ would be the ideal period of
time.’’ 627 The Commission
acknowledges the value of historical
studies of securities markets, and the
final rule does not preclude an RNSA
from making certain reported data
public in perpetuity. However, requiring
that RNSAs make certain information
publicly available indefinitely could
prove unduly burdensome on RNSAs
when compared with the utility of old
and potentially less informative data.
Furthermore, making information
available in a convenient and usable
standard electronic data format
indefinitely would necessitate that
RNSAs retain the data indefinitely,
which would be inconsistent with the
final rule’s data retention
requirements 628 and other retention
obligations of records that Exchange Act
rules impose on RNSAs.629 Five years is
the appropriate length of time for an
RNSA to be required to make
information available to the public,
because such a time period will provide
broker-dealers and investors with an
opportunity to identify trends occurring
in the market and in individual
securities based on changes to the
material terms of securities lending
transactions.
For the foregoing reasons the
Commission is adopting the collected
information availability requirements
for RNSAs, with respect to making
certain collected information available
to the public, substantially as proposed,
with the phrase ‘‘without charge’’
removed and the relevant paragraphs
renumbered to align with the format of
the final rule.630
625 The requirement to provide the Rule 10c–1a
information in the same manner such information
is maintained pursuant to final Rule 10c–1a(h)(1)
and without use restrictions is not intended to
preclude an RNSA from creating alternative means
to provide information to the public or subscribers.
For example, an RNSA might choose to file with the
Commission proposed rules to establish data feeds
of the Rule 10c–1a information that vendors might
subscribe to (including fee-based subscriptions) and
repackage for onward distribution.
626 See Proposing Release, 86 FR 69820 (Question
58).
627 See Robinson Letter, at 12.
628 See final Rule 10c–1a(h)(1).
629 See supra note 609.
630 See final Rule 10c–1a(h)(3). References to the
relevant collected information in paragraphs (b) and

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3. RNSA Fees—Rule 10c–1a(i)
Proposed Rule
The Commission proposed that
RNSAs may establish and collect
reasonable fees, pursuant to rules that
are effective pursuant to section 19(b) of
the Exchange Act and Rule 19b–4
thereunder, from each person who
provides any data set forth in
paragraphs (b) through (e) of this section
directly to an RNSA.631 Under the
Exchange Act, RNSAs are allowed to
adopt rules that impose the equitable
allocation of reasonable fees among
members and issuers, and other persons
that use an RNSA facility or system.632
In the Proposing Release the
Commission stated its preliminary belief
that it would be appropriate to establish
and collect reasonable fees from each
person who directly provides the
information set forth in the rule to an
RNSA.

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Final Rule
One commenter supported an RNSA
acting in accordance with section 19(b)
of the Exchange Act and Rule 19b–4
thereunder when implementing rules
regarding fees.633 Another commenter
recommended that reporting costs
should not only be borne by persons
who provide data directly to an RNSA
and recommended that ‘‘costs incurred
by FINRA . . . be shared among all
those that benefit from securities
lending activity, not solely on lending
agents and beneficial owner clients.’’ 634
Similarly, another commenter
recommended ‘‘that the costs incurred
by the RNSA to establish and operate
the reporting system for securities
(c) of the proposed rule have been updated to
reference paragraphs (c) and (d) of the final rule.
The proposed rule’s reference to ‘‘the aggregate of
the information provided pursuant to paragraph (e)
of this section’’ has been removed from the final
rule as discussed above, in Parts VII.F.4 and VII.F.5.
Additionally, the word ‘‘provide’’ at the beginning
of proposed Rule 10c–1(g)(3) has been replaced by
‘‘make’’ in final Rule 10c–1a(h)(3) for consistency.
631 See proposed Rule 10c–1(h).
632 See 15 U.S.C. 78o–3(b)(5) (‘‘The rules of the
association provide for the equitable allocation of
reasonable dues, fees, and other charges among
members and issuers and other persons using any
facility or system which the association operates or
controls.’’).
633 See Bloomberg L.P. Letter, at 3 (stating that
‘‘[t]he rules of an RNSA, including those pertaining
to any fees, should thus comport with the
requirements of the Exchange Act’’). See also HMA
Letter, at 7 and 10 (stating that ‘‘it will be essential
for the Commission to ensure that the RNSA’s . . .
fees related to the development and operations of
the reporting and dissemination systems
contemplated by the Proposal are subject to
meaningful scrutiny’’ and recommending ‘‘that any
fees are imposed pursuant to filings that are subject
to Commission review, and approved only if
determined to be consistent with the Exchange Act
and Commission Rules’’).
634 See ABA Letter, at 3.

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lending data should be equitably shared
by both borrowers and lenders, along
with a tiered fee structure that
eliminates costs for General Collateral
(‘‘GC’’) transactions.’’ 635
The Commission recognizes that
additional flexibility may be warranted
in how costs incurred by an RNSA are
recouped. To provide more flexibility in
the establishment and collection of
reasonable fees by RNSAs, the final rule
has been amended from the proposed
rule to remove the requirement that fees
only be collected ‘‘from each person
who provides any data set forth in
paragraphs (b) through (e) of this section
directly to the RNSA.’’ 636 The final rule
provides that an RNSA may ‘‘establish
and collect reasonable fees, pursuant to
rules that are promulgated pursuant to
section 19(b) and Rule 19b–4 of the
Exchange Act.’’ 637 These changes from
the proposed rule will provide RNSAs
with greater flexibility to structure
reasonable fees, including permitting
the charging of fees to entities that use
certain value-added services, as
discussed above in Part VII.K.2, when
accessing the information made publicly
available by an RNSA.638
4. Data Security—Rule 10c–1a(h)(4)
Proposed Rule
The Commission proposed a
requirement that RNSAs establish,
maintain, and enforce reasonably
designed written policies and
procedures to maintain the security and
confidentiality of certain confidential
information required by the proposed
rule.639 In the Proposing Release the
Commission stated its preliminary belief
that an RNSA needs to protect Rule
10c–1 information from intentional or
inadvertent disclosure to protect
investors that provide such information
by establishing reasonably designed
written policies and procedures because
the distribution of such information
would identify market participants or
could reveal information about the
internal operations of market
participants, which could be adverse to
those providing information to an
RNSA.640
635 See

State Street Letter, at 2.
proposed Rule 10c–1(h).
637 Final Rule 10c–1a(i).
638 See supra Part VII.K.2 (discussing the removal
of the phrase ‘‘without charge’’ from proposed Rule
10c–1(g)(3) concerning the requirements for RNSAs
to make certain information available to the public).
639 See proposed Rule 10c–1(h)(4) (specifically
including the information collected pursuant to
paragraphs (d) and (e)(3) of the proposed rule).
640 See Proposing Release, 86 FR 69820.
636 See

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75687

Final Rule
For the reasons discussed above, in
Part VII.F.3, the Commission is adopting
the final rule as proposed and requiring
an RNSA to establish, maintain, and
enforce written policies and procedures
to maintain the confidentiality of the
confidential data elements collected
under the final rule.641
L. Data Availability to the Commission
and Other Persons—Rule 10c–1a(h)(2)
Proposed Rule
The Commission proposed that
RNSAs be required to make certain
information, including confidential
information, collected pursuant to the
proposed rule available to the
Commission or other persons as the
Commission may designate by order
upon a demonstrated regulatory
need.642
Final Rule
Two commenters recommended that
the final rule require RNSAs to make
collected confidential information
available to SROs without obtaining an
SEC order.643 However, another
commenter recommended that access to
such information by securities
exchanges should require a clear
regulatory purpose.644 The Commission
recognizes that other regulators and
SROs may require access to the
confidential information reported to
RNSAs pursuant to final Rule 10c–1a for
regulatory purposes. However, it is
appropriate to only provide such
information by order of the Commission
upon a demonstrated regulatory
need.645 Imposing this condition on
access to reported information should
help ensure the security of the reported
data elements, while taking into account
that other regulators may require access.
For the foregoing reasons the
Commission is adopting the
requirement that RNSAs make collected
information available to the
641 See

final Rule 10c–1a(h)(4).
proposed Rule 10c–1(g)(2) (specifically
including the information collected pursuant to
paragraph (a)(2)(iii) and paragraphs (b) through (e)
of the proposed rule).
643 See NYSER Letter 2, at 2 (stating that ‘‘[t]here
may be NYSER inquiries or investigations where
securities lending information would be important,
and where time could be of the essence’’); Nasdaq
Letter, at 4.
644 See HMA Letter, at 11 (stating that any access
by exchanges ‘‘must be narrowly tailored to achieve
a clear, specific regulatory purpose, and subject to
significant oversight by the Commission’’).
645 See Proposing Release, 86 FR 69852. See also
final Rule 10c–1a(h)(2). Restrictions on the
availability of reported Rule 10c–1a information to
other persons is subject to applicable law, as an
RNSA could be compelled to provide information
pursuant to a court order or other legal authority
(such as a subpoena).
642 See

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Commission, and make it available to
other persons as the Commission may
designate by order upon a demonstrated
regulatory need, with a technical
edit,646 with the relevant paragraphs
renumbered to align with the format of
the final rule.647

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M. Cross-Border Application of Rule
10c–1a
The Commission received a number
of comments about the rule’s intended
cross-border application.648 Many of
these comments requested that the
Commission provide cross-border
guidance to help promote legal certainty
and competitive equity, and that in
doing so the Commission rely on
existing definitions for U.S. and non-US
646 The Commission is also making a technical
edit to specify that its own access to the information
collected pursuant to paragraph (b)(1)(iv) and
paragraphs (c) through (e) is not limited. Final Rule
10c–1a(h)(2) has been formatted to distinguish the
Commission’s access from ‘‘other persons as the
Commission may designate.’’
647 See final Rule 10c–1a(h)(2). References to the
relevant collected information in paragraphs
(a)(2)(iii) and (b) through (e) of the proposed rule
have been updated to reference paragraphs (b)(4)
and (c) through (e) of the final rule.
648 See, e.g., Letter from Mark A. Steffensen,
Senior Executive Vice President and General
Counsel for HSBC North American Holdings Inc.
and HSBC Bank USA, N.A. (Jan. 24, 2023) (‘‘HSBC
Letter 1’’), at 1–2 (expressing concern that the crossborder application of the proposed rule is unclear
and overbroad, which makes it difficult for firms to
assess the scope of the new reporting obligations
and challenging to implement internal programs,
policies, procedures to ensure compliance with the
new reporting regime. Further, an expansive crossborder application could lead to questions
regarding the Commission’s authority to promulgate
the rule, and its commitment to respecting the
decisions of peer EU/UK regulators.). See also
Linklaters Letter, at 2 (stating that, ‘‘because the
proposed rule would apply to ‘any person,’ ‘‘the
scope of the proposed rule, particularly outside the
U.S., is unclear and potentially overbroad’’). The
commenter, however, offered suggestions for
clarifying the proposed rule’s extraterritorial scope,
including recommending that the Commission
clarify that the proposed rule ‘‘does not apply to
non-U.S. persons that do not use any U.S.
jurisdictional means in connection with a securities
lending transaction or, alternatively, exclude
Canadian institutions from the scope of the
proposed rule.’’ See id. To provide legal certainty
as to its cross-border application, the commenter
also suggested that the Commission should clarify
that, given that it would be promulgated under
section 10(c)(1) of the Exchange Act, final Rule 10c–
1a would not apply to non-U.S. persons that do not
use any U.S. jurisdictional means to effect, accept,
or facilitate a securities lending transaction. See id.
at 2–3. See also ICI Letter 1, at 7–8 (encouraging the
Commission to analyze and clarify the cross-border
implications of the final rule to ensure that the final
rule does not have inappropriate cross-border
reach). See also IIB Letter, at 4–5; RMA Letter, at
17–18; Federated Hermes Letter, at 2 (agreeing with
ICI’s comment regarding the Commission needing
to clarify the cross-border ramifications of the final
rule); EBF Letter, at 1–2 (stating that the SEC needs
to clarify the cross-border reach of the proposed
rule by following the same approach as used for
foreign broker-dealer registration, with the goal of
being able to define the precise territorial scope of
the proposed rule).

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market participants to avoid new
documentation requirements.649 Among
other things, these commenters
requested clarification or specific
guidance as to when non-U.S. persons
would be subject to the final rule 650 and
clarity as to the circumstances under
which a securities loan will be deemed
to be within the U.S. market for
purposes of applying reporting
requirements.651 Some commenters
stated that because the rule would apply
broadly to ‘‘any person’’ that loans a
security on behalf of itself or another
person, that could mean the rule would
649 See

RMA Letter, at 18.
commenter stated that it believed the rule
should not apply to non-U.S. persons who do not
facilitate, effect, or accept loans in the U.S. That
commenter also suggested the Commission consider
taking a risk-based approach that advances the goals
of section 984 of the Dodd-Frank Act by more
precisely targeting the segment of the securities
lending market that presents the greatest risks to the
U.S. financial system, by excluding certain
categories of market participants, such as Canadian
Institutions. The commenter did not further explain
the parameters of their suggested approach. See
Linklaters Letter, at 3. The cross-border scope of the
rule should be focused on facilitating, effecting, or
accepting loans in the U.S. rather than the
alternative approach the commenter suggests that
would exclude Canadian Institutions and thereby
limit transparency regarding loans of securities that
are facilitated, effected, or accepted in the U.S.
Another commenter stated that, despite the
legislative history of section 10(c) and the
Commission’s statements in the proposal, ‘‘the
intent of proposed Rule 10c–1 was to increase
transparency of securities lending information with
respect to the U.S. markets for the benefit of U.S.
brokers, dealers, and investors’’ but that the reach
of the rule to all lenders is broader. See ICI Letter
1, at 7–8. See also SIFMA Letter 1, at 19–20. See
MFA Letter 3, at 6 (stating that the Commission
should ‘‘clarify the cross-border implications of any
final securities lending reporting rule it adopts,’’
and also stated that ‘‘it would be inappropriate to
apply the Proposed Securities Lending Rules to
non-U.S. entities such as UCITS, AIFs, or other
funds that are subject to reporting under SFTR and
not otherwise subject to U.S. regulatory
requirements’’). See also HSBC Letter 1, at 2 (stating
that, ‘‘[g]iven that complying with any new
reporting regime is likely to be costly and
operationally complex regardless of its ultimate
scope—especially for large firms with global
operations . . . it is essential that the Commission
clarify the cross-border application and certain
other aspects of each of the proposed rules in line
with the Commission’s authority to promulgate
rules only where necessary and appropriate in the
U.S. public interest or for the protection of U.S.
investors’’). Another commenter urged the
Commission to define the jurisdictional scope of the
transactions to be reported under the final rule,
including which securities must be reported and
which parties are required to report. See FIF Letter,
at 8.
651 See, e.g., RMA Letter, at 17 (stating that,
‘‘[w]ithout such definition, non-U.S. beneficial
owners and agent lenders would be left with
substantial legal uncertainty’’). According to this
commenter, the ‘‘reach of the-reporting
requirements should be limited territorially, setting
explicit rules on when transactions involving nonU.S. entities are deemed to be within scope.’’ Id.
See also IHS Markit Letter, at 3 (requesting clarity
regarding whether international broker-dealers
lending U.S. securities are within the scope of the
proposed rule).
650 One

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apply to ‘‘all lenders’’ 652 regardless of
whether the lender loans a U.S. security
or a non-U.S. security and whether or
not the lender was a U.S. person or
not.653 Other commenters, in contrast,
warned that, because a significant
amount (up to 18 percent) of lender
transactions in the U.S. market are
provided by funds outside of the U.S.,
the Commission risks not capturing this
considerable volume of activity if it
does not clarify cross-border scope of
the final rule.654 Many of these
commenters raised questions about the
scope of the Commission’s cross-border
regulatory authority under section
10(c).655
Although the Proposing Release did
not propose rule text addressing the
cross-border aspects of proposed Rule
10c–1 or otherwise discuss the rule’s
cross-border reach, the Commission is
addressing commenters’ contentions
about the Commission’s cross-border
authority under section 10(c) and
offering general guidance as to the rule’s
cross-border scope. As an initial matter,
the Commission advises that final Rule
10c–1a is intended to reach the full
scope of the cross-border authority
provided for by section 10(c).656
Turning to the cross-border scope of
section 10(c), the Commission’s
understanding of that provision’s cross652 See, e.g., SIFMA AMG Letter, at 3 (urging the
Commission to ‘‘address extraterritorial issues such
as the scope of securities (US or non-US) and
lenders (US or non-US) as the present drafting
potentially addresses all securities (US and non-US)
lent by US lenders and/or all US securities lent by
all lenders (US and non-US)’’). See also Pirum
Letter, at 3 (stating that, as proposed, any person
that loans a security on behalf of itself or another
person has a reporting requirement yet without the
rule specifying whether it is the domicile of the
person lending the security, the security itself or a
combination of both, which brings a transaction
into scope for reporting).
653 See, e.g., ICI Letter 1, at 7–8 (stating that the
rule’s cross-border reach needs to be clarified
because the proposed rule currently applies to ‘‘any
person’’ (very broad) and it is unclear whether it
could apply to non-U.S. entities). In requesting this
clarification, this commenter points out the
legislative history of section 10(c) and its focus on
U.S. markets and increasing transparency for the
benefit of U.S. broker-dealers. See id.
654 See ISLA Letter, at 2.
655 See, e.g., MFA Letter 1, at 12 (suggesting the
Commission limit the scope of the proposed rule to
U.S. securities and stating that applying the rule to
all securities irrespective of the jurisdiction that
principally regulates such offerings goes beyond
what is intended by section 10(c). According to this
commenter, Congress did not intend to capture
cross-border lending activities when it added
section 10(c) to the Exchange Act, and capturing
such activities would not further the transparency
goals of the proposed rule but, instead, could
inadvertently result in market participants
segregating their foreign lending activities so as to
limit U.S. assertion of jurisdiction activities).
656 Because final Rule 10c–1a is co-extensive with
the full cross-border authority of section 10(c), by
definition, it cannot exceed the cross-border
authority that Congress afforded.

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border reach is based on the territorial
approach that the Commission has
applied when crafting rules to
implement other provisions of the
Exchange Act.657 Consistent with that
territorial approach (which is based on
Supreme Court precedent, including
Morrison v. National Australia Bank,
Ltd. and its progeny) the Commission
examined the relevant statutory
provision to determine the domestic
conduct that is covered by the
provision.658 By its terms, section 10(c)
requires reporting when, directly or
indirectly, a person has ‘‘effect[ed],
accept[ed], or facilitate[d]’’ a transaction
involving the loan or borrowing of
securities. Based on that language, the
Commission concludes that the relevant
domestic conduct that triggers the
Commission’s regulatory authority
under section 10(c) is conduct within
the U.S. that comprises (in whole or in
part) effecting, accepting, or facilitating
of a borrowing or lending transaction.
Because the Commission intends final
Rule 10c–1a to be co-extensive with the
regulatory scope of section 10(c), the
Commission is of the view that the
rule’s reporting requirements will
generally be triggered whenever a
covered person effects, accepts, or
facilitates (in whole or in part) in the
U.S. a lending or borrowing transaction.
One significant exclusion proposed by
commenters concerned non-U.S.
residents. Having considered those
comments, such an exclusion would not
be appropriate. Section 10(c) is focused
on increasing transparency regarding
lending and borrowing transactions that
are effected, accepted, or facilitated (in
whole or in part) within the U.S.
Excluding borrowing and lending
transactions by non-U.S. persons when
those transactions are effected,
accepted, or facilitated (in whole or in
part) within the U.S. could impact the
completeness of the data, providing less
transparency and potentially resulting
in U.S. market participants receiving
misleading information as a result of
those omissions. Moreover, the
exclusion of non-U.S. persons suggested
by the commenters could cause
competitive harm to U.S. market
657 See, e.g., Regulation SBSR—Reporting and
Dissemination of Security-Based Swap Information,
Release No. 34–74244 (Feb. 11, 2015), 80 FR 14563,
14649 (Mar. 19, 2015) (discussing the territorial
approach to the cross-border application of Title VII
requirements for regulatory reporting and public
dissemination of security-based swap transactions).
658 561 U.S. 247. See, e.g., Abitron Austria GmbH
v. Hetronix Int’l, Inc, 600 U.S. 412, 418 (June 29,
2023) (stating that ‘‘[the Supreme Court has]
repeatedly and explicitly held that courts must
‘identif[y] ‘‘the statute’s ‘focus’’’ and as[k] whether
the conduct relevant to that focus occurred in
United States territory’’).

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participants as it would allow non-U.S.
persons engaging in the same activities
as U.S. persons to benefit from the
transparency about the U.S. securities
lending market provided by final Rule
10c–1a without contributing to that
transparency. For these reasons, the
Commission declines to adopt such an
exclusion.
Commenters suggested several other
exclusions from final Rule 10c–1a that
the Commission has also decided not to
adopt, including that the final rule
should apply only to loans of U.S.exchange traded securities offered by a
U.S. lender.659 One commenter stated
‘‘that market participants—particularly
those outside of the United States—
might determine to limit or cease
trading or interacting with U.S.
intermediaries, or leave the U.S. markets
altogether’’ in order to prevent public
disclosure of their transactions.660
Another commenter stated that
capturing such activities would not
further the transparency goals of the
rule but, instead, could inadvertently
result in market participants segregating
their foreign lending activities so as to
avoid reporting under final Rule 10c–
1a.661 Other commenters suggested that
final Rule 10c–1a should apply only to
loans of securities in which: (1) the
country of issue and primary trading
market of the securities is the U.S., and
(2) the beneficial owner/lender or
Lending Agent is a U.S. person.662
Having considered these comments, as a
policy matter, it is not appropriate to
exclude any of these categories of
lending transactions. Each of these types
of transactions could have a potential
direct impact upon U.S. markets and
U.S. market participants and, thus,
659 See, e.g., HSBC Letter 1, at 3; Mark A.
Steffensen, Senior Executive Vice President and
General Counsel, HSBC Bank USA, N.A. (Feb. 5,
2023) (‘‘HSBC Letter 2’’), at 1–2; SIFMA Letter 1,
at 4; SIFMA Letter 2, at 3; see also MFA Letter 1,
at 12; MFA Letter 3, at 12.
660 HSBC Letter 1, at 5. But see HSBC Letter 2,
at 1 (stating, in response to a question regarding
whether the rule should be limited to U.S. lenders
that the commenter ‘‘would expect the depth and
liquidity of the U.S. market to act as a disincentive
for U.S. asset managers to avoid U.S. lenders
altogether, and [the commenter] cannot envision
any incentive for U.S. asset managers to prefer nonU.S. lenders that are themselves subject to similar
reporting requirements in their home
jurisdictions’’).
661 See MFA Letter 1, at 12. The commenter stated
that applying the rule to all securities irrespective
of the jurisdiction that principally regulates such
offerings goes beyond what is intended by section
10(c), but for the reasons already discussed the
Commission does not agree.
662 See SIFMA Letter 1, at 19–20 (stating that
proposed Rule 10c–1 should ‘‘apply only to loans
of securities where (i) the country of issue and
primary trading market of the securities are the U.S.
and (ii) the beneficial owner lender or lending agent
is a U.S. person’’). See also FIF Letter, at 8.

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consistent with the breadth of the crossborder scope of section 10(c) it is
appropriate to retain these categories of
transactions within the rule’s reporting
requirements so as to enhance overall
transparency in the U.S. securities
market.663
Finally, some commenters asked the
Commission to consider the issue of
potential overlap with the SFTR that is
already implemented in the EU and
UK.664 These commenters stated that
the SFTR uses the domicile of the
transacting entities (i.e., both the lender
and the borrower) to determine which
entity has the reporting obligation and
expressed concern about potential
adverse impacts from regulatory overlap
with Rule 10c–1a to the extent it covers
non-U.S. persons.665 One commenter
suggested that the Commission, at a
minimum, include a carve-out from
proposed Rule 10c–1 (or allow for
substituted compliance with respect to
the rule) for loans by EU or UK lenders
that are subject to reporting under the
EU or UK SFTR.666 The Commission
acknowledges that there will be some
overlap with the SFTR, however, the
overlap that may occur with respect to
entities established in the EU or UK (or
to the EU or UK branch of a non-EU/UK
entity) is not sufficient to warrant an
exclusion. To the extent transactions are
subject to both the EU or UK SFTR
reporting rules and Rule 10c–1a, this
overlap will be due to the occurrence
663 The Commission acknowledges some market
participants may seek to restructure their activities
to avoid reporting, but on balance it is appropriate
that the rule operate within the full scope of the
cross-border authority that Congress established
when it adopted section 10(c).
664 See, e.g., BlackRock Letter, at 3 (stating that,
when determining scope, the SEC should look to
avoid overlap or duplication with SFTR reporting
in Europe and encouraging the SEC to minimize the
number of individual loans required to be reported
under both regimes); IIB Letter, at 5 (expressing the
concern that the SEC should provide clear
guidelines, as well as follow the registered brokerdealer registration model).
665 See Pirum Letter, at 3; Fidelity Letter, at 4
(expressing the concern that the Commission does
not address whether the proposed rule is intended
to require the reporting of loans of non-U.S.
securities and recommending that the final rule not
require the reporting of loans of non-U.S. securities
as such loans are already subject to reporting under
the EU’s SFTR); See Regulation (EU) 2015/2365 of
the European Parliament and of the Council of 25
Nov. 2015 on transparency of securities financing
transactions and of reuse and amending Regulation
(EU) No 648/2012; see also ICI Letter 1, at 12–13
(expressing concern regarding the apparent broad
reach of the rule and how it potentially could apply
to non-U.S. entities, including those entities already
subject to SFTR’s reporting regime and citing
Article 4 of (EU) 2015/2365, available at https://
www.esma.europa.eu/policy-activities/post-trading/
sftr-reporting). See also CASLA Letter, at 3 (stating
that the SEC should clarify if the domicile of the
underlying client/agent lender would apply from
territorial approach scope perspective).
666 See HSBC Letter 2, at 1.

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within the U.S. of the relevant domestic
activities as specified by section 10(c).
For the reasons discussed above, related
to transparency and competition within
the U.S. market, Rule 10c–1a will apply
to those transactions notwithstanding
any potential overlap and resulting
adverse impacts.
N. Additional Comments
One commenter stated that the
Commission has already exhausted its
rulemaking authority under section
984(b) of the Dodd-Frank Act, that the
authority to promulgate rulemaking has
expired, and that the Commission is
seeking to regulate transactions outside
the scope of the intended Congressional
authority.667 Section 984(a) of the DoddFrank Act, codified in section 10(c)(1) of
the Exchange Act, has no deadline for
Commission action. Although, section
984(b) includes such a date, the
‘‘[p]assage of the statutory action
deadline does not deprive the agency of
the power to act.’’ 668 Section 984(b) of
the Dodd-Frank Act provides that the
Commission shall promulgate ‘‘rules’’
and does not limit the number of any
such rules. The Commission did not
‘‘exhaust’’ its authority under sections
984(a) and (b) by adopting the
Investment Company Reporting
Modernization rules.669
The commenter also stated that, by
‘‘linking’’ securities loan transactions
entered into in order to fulfill delivery
obligations arising from customer short
sales,670 the Commission would be
exceeding the scope of its rulemaking
authority.671 With regard to authority,
section 10(c)(1) of the Exchange Act
confers the Commission with plenary
authority over both short sales and the
loan or borrowing of securities, with a
limited exception to authority over
securities loans related to the safety and
soundness or systemic risk of certain
financial institutions such as banks and
credit unions.672 A loan of a security
may be used for short sales or other
purposes, and the use of a securities
loan to facilitate a short sale is separate
and distinct from the short sale itself.
While it is possible that some persons
667 See

Citadel Letter, at 12–14.
and Pierce. Administrative Law
Treatise Section 4.9 (6th Edition, 2023–1 Cum.
Supp. 2018). When are Agencies Required to Act by
Rule? (citing Brock v. Pierce County, 476 U.S. 253
(1986); Southwestern Bell Telephone Co. v. Federal
Communications Commission, 138 F.3d 746 (8th
Cir. 1998).
669 Investment Company Reporting
Modernization, Release No. 34–79095 (Oct. 13,
2016) 81 FR 81870, 81887–88 n.192 (Nov. 18, 2016).
670 See Citadel Letter, at 13.
671 See Citadel Letter, at 14.
672 See 15 U.S.C. 240.78j(c) (section 10(c)(1) of the
Exchange Act).

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may seek out short sale information
through securities lending information
that will be provided under this rule,
the modifications made from the
proposed rule, in particular delaying the
publication of the amount of the loan,
should make it more difficult for such
persons to succeed at such efforts,
thereby addressing the potential
negative consequences of such
‘‘linking’’ of securities loan information
to short sale information (e.g., short
sellers seeking to use securities lending
information to alter their short selling
strategies, thereby potentially reducing
liquidity and harming investors) raised
by the commenter.
Some commenters urged the
Commission to take additional or
different regulatory and non-regulatory
actions than the approaches that were
proposed, including actions that the
Commission did not propose. These
suggestions covered a variety of areas,
including: notifications to retail
investors; 673 securities lending
transaction terms; 674 other SEC
regulations; 675 SEC enforcement actions
and penalty provisions; 676 studies,
audits, and roundtables; 677 reporting
technologies; 678 broker-dealer
673 See, e.g., Form Letters A and B; Trimbath
Letter; Letter from Adam Rensel (Aug. 16, 2022);
Letter from Kevin Hagemann (Aug. 16, 2022); Letter
from Sam Wood (Sept. 1, 2022).
674 See, e.g., Trimbath Letter; Form Letters A and
B.
675 See, e.g., Letter from Marc Pecnik (Dec. 6,
2022); Letter from A K Tran, MD, Ph.D. (Nov. 26,
2021); Letter from Christian Bashnick (Aug. 16,
2022); Letter from Doyoung Park (Aug. 16, 2022);
Letter from Dakota Glassburn (Aug. 16, 2022); Form
Letter from Brandon Gallagher, et al. (Aug. 16,
2022); Letter from Adrian Convery (Aug. 16, 2022);
Letter from Antonio Franco (Aug. 16, 2022); Letter
from Cam Johnson (Aug. 16, 2022); Letter from
Patrick Barragan (Aug. 16, 2022); Letter from M. A.
Uit den Boogaard (Aug. 16, 2022); Letter from
Fulton (Aug. 16, 2022).
676 See, e.g., Letter from DWK (Oct. 8, 2022);
Letter from Curtis Higgins (Mar. 2, 2022); Letter
from Enrique Deaguila (Oct. 29, 2022); Letter from
Matt Hyland (Feb. 19, 2022); Letter from Ryan
Deolall (Oct. 30, 2022); Letter from Dave Cazza
(Aug. 15, 2023).
677 See, e.g., Letter from Edmon Blount, Founder
and Director Emeritus, Center for the Study of
Financial Market Evolution (Dec. 15, 2021)
(‘‘CSFME Letter 1’’), at 6; Letter from Edmon
Blount, Founder and Director Emeritus, Center for
the Study of Financial Market Evolution (Apr. 26,
2022) (‘‘CSFME Letter 4’’), at 1; Letter from Edmon
Blount, Founder and Director Emeritus, Center for
the Study of Financial Market Evolution (Nov. 1,
2022) (‘‘CSFMA Letter 5’’); see also Letters from Dr.
Radek Stech, CEO, Global Principles for Sustainable
Securities Lending (Global PSSL) and Senior
Lecturer, University of Exeter Law School (Jan. 7,
2022, Apr. 7, 2022, and Nov. 1, 2022); ISLA Letter,
at 2–3.
678 See, e.g., Letter from David S. Schwartz,
Managing Director, Center for the Study of
Financial Market Evolution (Mar. 17, 2022)
(‘‘CSFME Letter 3’’), at 1–2; Advanced Securities
Consulting Letter, at 1–3; Letter from Matthew
Cohen, Provable Markets (Jan. 7, 2002); Data Boiler

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revenue; 679 and ‘‘onward lending.’’ 680
These issues are outside the scope of the
proposal, and the final amendments
appropriately further the Commission’s
objectives of promoting investor
protection, enhancing market efficiency,
and facilitating capital formation by
implementing the requirements of
section 984(b) of the Dodd-Frank Act
and enhancing the transparency of
securities lending and borrowing.
VIII. Compliance Date
The Proposing Release did not
include a specific proposed compliance
date for the final rule, but commenters
expressed a range of views on the length
and structure of an implementation
period.681
The Commission received several
comments recommending an
implementation period that runs from
the time that technical specifications are
published by an RNSA.682 One
commenter proposed an ‘‘initial
compliance period of at least 18 months
to develop necessary systems and
otherwise prepare for compliance.’’ 683
Another commenter proposed a period
of ‘‘at least 18 months after publication
of technical specifications by the
registered national securities association
to come into compliance with the new
Technologies Letter LLC; Letter from Alan
Konevsky, interim Chief Executive Officer and
Chief Legal Officer, tZERO (Jan. 7, 2022); Letter
from Dan Liefwalker (Dec. 17, 2021); Letter from
Jordan Cox (Jan. 4, 2022); Letter from Samuel
Hudock (Mar. 10, 2022); Letter from Enzo Villani
(Jan. 19, 2022).
679 See, e.g., Trimbath Letter, at 1–2.
680 See, e.g., Form Letters A and B; Trimbath
Letter; Letter from Julian Young (Aug. 16, 2022);
Letter from Helmut Herglotz (Oct. 31, 2022); Letter
from Juan Camarena (Oct. 30, 2022).
681 With respect to the compliance period, several
commenters requested the Commission to consider
interactions between the proposed rule and other
recent Commission rules. In determining
compliance periods, the Commission considers the
benefits of the rules as well as the costs of delayed
compliance periods and potential overlapping
compliance periods. For the reasons discussed
throughout this release, to the extent that there are
costs from overlapping compliance periods, the
benefits of the rule justify such costs. See infra Part
IX.B for a discussion of the interactions of the final
rule with certain other Commission rules.
682 See FIF Letter, at 2; BlackRock Letter, at 9
(recommending a timeline that allows persons that
make covered securities loans to establish internal
reporting regimes ‘‘after the designated RNSA has
completed their technology database and requisite
testing’’); EBF Letter, at 2 (recommending a period
of ‘‘at least 18 months after publication of technical
specifications by the [RNSA] to come into
compliance with the new requirements’’); SIFMA
Letter 1, at 20 (recommending ‘‘that market
participants . . . be given a minimum of 18 months
following the RNSA’s finalization of the technical
specifications for reporting’’). See also ASA Letter,
at 2 (stating that ‘‘[v]endors would need time to
modify and upgrade their technology systems to
comply with any new standards’’).
683 See IIB Letter, at 3.

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requirements.’’ 684 Another commenter
recommended that the Commission
‘‘provide a minimum two-year
implementation period’’ for the final
rule.685 One commenter stated that
ample time should be provided for
covered persons to develop ‘‘procedures
and protocols and properly train their
compliance and trading personnel
before subjecting them to additional
regulation.’’ 686 However, other
commenters encouraged the
Commission to expedite the adoption of
the final rule.687
Certain commenters requested a
phased approach to implementation,
including a recommendation that the
implementation of the final rule begin
only with loans of U.S. equity
securities.688 Other commenters
recommended initially reporting only
securities listed or traded on a U.S.
exchange and reporting other U.S.
equity securities or debt securities after
further study.689 Other commenters
recommended deferring public
dissemination of data to allow the
Commission to gain experience with the
data.690 Similarly, one commenter
supported ‘‘an approach to
implementation that requires
confidential reporting for regulatory
684 See

EBF Letter, at 2.
Fidelity Letter, at 2. The commenter also
recommended that ‘‘[t]he Commission should also
provide necessary guidance to market participants
on the final rule a full year in advance of the
implementation date.’’ An RNSA may elect to
provide updates as it develops its rules for
compliance with final Rule 10c–1a. As discussed
below in this part, the compliance date for covered
persons, referred to throughout this release as the
‘‘reporting date’’, will be the first business day 24
months after the effective date of final Rule 10c–1a.
See also Nasdaq Letter, at 2 (stating that ‘‘a two-year
implementation period would provide adequate
time for market participants to comply with the
Proposal’’).
686 See S3 Partners Letter, at 5.
687 See HMA Letter, at 1 (stating that the
Commission should ‘‘revise and adopt the Proposal
without delay’’); Better Markets Letter, at 1
(recommending that the Commission ‘‘finalize this
long-overdue, mandatory rulemaking without delay
or dilution’’).
688 See, e.g., BlackRock Letter, at 3; ICI Letter 1,
at 7; Federated Hermes Letter, at 2; AIMA Letter,
at 5; MFA Letter 3, at 6; SIFMA AMG Letter, at 11
(recommending that ‘‘[o]nce the SEC and the RNSA
become familiar with the data they are receiving
and can assess the data’s potential utility to the
market, the SEC could then propose rules on
making data available to the public’’); ABA Letter,
at 4 (‘‘The SEC should limit covered securities
lending transactions, at least during the initial
stages of reporting, to National Market System
equity securities and not include fixed-income
securities, such as government securities.’’); S3
Partners Letter, at 15 (recommending ‘‘that the
Commission phase-in implementation in a manner
consistent with best practices in technology and
policy implementation’’).
689 See CASLA Letter, at 2; RMA Letter, at 15–17.
See also SBAI Letter, at 2; MFA Letter 3, at 6.
690 See CASLA Letter, at 2; RMA Letter, at 17;
MFA Letter 3, at 7.

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purposes to give the SEC experience
with the data to refine it as necessary to
ensure it serves its purpose. Any further
stages that would require public
dissemination of the data should only
be considered following additional
economic analysis and public
consultation.’’ 691
Another commenter recommended
that ‘‘[a]ny proposed timeline should
carefully consider the universe of
entities required to report transactions
for the first time.’’ 692 The Commission
recognizes that covered persons may
have differing degrees of expertise and
familiarity with existing RNSA
reporting systems, and that lacking such
familiarity could increase the time
needed to prepare for compliance with
final Rule 10c–1a’s requirements.
However, the Commission also
recognizes that the final rule permits the
use of reporting agents, as well as other
third party vendor service providers,
either of which could help facilitate
preparation for fulfillment of the final
rule’s reporting requirements by less
experienced covered persons. For
example, some commenters stated that
existing third party vendors have
experience and technological capacity
to be able to provide reporting-related
services (e.g., data vendors and entities
that report information for other
regulatory purposes).693
Another commenter proposed means
of expediting the implementation of the
final rule, including initially: (1)
applying it to only larger market
participants; (2) requiring only certain
data elements; and (3) not enforcing it
for several years.694 However, limiting
the reporting of Rule 10c–1a
information (i.e. to larger market
participants or only requiring certain
data elements) would provide the public
with a narrow and incomplete view of
the securities lending market activity.695
691 See Letter from Members of the U.S. House of
Representatives Alma S. Adams, Ph.D., Frank D.
Lucas, Madeleine Dean, Bill Huizenga, Bill Foster,
Blaine Luetkemeyer, Vicente Gonzalez, Ann
Wagner, Josh Gottheimer, Andy Barr, Al Lawson,
French Hill, David Scott, Tom Emmer, and Bryan
Steil (Nov. 22, 2022), at 2. See also Letter from
Representative Lucas, et al., at 1; MFA Letter 3, at
8.
692 See BlackRock Letter, at 7–8.
693 See S3 Partners Letter, at 12; Sharegain Letter,
at 2; IIB Letter, at 10.
694 See James J. Angel Letter, at 10.
695 See Proposing Release, 86 FR 69807 (stating
that ‘‘available data are incomplete, as private
vendors do not have access to pricing information
that reflects all transactions. This, in part, reflects
the voluntary submission of transaction information
by subscribers to vendors’’); id. at 69807 (stating
that ‘‘participation in the give-to-get data product is
purely voluntary, meaning that the data could be
missing observations in a systematic fashion, thus
biasing the impression it creates of the lending
market’’).

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Similarly, not enforcing the rule for
several years could incentivize nonreporting and skew the reported data to
disproportionally represent market
participants that voluntarily report.
Taking into consideration
commenters’ wide-ranging
recommendations, the following
compliance dates strike an appropriate
balance between making securities loan
information publicly available and
providing adequate time for industry
participants to come into compliance.
Specifically, the final rule’s compliance
dates require that: (1) an RNSA propose
rules pursuant to final Rule 10c–1a(f)
within four months of the effective date
of final Rule 10c–1a; (2) the proposed
RNSA rules are effective no later than
12 months after the effective date of
final Rule 10c–1a; (3) covered persons
report Rule 10c–1a information to an
RNSA starting on the first business day
24 months after the effective date of
final Rule 10c–1a (the ‘‘reporting date’’);
and (4) RNSAs publicly report Rule
10c–1a information pursuant to final
Rules 10c–1a(g) and (h)(3) within 90
calendar days of the reporting date for
covered persons to report Rule 10c–1a
information to an RNSA. Additionally,
upon the reporting date requiring
covered persons to report Rule 10c–1a
information to an RNSA, RNSAs are
required to fulfill the data retention and
availability requirements—including
relevant information security policies
and procedures—pursuant to
paragraphs (h)(1), (h)(2), and (h)(4), and
may establish and collect reasonable
fees pursuant to paragraph (i) of final
Rule 10c–1a.
This approach to the final rule’s
compliance dates balances the
Commission’s goal of increasing
transparency in the securities lending
market with providing RNSAs and
market participants with adequate time
to implement systems and processes to
comply with the final rule’s reporting
requirements. The Commission has also
taken into consideration that the
technology to collect and disseminate
Rule 10c–1a information already exists.
Specifically, FINRA, which is currently
the only RNSA, already operates
facilities that collect and disseminate
transaction information, including
TRACE.696 FINRA’s extensive
experience in developing and operating
such facilities will enable it to design
and propose rules regarding the format
and manner of its collection of
696 See FINRA Letter, at 2 (stating that ‘‘FINRA
has extensive experience establishing and
maintaining systems that are designed to capture
and disseminate transaction information—similar to
the system contemplated by the Commission under
the Proposal’’).

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information within four months
following the effective date of the final
rule. Additionally, requiring that RNSA
rules are effective no later than 12
months after the effective date of final
Rule 10c–1a will help to ensure that
information improving the transparency
of the securities lending market is made
available to the public without
unnecessary delay.
A reporting date for covered persons
of 24 months after the effective date of
final Rule 10c–1a is sufficient for
covered persons (and eligible reporting
agents) to prepare for compliance with
the final rule’s reporting requirements.
Two commenters recommended an
implementation period of two years,697
and another commenter recommended a
compliance period of at least 18
months.698 One commenter’s proposed
implementation period of eighteen
months after publication of technical
specifications by an RNSA could
provide more or less implementation
time to covered persons than the final
rule does. Depending on when an RNSA
adopts rules pursuant to final Rule 10c–
1a(f), covered persons could potentially
have more than 12 months to begin
reporting Rule 10c–1a information,
including more than the 18 months the
commenter recommends. Further, the
final rule has been modified to reduce
certain burdens, such as requiring endof-day reporting rather than reporting in
15-minute increments, and removal of
the available to lend and securities on
loan requirements, which should reduce
the amount of time required to prepare
for compliance. As stated above, in this
part, the reporting date for covered
persons strikes a balance between
making securities loan information
publicly available and providing
industry participants with sufficient
time to come into compliance. Covered
persons’ permitted reliance on reporting
agents and ability to use third party
vendors 699 to help facilitate the
fulfillment of reporting obligations will
allow for the outsourcing of certain
697 See Fidelity Letter, at 2 (recommending that
the ‘‘Commission should provide a two-year
implementation period for any final rulemaking on
the Proposal’’); Nasdaq Letter, at 2 (‘‘a two-year
implementation period would provide adequate
time for market participants to comply with the
Proposal’’).
698 See IIB Letter, at 3 (recommending that the
‘‘SEC should provide reporting entities an initial
compliance period of at least 18 months to develop
necessary systems and otherwise prepare for
compliance with the requirements of the rule’’).
699 Numerous commenters have mentioned their
experience in the market for reporting services. See,
e.g., IHS Markit Letter, at 1; Pirum Letter, at 1;
DTCC Letter, at 4; Sharegain Letter, at 2. See also
Equilend Letter, at 1 (stating that it ‘‘welcomes the
opportunity to act as a reporting agent for the
Proposed Rule’’).

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functions to prepare for and comply
with the final rule’s requirements.
A compliance date that requires
RNSAs to publicly report Rule 10c–1a
information within 90 calendar days of
the reporting date for covered persons
reporting Rule 10c–1a information to an
RNSA will help ensure the utility of
such data once it is made publicly
available. Providing RNSAs with up to
90 calendar days between covered
persons being required to publicly
report Rule 10c–1a information and
RNSAs being required to make such
information available to the public
pursuant to final Rules 10c–1a(g) and
(h)(3) will help RNSAs resolve any
initial issues with collecting,
aggregating, and publishing Rule 10c–1a
information following the reporting date
for covered persons. Additionally, upon
the reporting date for covered persons
an RNSA is required to fulfill the data
retention and availability
requirements—including relevant
information security policies and
procedures—pursuant to paragraphs
(h)(1), (h)(2), and (h)(4), and may
establish and collect reasonable fees
pursuant to paragraph (i) of final Rule
10c–1a.
IX. Economic Analysis
A. Introduction and Market Failure
1. Introduction
The Commission has considered the
economic effects of final Rule 10c–1a
and, wherever possible, the Commission
has quantified the likely economic
effects of the final rule.700 The
Commission is providing both a
qualitative assessment and quantified
estimates of the potential economic
effects of the final rule where feasible.
The Commission has incorporated data
and other information to assist it in the
analysis of the economic effects of the
final rule. However, as explained in
more detail below, because the
Commission does not have, and in
certain cases does not believe it can
reasonably obtain, data that may inform
the Commission on certain economic
effects, the Commission is unable to
700 Section

3(f) of the Exchange Act requires the
Commission, whenever it engages in rulemaking
and is required to consider or determine whether
an action is necessary or appropriate in the public
interest, to consider, in addition to the protection
of investors, whether the action would promote
efficiency, competition, and capital formation.
Additionally, section 23(a)(2) of the Exchange Act
requires the Commission, when making rules under
the Exchange Act, to consider the impact such rules
would have on competition. Section 23(a)(2) of the
Exchange Act prohibits the Commission from
adopting any rule that would impose a burden on
competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act.

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quantify certain economic effects.701
Further, even in cases where the
Commission has some data,
quantification is not practicable due to
the number and type of assumptions
necessary to quantify certain economic
effects, which render any such
quantification unreliable. Our inability
to quantify certain costs, benefits, and
effects does not imply that such costs,
benefits, or effects are less significant.
Commenters raised a number of
concerns with the analyses and
conclusions in the Proposing Release.
The Commission reviewed all of the
comments received and, in a few
instances, have modified the subsequent
economic analysis in response to
additional information provided by
commenters. We have also conducted
analyses of changes to the proposed rule
text.
The Commission believes that the
final rule will increase transparency in
the securities lending market by making
available the public portion of Rule
10c–1a information, which is more
comprehensive than existing data, and
by making such data available to a
wider range of market participants and
other interested persons than currently
are able to access existing data.
The subsequent benefits include a
reduction of the information
disadvantage faced by end borrowers
and beneficial owners in the securities
lending market, improved price
discovery in the securities lending
market, increased competition among
providers of securities lending analytics
services, reduced costs associated with
tracking market conditions for brokerdealers and lending programs, and
improved decision-making by investors,
beneficial owners and other market
participants.702 The Commission
believes that final Rule 10c–1a will also
likely reduce the borrowing costs of
some securities,703 which will improve
price discovery, liquidity, and capital
formation in the underlying security
markets. The Commission also believes
the final rule will benefit investors by
increasing the ability of regulators to
surveil, study, and provide oversight of
701 For example, while the Commission believes
that certain currently available securities lending
data products may be biased due to missing
observations, the extent of the biases cannot be
quantified as the data that would be needed to
assess the extent of the bias are missing. See infra
note 759 and corresponding text for further
discussion.
702 See infra Part IX.C.1 for further discussion of
the expected benefits of final Rule 10c–1a.
703 See infra Part IX.C.1 for further discussion of
the expected effects of final Rule 10c–1a on short
selling. See infra note 853 and corresponding text
for further discussion of why the effects discussed
above are likely to be concentrated among stocks
that have higher borrowing costs.

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both the securities lending market and
individual market participants.
The Commission believes that the
final Rule 10c–1a will result in costs.
The final rule will lead to direct
compliance costs as entities providing
Rule 10c–1a information to an RNSA
will have to build or adjust systems to
meet the requirements of the final rule.
The entities that provide Rule 10c–1a
information to an RNSA may absorb
these costs in the form of lower profits
or may pass them on to their customers
in the form of increased fees for brokerdealer services or lending program
services. The final rule will also impose
direct costs on an RNSA responsible for
collecting, maintaining, and distributing
the data, who may pass on these costs
by imposing fees on entities that
provide Rule 10c–1a information to an
RNSA and/or consumers of Rule 10c–1a
data (‘‘Rule 10c–1a data’’). Additionally,
the Commission believes that the final
rule could render existing securities
lending data services less valuable,
potentially leading to less revenue for
the firms currently compiling and
distributing these data for a fee.704 Also,
broker-dealers and lending programs
will have costs in the form of lost
information advantage when dealing
with beneficial owners and end
borrowers in the securities lending
market. For securities lending data that
are currently not reported, or to which
access is limited, making the data public
may affect the profitability of certain
trading strategies as investors use the
data to learn about market sentiment
and adjust their trading strategies
accordingly.

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2. Market Failures
In the securities lending market, the
cost to borrow a given security depends
on a number of factors, including the
current demand for the security, the
length of the loan, and the type and
amount of collateral used, among
others.705 Information about loan prices
along with information about loan
characteristics helps inform market
participants about whether the price of
a given securities loan is consistent with
the current market rate. At the same
time, the securities lending market is
characterized by information frictions
that stem from the fact that access to
timely securities lending data is limited
for some market participants.706 This
704 See supra Part IX.D.2 discussing why existing
data providers may retain certain advantages in the
market for securities lending data and analytics.
705 See infra note 723 and corresponding text for
a discussion of factors that could be important
drivers of borrowing costs.
706 See infra Part IX.B.2 for further discussion of
the current state of transparency in the securities

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means that, at any point in time, there
is incomplete information on market
conditions and some market
participants have better information
than others on borrowing costs and
transactions. Such incomplete
information and asymmetric
information may lead to inefficient
prices for securities loans (including
loans of equity securities and fixed
income securities).707
There is a general lack of
comprehensive information on current
market conditions in the securities
lending market. Most providers of
commercial securities lending data
currently focus on loans from lending
programs to broker-dealers
(‘‘Wholesale’’ loans) 708 and largely use
a ‘‘give-to-get’’ model, where entities
who wish to obtain securities lending
data are typically required to: (1) be
participants in the Wholesale lending
market themselves, with data that they
could provide, and (2) provide their
data to the commercial vendor in order
to access the full dataset provided by
the vendor. This means that only those
market participants with data to report
for themselves are able to access the
lending market. In response to commenters, the
Baseline has been expanded to include a more
robust discussion of data products that are currently
available from commercial data vendors. See infra
Part IX.B.5 for additional discussion.
707 The Commission believes that the issues
discussed in this part regarding a need for
additional market transparency apply to all
reportable securities, though, as pointed out by
commenters (see, e.g., RMA Letter, at 16 and IIB
Letter, at 6) and discussed below in Part IX.B.2, the
market for securities lending may currently be more
transparent for some reportable securities as
compared to others. The Commission recognizes
that, to the extent that crypto asset securities qualify
as reportable securities under final Rule 10c–
1a(j)(3), the benefits and costs of the final Rule 10c–
1a in the market for crypto asset security lending
may vary based on the characteristics of that
market. The Commission is unable to describe the
lending market in reportable crypto asset securities,
however, in part because there is insufficient
reporting of crypto asset security transactions to the
CAT, TRACE, or RTRS to allow for meaningful
analysis.
708 The Proposing Release defined ‘‘Retail’’ loans
as those from a broker-dealer to an end borrower,
while loans from lending programs to broker
dealers constitute ‘‘Wholesale’’ loans (See
Proposing Release, 86 FR 69805, 69831). To avoid
confusion with the common use of the term ‘‘retail’’
to refer to a non-institutional (i.e., individual)
investor, this release will refer to loans from a
broker-dealer to an end borrower as ‘‘Customer’’
loans or loans in the Customer market, and loans
from a lending program to a broker-dealer or others
as ‘‘Wholesale’’ loans, or loans in the Wholesale
market. One commenter expressed concern that the
Proposing Release did not adequately address the
implications of the Rule for Short Sale Linked
Activity (see Citadel Letter, at 5), by which the
commenter stated that they are referring to what the
Proposing Release calls the ‘‘retail market’’ (see
Citadel Letter, at 1). The Economic Analysis uses
the terms Wholesale market and Customer market
to make clear the implications of the final rule for
the different segments of the market.

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data, and other market participants have
a very limited view into the Wholesale
market. Furthermore, participation in
give-to-get data products is voluntary,
meaning that relevant observations
could be missing from the data in a
systematic fashion, thus biasing the
impression it creates of the lending
market.709
Some commenters disagreed with the
Commission’s assessment of the current
opacity of the securities lending market.
One commenter pointed out that there
are some commercial securities lending
datasets that are available to all
subscribers,710 and another commenter
stated that ‘‘the ‘give-to-get’ model is not
the only model for commercial data for
securities lending.’’ 711 Based on the
Commission’s experience, the collection
of data for these currently available
commercial datasets that are not give-toget largely relies on surveying asset
managers, and potentially others, in the
Customer segment of the market about
their borrowing experiences.712 To
differentiate this data from the give-toget data, this type of dataset will be
referred to going forward as ‘‘Customer
market survey’’ data.
One commenter stated that ‘‘the
Commission does not explain why
[Customer market] survey data is
inadequate or unavailable.’’ 713 The
Commission acknowledges that
Customer market survey data may be
more widely available, as access to these
datasets is generally not restricted in
terms of which entities can purchase the
data. However, the Commission believes
that Customer market survey datasets
are inadequate for two reasons. First,
since they rely on surveys of borrowers
in the Customer segment of the market,
they lack comprehensiveness and have
limited insight into the Wholesale
market.714 Second, similar to the giveto-get datasets, Customer market survey
datasets may also contain biases as they
rely on voluntary submissions of data
from a potentially limited subset of
709 See infra Part IX.B.2 for further discussion of
the potential for biases related to selection issues
in commercial securities lending databases.
710 See S3 Partners Letter, at 5.
711 See Citadel Letter, at 8.
712 See Proposing Release, 86 FR 69832, referring
to this data by stating ‘‘Other firms provide a
different approach to securities lending data by
surveying fund managers about their borrowing
experience, such as the fees they paid to borrow,
from which they provide estimates of lending fees.’’
See Antonio Garango, Short Selling Activity and
Future Returns: Evidence from FinTech Data (Nov.
2020), at 1, 3, available at https://papers.ssrn.com/
sol3/papers.cfm?abstract_id=3775338 (retrieved
from SSRN Elsevier database) (‘‘Garango 2020’’).
713 See Citadel Letter, at 8.
714 See supra note 708 for a definition of
‘‘Customer’’ loans.

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market participants.715 As discussed
above, these two types of datasets differ
in terms of the market segments that
they cover, and in terms of their
accessibility.716
One commenter stated that the
Commission ‘‘has overstated the level of
opacity in the securities lending
market,’’ that both the number of data
vendors and the detail of their data
products have increased over time, and
that market participants generally have
access to one or more securities lending
datasets.717 However, based on the
Commission’s experience, the
commercial securities lending data
products that are currently available
lack comprehensiveness and likely
suffer from biases.718 Furthermore,
while some market participants could
potentially have access to multiple
datasets, this would generally be
possible only for a limited set of market
participants who have access to give-toget data, and who may find it
cumbersome or costly to combine
different types of data.719 The
Commission is not aware of any
commercially available securities
lending dataset that currently provides
securities lending data as
comprehensive, accessible, and
informative about all segments of the
securities lending market (i.e., both the
Wholesale market and Customer
market), as the data provided by the
final rule.720
One commenter stated that lending
agents frequently provide their clients
with benchmark reports based on
market data, and that beneficial owners
currently benefit from substantial
information obtained from lending
agents.721 However, the Commission
believes that, even if some lending
agents or broker-dealers are incentivized
to provide their clients with information
about the quality of their securities
715 See infra Part IX.B.2 for further discussion of
the potential for biases related to selection issues
in commercial securities lending databases.
716 See infra Part IX.B.2 for additional discussion
of the characteristics of, and differences between,
customer market survey data and give-to-get data.
717 Specifically, the commenter stated that ‘‘the
level of detail in the data provided by data vendors
has improved drastically’’ and ‘‘the number of data
vendors present in the market has been growing,’’
such that ‘‘the vast majority of parties involved in
the lending of securities have access to at least one
securities lending data vendor, and in many cases
multiple vendors.’’ See IHS Markit Letter, at 13.
718 See infra Part IX.B.2 for further discussion of
the biases and lack of comprehensiveness in
commercial securities lending datasets.
719 See infra notes 768 through 770 and
corresponding text for further discussion of
limitations related to combining multiple securities
lending datasets.
720 See infra Part IX.B.2 for an additional
discussion of this data.
721 See RMA Letter, at 5–6.

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lending services, it is unlikely that they
have incentives to provide information
in a standardized fashion. Therefore, it
is unlikely that market participants
would be able to use this information to
compare the quality of securities
lending services across lending agents
or broker-dealers.
The Commission believes that the
problems of incomplete information and
information asymmetries in the
securities lending market are unlikely to
be solved by market forces. Specifically,
these information problems are unlikely
to be solved by the availability of
commercial securities lending data
products. Firstly, there is a general a
lack of incentives to improve the
accessibility of give-to-get datasets. This
is because market participants may be
discouraged from contributing their data
to give-to-get datasets if these datasets
are widely available, e.g., to
sophisticated investors such as hedge
funds who could use this information to
learn about the other participants’
trading or hedging strategies.722
Therefore, for give-to-get data vendors,
restricting access is likely seen as
necessary in order to persuade market
participants to contribute to the
vendors’ data products, and information
asymmetry would be expected to persist
as a result. Secondly, and more
generally, as commercial data vendors
lack the authority to mandate the
reporting of securities loans, both the
commercial data products that currently
exist (both give-to-get and Customer
market survey models), as well as any
new commercial data product that could
presumably emerge, can only be based
on the voluntary contribution of data.
Market participants who choose not to
contribute data may so choose because
they believe it is in their interest to keep
their data out of public view. This
makes it unlikely that any securities
lending data vendor will be able to
produce a securities lending data
product that is comprehensive and free
from biases.723 Thirdly, as discussed
above, the information that lending
agents or broker-dealers are incentivized
to provide to their clients is unlikely to
be standardized and thus useful for
comparing the quality of securities
lending services across lending agents
or broker-dealers. Thus, the availability
of this information would also be
unlikely to solve the problems of
722 See infra Part IX.B.2 for further discussion of
market participants’ incentives to provide data to
give-to-get data vendors.
723 See infra Part IX.B.2 for further discussion of
the potential for biases related to selection issues
in commercial securities lending databases.

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incomplete and asymmetric information
in the securities lending market.
A. Economic Baseline
The baseline against which the costs,
benefits, and the effects on efficiency,
competition, and capital formation of
the final rule are measured consists of
the current state of the securities
lending market, current practice as it
relates to securities lending and
availability of data about securities
lending, and the current regulatory
framework. The economic analysis
appropriately considers existing
regulatory requirements, including
recently adopted rules, as part of its
economic baseline against which the
costs and benefits of the final rule are
measured.724
Several commenters requested the
Commission to consider interactions
between the economic effects of the
proposed rule and other recent
Commission rules.725 The Commission
724 See, e.g., Nasdaq v. SEC, 34 F.4th 1105, 1111–
15 (D.C. Cir. 2022). This approach also follows SEC
staff guidance on economic analysis for rulemaking.
See Staff’s ‘‘Current Guidance on Economic
Analysis in SEC Rulemaking,’’ (Mar. 16, 2012),
available at https://www.sec.gov/divisions/riskfin/
rsfi_guidance_econ_analy_secrulemaking.pdf (‘‘The
economic consequences of proposed rules
(potential costs and benefits including effects on
efficiency, competition, and capital formation)
should be measured against a baseline, which is the
best assessment of how the world would look in the
absence of the proposed action.’’); Id. at 7 (‘‘The
baseline includes both the economic attributes of
the relevant market and the existing regulatory
structure.’’). The best assessment of how the world
would look in the absence of the proposed or final
action typically does not include recently proposed
actions, because that would improperly assume the
adoption of those proposed actions.
725 See, e.g., AIMA Letter 3, at 4 (‘‘Because the
. . . Proposals have aggregate and overlapping
effects, they should be considered holistically and
their potential adoption should be appropriately
sequenced . . . .’’); Letter from Eric J. Pan,
President and CEO, Investment Company Institute,
Aug. 17, 2023 (‘‘ICI Letter 2’’), at 1 (‘‘The
Commission has issued a wide range of
interconnected rule proposals . . . [that] in the
aggregate warrant further analysis by the
Commission.’’). Commenters indicated there could
be interactions between this rulemaking and the
following rules: Enhanced Reporting of Proxy Votes
by Registered Management Investment Companies;
Reporting of Executive Compensation Votes by
Institutional Investment Managers, Release Nos. 34–
93169, IC–34389 (Sept. 29, 2021) 86 FR 57478 (Oct.
15, 2021) (‘‘Amendments to Form N–PX Proposal’’)
(see, e.g., HMA Letter, at 4); Short Position and
Short Activity Reporting by Institutional Investment
Managers, Release No. 34–94313 (Feb. 25, 2022) 87
FR 14950 (Mar. 16, 2022) (see, e.g., Overdahl Letter,
at 14; AIMA Letter 3, at 2); Prohibition Against
Fraud, Manipulation, or Deception in Connection
With Security-Based Swaps; Prohibition Against
Undue Influence Over Chief Compliance Officers;
Position Reporting of Large Security-Based Swap
Positions, Release No. 34–93784 (Dec. 15, 2021) 87
FR 6652 (Feb. 4, 2022) (see, e.g., Overdahl Letter,
at 14; AIMA Letter 3, at 2; ICI Letter 2, at n. 13);
Modernization of Beneficial Ownership Reporting,
Release Nos. 33–11030, 34–94211 (Feb. 10, 2022) 87
FR 13846 (Mar. 10, 2022) (see, e.g., Overdahl Letter,

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recently adopted four of the rules
mentioned by commenters as
potentially impacting the economic
effects of the final Rule 10c–1a, namely
the recent Amendments to Form N–PX
Adoption,726 the Settlement Cycle
Adoption,727 the May 2023 SEC Form
PF Amending Release,728 and the
Beneficial Ownership Amending
Release.729 These recently adopted rules
at 14; ICI Letter 2, at n.13); Private Fund Advisers;
Documentation of Registered Investment Adviser
Compliance Reviews, Release No. IA–5955 (Feb. 9,
2022) 87 FR 16886 (Mar 24, 2022) (‘‘SEC Private
Fund Advisers Proposal’’) (see, e.g., Overdahl
Letter, at 14); and Amendments to Form PF to
Require Event Reporting for Large Hedge Fund
Advisers and Private Equity Fund Advisers and to
Amend Reporting Requirements for Large Private
Equity Fund Advisers, Release No. IA–5950 (Jan. 26,
2022) 87 FR 9106 (Feb. 17, 2022) (‘‘February 2022
SEC Form PF Proposing Release’’) (see Overdahl
Letter, at 14); Shortening the Securities Transaction
Settlement Cycle, Release Nos. 34–94196, IA–5957
(Feb. 9, 2022) 87 FR 10436 (Feb. 24, 2022) (see
SIFMA Letter 1, at 20–21). See also Citadel Letter,
at 10 (stating that Rule 10c–1a ‘‘must be assessed
along with the additional public disclosure
contemplated in recent Commission proposals
regarding large security-based swap positions,
beneficial ownership reporting and short position
and activity reporting’’).
726 Enhanced Reporting of Proxy Votes by
Registered Management Investment Companies;
Reporting of Executive Compensation Votes by
Institutional Investment Managers, Release Nos. 33–
11131, 34–96206, IC–34745 (Nov. 2, 2022) 87 FR
78770 (Dec. 22, 2022) (‘‘Amendments to Form N–
PX Adoption’’). The Form N–PX amendments
require funds to report publicly their proxy voting
records on an annual basis, and apply to most
registered management investment companies. The
effective date is July 1, 2024.
727 Settlement Cycle Adoption, supra note 738.
The Settlement Cycle amendments shorten the
standard settlement cycle for most broker-dealer
transactions from two business days after the trade
date to one business day after the trade date
(‘‘T+1’’). The implementation date, May 28, 2024,
will occur before the implementation of these rules,
and we therefore expect that all reports made
pursuant to this rule will occur after the
implementation of the T+1 settlement cycle.
Further, because of the need for an RNSA to
develop and implement rules before reporting can
begin, we believe that the May 2024
implementation date for T+1 will precede any
significant compliance costs incurred by market
participants pursuant to this final rule.
728 Form PF; Event Reporting for Large Hedge
Fund Advisers and Private Equity Fund Advisers;
Requirements for Large Private Equity Fund Adviser
Reporting, Release No. IA–6297 (May 3, 2023) 88
FR 38146 (June 12, 2023) (‘‘May 2023 SEC Form PF
Amending Release’’). The Form PF amendments
require large hedge fund advisers and all private
equity fund advisers to file reports upon the
occurrence of certain reporting events. The
compliance dates are December 11, 2023, for the
event reports in Form PF sections 5 and 6, and June
11, 2024, for the remainder of the Form PF
amendments.
729 Modernization of Beneficial Ownership
Reporting, Release Nos. 33–11253, 34–98704 (Oct.
10, 2023) (‘‘Beneficial Ownership Amending
Release’’). Among other things, the amendments
shorten the filing deadlines for beneficial
ownership reports filed on Schedules 13D and 13G.
The compliance dates are 90 days after the effective
date, for Schedule 13D amended filing deadlines;
September 30, 2024, for the Schedule 13G amended

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were not included as part of the baseline
in the Proposing Release because they
were not adopted at that time. In
response to commenters, this economic
analysis considers potential economic
effects arising from the extent to which
there is any overlap between the
compliance period for final Rule 10c–1a
and the compliance periods for each of
these four adopted rules.730
Other rules mentioned by commenters
remain at the proposal stage. To the
extent those proposals are adopted, the
baseline in those subsequent
rulemakings will reflect the regulatory
landscape that is current at that time.
1. Securities Lending
A securities loan is typically a fully
collateralized transaction whereby the
lender, also known as the beneficial
owner, temporarily transfers legal right
to a security to the borrower, the
counterparty, in exchange for
compensation. The form of
compensation depends on the type of
collateral used to secure the transaction.
There are two general types of collateral:
cash and non-cash.
In the U.S., the most common form of
collateral for equity security loans is
cash. The borrower of the security
deposits collateral, typically 102 percent
or 105 percent of the current value of
the asset being loaned. The lender then
reinvests this collateral, usually in lowrisk interest-bearing securities, then
rebates a portion of the interest earned
back to the borrower. The difference
between the interest earned and what is
filing deadlines; and December 18, 2024, for the
structured data requirement. We anticipate that the
implementation of amendments to Schedules 13D
and 13G will precede any significant compliance
costs incurred by market participants pursuant to
final Rule 10c–1a.
730 Since proposing this rule, the Commission
adopted another proposed rule identified by a
commenter, the SEC Private Fund Advisers
Proposal. See Overdahl Letter at 14; Private Fund
Advisers; Documentation of Registered Investment
Adviser Compliance Reviews, Release No. IA–6383
(Aug. 23, 2023) 88 FR 63206 (Sep.14, 2023) (‘‘SEC
Private Fund Advisers Adopting Release’’).
However, the Commission believes there are no
potential significant effects from overlapping
requirements to comply with final Rule 10c–1a.
Specifically, one of the rules from the SEC Private
Fund Advisers Adopting Release requires registered
investment advisers to private funds to, among
other things, provide transparency to their investors
regarding the fees and expenses and other terms of
their relationship with private fund advisers and
the performance of such private funds. The
Commission anticipates that most registered
investment advisers would either not face any
reporting obligations under final Rule 10c–1a(a) or,
to the extent they are involved in the lending of
securities, would not report loans directly, but
would do so through a reporting agent. As a result,
the Commission does not anticipate the compliance
costs associated with final Rule 10c–1a to be
incurred directly by those who are impacted by the
SEC Private Fund Advisers Adopting Release.

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rebated to the borrower is the lending
fee earned by the lender. The portion of
the interest earned on the reinvested
collateral that is returned to the
borrower is called the rebate rate, and is
a guaranteed amount set forth in the
terms of the loan. It is possible for the
lender to lose money on the loan if the
interest earned on the reinvestment of
the collateral does not exceed the rebate
rate. If the security is in high demand
in the borrowing market, the rebate rate
may be negative, indicating that the
borrower does not receive any rebate
and must also provide additional
compensation to the lender. In contrast,
borrowers of loans that are
collateralized other than with cash
typically must pay a lending fee. The
following will refer to ‘‘cost to borrow’’
or ‘‘borrowing costs’’ being higher when
rebate rates are lower (or negative) in
the case of cash-collateralized loans,
and lending fees are higher in the case
of non-cash-collateralized loans.731
Borrowing costs are influenced by the
current demand for the given security,
the potential difficulty a particular
broker-dealer may face finding an
alternative source of loans, the length of
the loan, the collateral used, the
creditworthiness of the counterparty,
and the relative bargaining power of the
parties involved, among other factors.732
Consequently, there is usually a
significant range of borrowing costs for
loans of the same security on the same
day to different entities.733
In the Wholesale market, securities
loans are most commonly obtained
through bilateral negotiations between
lending programs and broker-dealers,
often with a phone call.734 Generally,
when an end investor wishes to borrow
a share, and their broker-dealer does not
have the share available in their own
inventory or through customer margin
731 In many datasets, rebate rates for loans
collateralized by cash are converted to fees using
the conventional method of subtracting the rebate
rate from the Federal funds rate; see, e.g., the
footnote in Table 1.
732 Among other factors that can influence
borrowing costs, commenters also pointed out that
the size and stability of the lender’s position (see
HMA Letter, at 2), the lender’s propensity to recall
the loan (see Overdahl Letter, at 6), interest rate
stability and supply concentration (see SIFMA
AMG Letter, at 6), and factors idiosyncratic to the
parties, such as capital and opportunity costs (see
RMA Letter, at 6). One commenter pointed out that
fees in the Customer market can depend on
additional factors, such as whether a borrower/
client has exclusive access to a lenders’ portfolio,
the volume of a client’s borrow business, and other
prime brokerage services being offered, among
others (see MFA Letter 1, at 5).
733 See infra Part IX.B.3 for statistics on the range
of borrowing costs.
734 Most broker dealers are regulated by FINRA
and are subject to securities lending rules such as
FINRA Rules 4314, 4320, and 4330.

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accounts to loan,735 their broker-dealer
will borrow a share from a lending agent
with whom they have a relationship.
Obtaining a securities loan often
involves extensive search for
counterparties by broker-dealers.736
Investors borrow securities in the
Customer market for a variety of
reasons. In the equity market, a primary
reason for borrowing shares is to
facilitate a short sale. Investors use short
sales to take a directional position in a
security, or to hedge an existing
position.737 When investors execute a
short sale, they do not borrow the shares
on the day of the short sale. Rather,
because the stock market settles up to
two business days after a transaction
occurs (‘‘T+2’’) and the lending market
has same-day settlement, the loan
actually occurs on the settlement day.738
Options market activity can also be a
source of demand for security loans as
short selling is a critical component of
delta hedging. Delta hedging occurs
when options market participants,
particularly options market makers,
holding directional positions hedge
their inventory exposure by taking
offsetting positions in the underlying
stock.739 Equity options markets are
often significantly less liquid than the
markets for their underlying securities.
Delta hedging a long call or short put
position requires short selling, which in
turn requires borrowing the underlying
asset.
Equity security loans can also occur to
close out a fail to deliver. Fail to
delivers occur when one party of a
transaction is unable to deliver at
settlement the security that they
previously sold. Fail to delivers can
occur for multiple reasons.740 Rule 204
735 See infra Part IX.B.4 for further discussion of
the sourcing of shares by broker-dealers for
securities loans.
736 See, e.g., Adam C. Kolasinski, et al., A
Multiple Lender Approach to Understanding
Supply and Search in the Equity Lending Market,
68 J. Fin. 559, 559–95 (2013) (‘‘Kolasinski (2013)’’)
(providing an examination of the effect of high
search cost in the securities lending market).
737 Market makers in the equity market also use
short selling to facilitate liquidity provision in the
absence of sufficient inventory. However, these
short sales are not considered here because they are
almost always reversed intraday and thus do not
result in a securities loan.
738 Equity settlement moves to T+1 on May 28,
2024; See Shortening the Securities Transaction
Settlement Cycle, Release Nos. 34–96930, IA–6239
(Feb. 15, 2023), 88 FR 13872 (Mar. 6, 2023)
(‘‘Settlement Cycle Adoption’’).
739 For a given option contract, a quantity known
as the ‘‘delta’’ captures the sensitivity of the
option’s price to a $1 increase in the price of the
underlying security. When hedging inventory, the
market maker determines the appropriate position
size in the underlying stock according to the delta.
740 See, e.g., Amendments to Regulation SHO,
Release No. 34–58775 (Oct. 14, 2008), 73 FR 61690
n.8 (Oct. 17, 2008).

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of Regulation SHO generally requires a
participant of a registered clearing
agency to close out any fail to deliver at
the registered clearing agency by
purchasing or borrowing securities of
like kind and quantity. Thus, a broker
or dealer that is required to close out a
fail to deliver can borrow shares in the
lending market to comply with Rule 204
of Regulation SHO.741 Doing so allows
more time for the individual to source
the shares or purchase them in the open
market.
The financial management activity of
banks also drives securities loans,
particularly in the Wholesale fixedincome securities lending market. It is
the Commission’s understanding that a
significant fraction of debt security
loans occurs as banks manage liquidity
on their balance sheets. Securities loans
help banks manage liquidity on their
balance sheets because when a security
is on loan, legal claim to the security
transfers to the borrower.742 Thus, banks
lacking sufficient high-quality liquid
assets on their balance sheet may
borrow such high-quality assets to
bolster their liquidity ratios.743 U.S.
Treasury/Agency bonds are often lent
for this purpose, and consequently are
the most commonly lent securities.744
Also, the Commission understands
that some financial entities may use
securities loans to obtain the type of
collateral required for other agreements
they are trying to enter into. For
example, if a contract requires a certain
kind of fixed income security as
collateral, a firm may borrow that
security to collateralize the contract.
While a security is on loan, the
borrower is the legal owner of the
security and receives any dividends,
interest payments, and, in the case of
equity security loans, holds the voting
rights associated with the shares.745
Voting rights remain with the borrower
until the loaned securities are returned.
Usually, the terms of the loan stipulate
that dividends and interest payments
must be passed back to the beneficial
owner in the form of so-called
‘‘substitute dividends.’’ Because
dividends and substitute dividends are
741 See

17 CFR 242.204.
e.g., Concept Release on the U.S. Proxy
System, Release No. 34–62495 (July 13, 2010), 75
FR 42982, 42994 (July 22, 2010) (‘‘When an
institution lends out its portfolio securities, all
incidents of ownership relating to the loaned
securities, including voting rights, generally transfer
to the borrower for the duration of the loan’’).
743 These loans are generally collateralized with
securities instead of cash. A market participant can
increase the liquidity of their portfolio by
borrowing highly liquid securities and
collateralizing the loan with less liquid securities.
744 See OFR Pilot Survey, at 7; supra note 136.
745 See, e.g., OFR Reference Guide, supra note 4.
742 See,

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sometimes taxed differently, an investor
for whom a substitute dividend is taxed
at a lower rate than a dividend may loan
its shares to an investor for whom
dividends are taxed at a lower rate than
substitute dividends.746
Several commenters pointed out
additional reasons for borrowing
securities. One commenter stated that
there are many reasons for securities
lending that are unrelated to short
selling.747 Another commenter
purported that securities lending can be
used to gain influence in the voting of
equity securities.748
However, the Commission expects
that the majority of equity securities
lending, particularly in the Customer
market, occurs to facilitate short selling.
Investors’ ability to use securities loans
for purposes other than short selling is
limited by the ‘‘permitted purpose
requirement’’ of the Board of Governors
of the Federal Reserve System’s
Regulation T. Regulation T broadly
governs the lending activities of brokerdealers, and specifies that a brokerdealer may generally borrow or lend
U.S. securities from or to a (non-brokerdealer) customer solely ‘‘for the purpose
of making delivery of the securities in
the case of short sales, failure to receive
securities required to be delivered, or
other similar situations,’’ unless an
exemption applies.749 This limitation
results in a close correlation between
information about aggregate Customer
loan sizes and short interest.750
2. Current State of Transparency in
Securities Lending
As described above, currently
available securities lending data are
produced by commercial data vendors,
and are based on voluntary data
contributions, either using a give-to-get
model or from Customer market
surveys.751 Some commenters expressed
their belief that the Proposing Release
did not adequately analyze the impact
of Customer market survey data.752 This
746 This is known as dividend arbitrage. While the
IRS has issued regulations to try to combat this type
of dividend arbitrage, there is evidence that it still
occurs. See Peter N. Dixon, et al., To Own or Not
to Own: Stock Loans around Dividend Payments,
140 J. Fin. Econ 539,539–59 (2021) (‘‘Dixon, et al.,
(2021)’’).
747 See IHS Markit Letter, at 3.
748 See HMA Letter, at 3.
749 See 12 CFR 220.10(a).
750 See infra Part IX.B.6 for further discussion of
the correlation between securities loan information
and short interest.
751 See supra Part IX.A.2 for a description of these
types of datasets.
752 For example, one commenter stated that,
while they agree ‘‘with the Commission’s concerns
regarding the inadequacy and information
asymmetry issues inherent in the give-to-get
model,’’ the give-to-get model is ‘‘is not the industry

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baseline, and the discussion following
have been expanded to provide a more
detailed discussion of the Customer
market survey data and its impact on
securities lending transparency. The
available data have limitations.
Specifically, they lack
comprehensiveness in that they are
based on voluntary data contributions.
The reliance on voluntary data
contributions increases the likelihood
that data are missing in a non-random
manner which can introduce biases into
the data. Lastly, not all market
participants have access to all existing
commercial datasets resulting in
information asymmetries between
market participants.
Some commercial data vendors obtain
information on Wholesale loans using a
give-to-get model.753 Access to data
collected using a give-to-get model is
largely restricted, as only certain entities
can purchase the data. The Commission
understands entities with access to the
give-to-get Wholesale market data access
that data using various means such as
an application programming interface
(API), spreadsheet add-in applications,
file downloads, or directly from the
distributor’s website. It is the
Commission’s understanding that some
large institutional investors who would
like the give-to-get data, such as hedge
funds, cannot access it, even for a fee,
because they do not provide lending
data to the commercial vendors and so
are not qualified to purchase the data.
Additionally, distributing the data to
these investors may discourage other
market participants from contributing
their data to the data vendors. Because
securities loans are often entered into to
facilitate various trading and hedging
strategies, if the give-to-get data
providers expanded access to their data,
some securities lending market
participants may be discouraged from
contributing data. Consequently, if
sophisticated traders such as hedge
funds can access the data, then some
market participants may be leery of
contributing data to the give-to-get data
vendors for fear of hedge funds learning
about their trading or hedging strategies.
Additionally, while some data vendors
do allow non-lending market
participants, such as academics and
regulators, to access the data for a fee,
they sometimes place usage restrictions
on the data that make it unusable for
regulatory and some academic
standard.’’ See S3 Partners Letter, at 5. Similarly,
another commenter stated that ‘‘the ‘give-to-get’
model is not the only model for commercial data
for securities lending.’’ See Citadel Letter, at 8.
753 See supra Part IX.A.2 for a description of the
give-to-get model of data collection.

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functions.754 The Commission believes,
based on conversations with industry
participants and our staff’s use of some
of the data, that the coverage and
timeliness of the three biggest give-toget Wholesale data vendors are roughly
comparable.755
Other commercial data vendors
provide a different approach to
securities lending data by surveying
asset managers and others in the
Customer segment of the market about
their borrowing experience, such as
their costs to borrow, from which they
provide estimates of lending fees.756
One commenter stated that the
Commission ‘‘offers no reason to believe
that the [Customer market] survey and
‘give-to-get’ data are materially
different.’’ 757 Customer market survey
data have some characteristics that
make them distinct from the give-to-get
data provided by the vendors of
Wholesale market data discussed above.
First, Customer market survey data
vendors generally aggregate information
from respondents in the Customer
market—that is, the end borrowers that
engage in securities borrowing to
facilitate short selling—and thus cover a
different segment of the securities
lending market.758 Second, while
Wholesale market data are mostly
available only on a restricted basis,
Customer market survey data are
generally available to any purchaser.
However, despite these differences,
Customer market survey data face a
similar issue to the give-to-get data, in
that they only contain information about
the subset of those end borrowers that
choose to provide data. Since it is
unlikely that the full universe of lending
programs and borrowers contribute all
data to any given data vendor, the
Commission believes that both give-to754 For example, some data providers retain the
right to review and reject any use of the data at their
own discretion.
755 See infra note 812 for evidence of this from
the academic literature. The Commission expressed
this belief in the Proposing Release (See Proposing
Release, 86 FR 69832) and specifically requested
comment regarding the baseline of the economic
analysis as well as specific comment about ‘‘sources
of insight’’ into securities lending activity (See
Proposing Release, 86 FR 69849, questions 77 and
78). The Commission did not receive comment on
this point and thus continues to believe that the
data from the three biggest give-to-get Wholesale
data vendors are roughly comparable.
756 See Garango 2020, supra note 712.
757 See Citadel Letter, at 8.
758 For reasons below infra note 769, there is
uncertainty regarding the strength of the correlation
between Wholesale and Customer borrowing costs,
particularly for stocks that are not hard-to-borrow.
Therefore, it is unclear whether customer survey
data could be used to glean information about the
Wholesale market.

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get and Customer market survey data
lack comprehensiveness.
Furthermore, as stated in the
Proposing Release and restated here, the
Commission believes that the give-to-get
data are likely biased due to nonrandom omissions that result from the
voluntary nature of data submissions.759
The Commission also believes that,
since Customer market survey data are
also based on voluntary submissions,
these data also suffer from bias due to
non-random omissions. As will be
further detailed below, data based on
voluntary submissions can contain
biases because market participants that
choose not to disclose their data likely
make that choice because it is in their
strategic interest not to disclose,
resulting in non-random omissions.
One commenter stated that the
Commission’s statements in the
Proposing Release that give-to-get data
could be systematically biased has ‘‘no
basis beyond mere speculation.’’ 760 The
Commission disagrees. It is true that it
is not possible to empirically analyze or
quantify the extent of this bias using
existing data because there currently
does not exist a complete dataset with
which to compare the existing data, and
comparing a biased sample to an
unbiased sample is generally the only
data-based means of determining the
extent of the bias in a non-random
sample. Instead, the determination that
data are likely to not contain a
representative sample is routinely made
in economic studies (as well as data
analysis generally) based on an
understanding of how the sample is
created, which alone can be sufficient to
determine the likely validity of the
sample. The fact that non-random data
omissions result in biased data is well
established in statistics and data
science, and simply stems from the logic
that, if the reporting subsample is
systematically different from the
population, then statistics based on the
reporting sample will only reflect the
reporting sample, and will not be
reflective of the whole population.761
In the context of commercial
securities lending datasets, the
759 See

Proposing Release, 86 FR 69832.
Citadel Letter, at 8. Similarly, another
commenter asked for an assessment of the current
accuracy of existing data; See S3 Partners Letter, at
4. However, neither commenter provided any
supplemental analysis challenging the assumption
of non-random omissions, nor did they provide
additional insight into the nature of any bias.
Neither did either commenter provide a pathway to
overcoming obstacles related to such an empirical
analysis.
761 See, e.g., James J. Heckman, Selection Bias and
Self-Selection, in ECONOMETRICS, 201–224 (John
Eatwell, et al., eds., Palgrave Macmillan, London
1990) (‘‘Heckman (1990)’’).
760 See

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Commission believes that, because
market participants can choose whether
or not they want to contribute data to
commercial datasets,762 it is likely that
the sample of securities lending data
that is reported to commercial data
vendors is, on average, different from
the sample that is not reported. As such,
there are well-established theoretical
reasons as to why these data are likely
biased. These reasons are largely based
on the fact that market participants that
voluntarily contribute data to
commercial datasets ‘‘self-select’’ the
data that they would like to be included
in the dataset. The practice of having
entities under study ‘‘self-select’’ into
the dataset used to study them is widely
acknowledged in the empirical
economics literature to be very likely to
lead to biased data.763 This is because
the incentives to provide data are likely
connected to the incentives that drive
the behavior under study, such that the
behavior of those market participants
that do contribute data are likely to be
systematically different from the
behavior of those that do not contribute.
Trying to draw inferences from such a
dataset about the entire population of
market participants would thus result in
a biased view of the market.
The Commission has identified
examples of such incentives that would
likely introduce such ‘‘self-selection
biases’’ into commercially available
securities lending datasets. First, there
may be competitive reasons for market
participants to selectively choose which
loans to contribute to a securities
lending dataset. For example, to attract
more beneficial owner customers,
lending programs would like their
average terms to appear better than the
benchmark average terms. Thus, they
are incentivized to voluntarily
contribute information about their
lending activity for loans with higherthan-average borrowing costs—skewing
the average cost to borrow in the
resulting dataset up and making the
lender’s performance appear better than
it actually was.764 This could lead the
762 See infra of this part for a discussion of
investors’ incentives related to voluntarily
contributing data to commercial datasets, and why
this may result in systematic differences between
those that choose to contribute as compared to
those that do not.
763 See Heckman (1990), supra note 761.
764 One commenter stated that lending agents
frequently provide their clients with benchmark
reports based on market data, and that beneficial
owners currently benefit from substantial
information obtained from lending agents. See RMA
Letter, at 2; see also supra note 721 and infra note
772 and corresponding text. However, even if this
is the case, many beneficial owners do not have
access to securities lending data, particularly giveto-get Wholesale data, and so could likely not
independently benchmark transactions.

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reported borrowing costs in commercial
datasets to be systematically higher than
the actual borrowing costs in the
securities lending market.765
Similarly, some market participants
may choose not to voluntarily
contribute data to securities lending
datasets for their own strategic reasons,
such as a desire to keep their activity
private. The decision to not to
participate is, in itself, indicative that
such market participants are likely not
reflective of those who do choose to
participate. For example, market
participants that choose not to
contribute data may be more likely to be
sophisticated investors with greater
incentives to protect their trading and
hedging strategies. This matters because
the terms of securities loans are
influenced by the characteristics of the
parties involved,766 and so it follows
that the borrowing costs for market
participants that do not voluntarily
contribute data are systematically
different than the borrowing costs for
market participants that do contribute
data.
In addition to the issue of selfselection bias, currently there is no
securities lending dataset that contains
information about both the Customer
and Wholesale segments of the market.
The give-to-get datasets lack significant
coverage of the Customer segment of the
market, while the Customer market
survey data lack significant coverage of
the Wholesale segment of the market.767
765 Note that the reverse could also be true, as
lenders, in order to attract more customers in the
market for borrowers, may be incentivized to
voluntarily contribute information about loans with
lower-than-average borrowing costs, which would
skew the average cost to borrow downwards.
Ultimately, the Commission is not able to determine
the potential direction of the self-selection bias,
which could also vary over time. This would
complicate any attempt to adjust for the bias when
performing analyses on the data.
766 See infra Part IX.B.3 for further discussion of
the factors that influence the prices of securities
loans.
767 One industry publication noted in an
interview with a market participant engaged in
Wholesale market lending that they feel unable to
benchmark the performance of their lending
programs using commercial data because they have
very little insight into the Customer market. See,
e.g., Bob Currie, The Power of Reinvention, Sec. Fin.
Times (Aug. 31, 2021), at 20, available at https://
www.securitiesfinancetimes.com/sltimes/SFT_
issue_285.pdf, interviewing Matthew Chessum,
who stated that ‘‘as a lender, we monitor fees paid
to us by the agent, but we only see one side of the
trade. We have no sight of the pricing paid by a
hedge fund or prime broker, for example, when they
borrow those securities.’’ One commenter
questioned the applicability of this citation and
stated their opinion that, ‘‘[t]hat a single person
would like to see certain data is not evidence that
requiring the disclosure of that data is worth the
massive cost,’’ the commenter also states that ‘‘the
Commission neglects to estimate the number of
market participants that are seeking the same
disclosure’’ (see Citadel Letter, at 10). The

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While some, but not all, market
participants could potentially gain
access to data on both the Wholesale
markets and Customer markets by
subscribing to both give-to-get and
Customer market survey datasets, this
would generally be possible only for
market participants that contribute data
(and thus have access) to give-to-get
datasets and would also not surmount
the problems of incomplete or
potentially biased data. Different types
of data may also be cumbersome to
combine.768 There are also limitations to
using the Customer market survey data
to assess conditions in the Wholesale
market.769 Furthermore, the need to
subscribe to multiple datasets increases
market participants’ overall costs of data
access.770
As an additional source of securities
lending data, some market participants
that have many connections within the
securities lending market, such as large
broker-dealers and lending programs,
can query other market participants
directly about current conditions. These
centrally connected market participants
are also likely to have access to both
give-to-get Wholesale data and customer
Commission received numerous comment letters
from industry members and organizations
expressing support for the public disclosure of
securities lending data. See, e.g., Nasdaq Letter, at
1–2; AFREF Letter 1, at 1; Better Markets Letter, at
1; NYSE Letter 1, at 1–2; ASA Letter, at 1; and
Morningstar Letter, at 2; The Commission also
received letters from academics and individuals
supporting additional transparency. See, e.g., James
J. Angel Letter, at 1; Letter from Carl Nyborg (Dec.
15, 2021), at 1; Letter from Eric Olsen (Jan. 24,
2022); Letter from Scott Clark (Jan. 22, 2022).
768 For example, commercial data vendors often
convert rebate rates (for cash collateralized loans)
into fees, in order to combine with information
about lending fees for non-cash collateralized loans
and cash collateralized loans; see, e.g., infra note
786. Different commercial data vendors may use
different methodologies for this conversion, which
would make it difficult to combine and compare
information about borrowing costs across different
datasets.
769 Borrowing costs in the Customer market are
often contractually negotiated in the brokerage
agreement between a customer and their brokerdealer. It is common for these brokerage agreements
to stipulate a fixed rate for general collateral stocks
and some predetermined process to determine rates
for stocks on special, such as referencing Wholesale
market rates plus some mark-up. For this reason,
there is uncertainty regarding how strong the
correlation might be between Wholesale and
Customer borrowing costs, particularly for general
collateral stocks.
770 One commenter stated that, ‘‘while the
Proposal stated that purchasing multiple vendor
systems is expensive, there was no quantification of
actual vendor costs. Nor was there data provided on
how many firms actually use multiple vendors’’
(see S3 Partners Letter, at 4). The Commission
cannot provide such analysis because we do not
have, and commenters did not provide, typical
costs paid to vendors for such data. The
Commission understands that such pricing is
dynamic and individualized, and is generally not
aware of publicly available price lists or client lists.

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market survey data. Consequently, the
largest and most centrally connected
broker-dealers and lending programs
likely have access to better information
about the current state of the lending
market than other participants,
including their customers, the beneficial
owners, and end borrowers. This
asymmetric information between those
on the periphery of the lending market
and those in the center, who have access
to both Wholesale and Customer market
commercial datasets as well as queried
data from their connections, may lead to
inferior terms for those on the periphery
in the form of lower performance and
less favorable prices for beneficial
owners and end borrowers.771 Because
of the above-described issues with the
comprehensiveness and accessibility of
existing commercial datasets, the
availability of commercial data products
for the securities lending market does
not alleviate this information
asymmetry.
One commenter disagreed with the
Commission’s view that there are
information asymmetries between those
in the center of the lending markets and
beneficial owners and borrowers on the
periphery, because beneficial owners
benefit from the information obtained
by their lending agents.772 However, the
Commission believes that, even if
lending agents provide beneficial
owners with benchmark reports based
on commercial securities lending data,
this would not eliminate all information
asymmetries. The lending agent, or
other centrally located entity, has access
to the raw data, as well as the potential
to influence that data through their own
contributions of data to commercial data
vendors, whereas the beneficial owner
would need to rely on a subset of the
processed data that their lending agent
chooses to provide to them, if any.
In addition to the specific problem of
information asymmetry between various
market participants, the lack of
comprehensive and widely available
data on securities lending activity likely
means that the prices at which
771 For example, broker-dealers acting on behalf
of customers have an incentive to lend from their
inventory, even if lower cost borrowing options
exists, because they keep the whole lending fee in
such a transaction. The limited data available to the
end borrower about the state of the lending market
make it difficult for the end borrower to monitor the
performance of its broker-dealer for situations like
this.
772 See RMA Letter, at 6 (stating ‘‘[w]hile the
Proposing Release repeatedly asserts that
information asymmetries exist between those ‘in the
center’ of the lending markets and beneficial
owners and borrowers on the ‘periphery,’ in point
of fact beneficial owners currently benefit from
substantial information obtained by Lending Agents
acting on their behalf and pricing remains highly
competitive’’).

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securities loans take place are not
efficient, relative to the hypothetical
case in which complete information
about securities lending activity were
widely available. Asymmetric
information in general deters outsiders
from entering the market, as they
anticipate not being able to transact on
the same terms. This limits both
liquidity (because fewer participants
enter to transact) and price discovery
(because not all information enters
prices). Moreover, even lenders with
many connections in the securities
lending market lack a complete picture
of the lending market, implying that the
loan prices that they quote may not be
completely efficient.
Commenters stated that the lending
market for U.S. Government securities is
already transparent ‘‘because there is
sufficient liquidity and demand for
loans of these types of securities on
platforms and venues that have a high
degree of transparency.’’ 773 However,
the commenters did not provide
additional explanation as to why a high
degree of liquidity would entail a
transparent market, or additional details
regarding the transparency of the
platforms and venues that trade in U.S.
Government securities.
The Commission believes that
information asymmetries may still be
present in the lending market for U.S.
Government securities. Some
information about U.S. Government
securities loans is available from the
commercial securities lending datasets
described above. In addition, the
Commission understands that
information about loans of U.S.
Government securities that are awarded
to primary dealers through the Federal
Reserve Bank of New York’s System
Open Market Account (SOMA) portfolio
is available from the Federal Reserve
Bank of New York.774 While volume
773 See,

e.g., RMA Letter, at 16; IIB Letter, at 6.
its System Open Market Account
(SOMA) portfolio, the Federal Reserve Bank of New
York awards U.S. Government securities loans to
primary dealers (i.e., financial institutions that are
permitted to trade directly with the Federal Reserve
System) that have elected to participate in the
program based on competitive bidding in a multiple
price auction held each business day at noon.
Participation by primary dealers is entirely
voluntary and summary results are released to the
public following each day’s auction. See Fed. Res.
Bank of N.Y., ‘‘Securities Lending,’’ available at
https://www.newyorkfed.org/markets/domesticmarket-operations/monetary-policyimplementation/securities-lending, last visited Aug.
23, 2023. For a list of current primary dealers, see
https://www.newyorkfed.org/markets/
primarydealers. These data include both daily and
historical data on aggregate volumes and rates, as
well as transaction-by-transaction data
disseminated with a two-year lag. The latter dataset
contains identifying information for the security
lent (e.g., CUSIP), as well as the lending fee,
774 Through

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75699

and rate information from these
auctions may be informative to
participants about benchmark lending
rates, these data do not contain
information about activity in the
broader U.S. Government securities
lending market. Furthermore, certain
aggregate data from the Federal
Reserve’s FR 2004 reports, which collect
weekly and daily position, transaction,
financing, and fails data of primary
dealers in U.S. Government securities
and other selected fixed income
securities, are published in the Federal
Reserve Bank of New York’s press
release, ‘‘Weekly Release of Primary
Dealer Transactions.’’ 775 This dataset
contains aggregate volume information
about securities lent and borrowed by
primary dealers. It does not contain
information about lending rates, and
also does not contain information about
the U.S. Government loans of market
participants other than primary dealers.
Furthermore, some market
participants may be able to infer some
information about the securities lending
market from the market for repos; 776
this is particularly the case for securities
with a very active repo market, such as
U.S. Government securities. A fixedcollateral amount, and the identity of the
counterparty, see Fed. Res. Bank of N.Y.,
‘‘Historical Transaction Data,’’ available at https://
www.newyorkfed.org/markets/omo_transaction_
data, last visited Aug. 23, 2023.
775 The Federal Reserve’s weekly Form FR 2004
provides weekly volume statistics about primary
dealers’ financing activity in U.S. Government
securities, including aggregated volumes in
securities lending and repo. See Fed. Res. Bank of
N.Y., ‘‘Primary Dealer Statistics,’’ available at
https://www.newyorkfed.org/markets/
counterparties/primary-dealers-statistics, last
visited Aug. 23, 2023.
776 In a repo, one party sells an asset, usually a
Treasury security or other fixed-income security, to
another party with an agreement to repurchase the
asset at a later date at a slightly higher price. Repos
are a common form of short-term corporate
financing. In a repo, the party selling the security
is similar to the lender in a securities lending
agreement; the party purchasing the security is
similar to a borrower in cash collateralized
securities lending. In both cases, the transaction is
facilitated by cash transferring from the purchaser
(borrower) to the seller (lender). In a securities loan,
the cash is in the form of collateral while in a repo
transaction the cash is payment for the security. In
both cases, the purchaser or borrower becomes the
legal owner of the security. To unwind the repo or
securities loan, cash transfers back to the purchaser
in terms of the repurchase cost for a repo or in the
form of returned collateral in a securities loan.
Repos and securities loans differ in that repos
typically are primarily used for short-term financing
while securities loans typically are used to gain
access to the security itself. Also loans generally
allow the lender to recall the security on demand
while repos do not. Additionally, the cash received
by the seller of a repo is often not re-invested but
is used to finance the operations of a company
whereas the cash received in a securities loan is
generally re-invested in low risk fixed-income
securities for the life of the loan. See, e.g., Gary
Gorton & Andrew Metrick, Securitized Banking and
the Run on Repo, 104 J. Fin. Econ 425 (2012).

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term cash collateralized securities loan
is economically similar to a repo.
Consequently, an investor wishing to
gather information about fixed-term
loans in the securities lending market
could use prevailing terms in the repo
market to infer information about
borrowing costs for the same securities.
However, as majority of securities loans
do not have a fixed term,777 information
from the repo market would only be
useful for a small subset of securities
loans.
3. Characteristics of the Securities
Lending Market
The value of securities available to be
loaned generally far exceeds the total
value on loan. The OFR Pilot Survey
documents that in 2015 only about 10
percent of the value of securities
available for lending were on loan.778
However, for a specific security it is not
always the case that shares available to
loan far exceeds shares on loan. For
some securities, particularly highly
shorted securities, it can be extremely
difficult and expensive to find securities
to borrow. Securities that are difficult to
borrow are said to be ‘‘on special’’ and
can have average borrowing costs many
times higher than a security that is not
on special.779
Securities loans also exhibit a wide
range of borrowing costs for the same
security on the same day. The range of
borrowing costs for the same security
can be influenced by a number of
characteristics, such as the
creditworthiness of the borrower, the
type of collateral used, and the terms of

the loan.780 As discussed in further
detail below, the range of borrowing
costs likely also represents asymmetric
information between the parties to the
loan negotiation, such that one party is
able to charge a higher price than would
be possible if the other party had better
information regarding the current loan
prices for that security.781 It may also
represent a general lack of price
efficiency stemming from incomplete
information, as market participants
operate without a clear view of the
market as a whole.
Table 1 provides descriptive statistics
illustrating these characteristics of the
securities lending market. The data
come from Fidelity National
Information Services, Inc. (FIS) and
reflect conditions in the Wholesale
market for U.S. equity loans on the same
days as the OFR Pilot Survey,782 for the
sample of lenders that provide data to
FIS.783
Panel A of Table 1 provides the
distribution of utilization rates (defined
as the percent of shares currently on
loan relative to the total number of
shares available for lending). This panel
highlights that utilization rates are
highly positively skewed. For most
stocks supply significantly outstrips
demand with median utilization rates of
approximately 12 percent. For stocks at
the 90th percentile, utilization rates are
near 70 percent, implying that an
investor seeking to find shares of such
a stock to borrow may have a difficult
time doing so.
Table 1 only presents utilization rates
for equity lending transactions.

However, at least one commenter states
that utilization rates vary significantly
across asset classes, stating that data
from the OFR Pilot Survey show that
utilization rates are lower for more
individualized securities, such as
corporate bonds.784 Meanwhile,
referencing the OFR Pilot Survey, the
commenter pointed out that the
utilization rate for U.S. Treasuries and
agencies is higher than that of
equities.785
Panel B of Table 1, which presents
borrowing costs in term of lending
fees,786 shows that the lending fees paid
for equity loans exhibit a wide range.787
Stocks that are on special can have fees
many times higher than the median
stock. Specifically, stocks at the 90th
percentile of lending fees have an
average lending fee of 7 percent per year
while the median stock has a lending
fee of about 0.6 percent per year. Even
when loans involve the same stock, and
on the same day, there can be a
significant range in fees paid to borrow
securities.
Panel C of Table 1 highlights the
range of lending fees charged for the
same stock on the same day. The range
in fees is defined as the difference in the
maximum and minimum fees reported
to FIS for loans of the same stock on the
same day. This range can be quite
substantial. For the median stock the
range is about three percentage points,
or approximately five times the median
fee charged for securities lending
transactions.

TABLE 1—DISTRIBUTION OF LENDING FEES FOR U.S. COMMON STOCKS *
p10

p20

p30

p40

Median

Mean

p60

p70

p80

p90

17.21

24.83

39.35

68.98

N

Panel A: Distribution of Utilization Rates

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777 The OFR Pilot Survey (supra note 136, at 9)
estimates that 81% of the loans in their data were
open loans for which no maturity date is specified.
778 See OFR Pilot Survey, supra note 136. Note
that the number of shares available for loan must
be interpreted carefully. The Commission
understands that some beneficial owners may
report a supply of shares available that, if borrowed,
would exceed the total amount of securities lending
they are willing to engage in, so that not all shares
reported as available could in fact be borrowed at
once. Investment companies that engage in
securities lending consistent with SEC staff’s
current guidance generally limit securities lending
to no more than one third of the value of their
portfolio on loan at a given point in time. Some
investment companies may set individual portfolio
limits lower.
779 In contrast, easy-to-borrow stocks are often
referred to as ‘‘general collateral’’ stocks, which
tend to have lower borrowing costs.

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2.94

5.42

8.28

12.06

22.70

780 See supra note 732 for additional factors
pointed out by commenters that could be important
drivers of borrowing costs.
781 See supra Part IX.B.2 for a discussion of
information asymmetries in the securities lending
market, specifically between end borrowers and
broker-dealers and between beneficial owners and
lending programs. See also supra note 771 for an
example.
782 We limited our sample to the same period of
time as the OFR Pilot Survey (Oct. 9, 2015, Nov.
10, 2015, and Dec. 31, 2015) for ease of comparison.
Additionally, while the data presented here is
limited to equity loans, final Rule 10c–1a applies
to loans of both equity and fixed-income securities.
The Commission believes that there is a similar lack
of transparency for fixed-income loans and equity
loans, and thus the same economic structure likely
applies to both the fixed-income and equity lending
markets.
783 FIS data are collected using a give-to-get
model and thus is unavailable for many entities
other than those that provide their data to FIS.

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784 The commenter states that ‘‘the corporate and
asset-backed debt markets in particular are
characterized by relatively small issuance sizes and
substantial differences in instrument
characteristics,’’ and that ‘‘while the number of
publicly traded equity securities of U.S. issuers is
around 3,600, there are over two million unique
issuances of corporate and government bonds and
asset-backed securities in circulation.’’ See RMA
Letter, at 16.
785 See RMA Letter, at 16.
786 FIS converts rebate rates to fees using by
subtracting the rebate rate from the Federal funds
rate. See supra note 731 and the footnote of Table
1.
787 This result is consistent with the academic
literature. See, e.g., Dixon, et al., (2021), supra note
746. Also consistent with the academic literature,
average fees for each stock each day are computed
by FIS as the share weighted average fee across all
loans outstanding reported to FIS for a given stock
on a given day. Stocks are sorted by average fee and
percentiles are determined.

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TABLE 1—DISTRIBUTION OF LENDING FEES FOR U.S. COMMON STOCKS *—Continued
p10
10–Nov–15 .......................................
31–Dec–15 .......................................

I

0.94
0.75

p20
2.82
2.35

I

p30

I

p40

5.18
4.52

I

Median

8.19
7.31

I

11.72
11.17

Mean

I

22.51
22.25

p60

I

16.87
16.49

p70

I

24.59
25.02

p80

I

38.59
40.42

p90

I

68.10
67.64

N

I

3,638
3,639

Panel B: Distribution of Average Lending Fees
9–Oct–15 ..........................................
10–Nov–15 .......................................
31–Dec–15 .......................................

I

0.48
0.47
0.37

0.56
0.56
0.46

I

I

0.58
0.59
0.5

I

0.6
0.61
0.54

I

0.65
0.66
0.58

I

3.76
3.77
3.86

I

0.76
0.77
0.66

I

1.24
1.32
1.12

2.62
2.76
2.77

7.07
7.36
7.51

3,727
3,725
3,725

5.21
5.51
4.20

7.76
7.73
6.36

10.41
11.16
11.41

3,727
3,725
3,725

Panel C: Distribution of Range of Lending Fees
9–Oct–15 ..........................................
10–Nov–15 .......................................
31–Dec–15 .......................................

I

1.01
0.93
1.15

1.35
1.31
1.48

I

I

1.85
1.81
1.84

I

2.27
2.36
2.25

I

2.85
2.98
2.68

I

8.42
8.39
8.20

I

3.57
3.78
3.43

I

I

I

I

* This table provides descriptive statistics using data from FIS on securities lending fees and utilization rates for U.S. Common stocks during
sample period that matches the OFR Pilot Survey’s sample dates (Oct. 9, 2015, Nov. 10, 2015, and Dec. 31, 2015). For loans collateralized by
cash, rebate rates are converted to fees using the conventional method of subtracting the rebate rate from the Federal funds rate. Fees are converted to annual percent. N reports the number of observations from which FIS has reported the relevant statistics. Panel A shows the distribution of utilization rates, where the utilization rate is computed as the percent of shares on loan relative to total shares available for lending. Panel
B provides estimates of the distribution of average lending fees for each stock and provides percentile thresholds for lending fees. Since there is
a distribution of fees levied for the same stock on the same day, the average fee is computed as the value weighted average fee across all loans
for a given stock on a given day. Panel C shows statistics for the range of fees levied for the same stock on the same day defined as the maximum fee minus the minimum fee. In all panels ‘Mean’ is equal-weighted.

One commenter argued that the
Proposing Release offered ‘‘no evidence
to suggest that lending fees brokerdealers charge are so meaningfully
different (after controlling for various
commercial factors).’’ 788 As the
Commission acknowledged in the
Proposing Release and continues to
acknowledge here, there are a number of
factors that can drive variations in
borrowing costs including, e.g., the
creditworthiness of the borrower.789
However, the Commission is unaware of
the existence of data that would allow
for a full analysis of all possible factors
contributing to borrowing costs, and the
commenter did not provide any
roadmap for performing such an
analysis accurately. That the observed
range in borrowing costs is likely
driven, at least in part, by asymmetric
information and a general lack of price
efficiency in the securities lending
market is supported by academic
literature, which finds that asymmetric
information drives dispersion in prices,
particularly in opaque markets with
limited transparency.790 One
788 See

Citadel Letter, at 10.
Proposing Release, 86 FR 69833.
790 See, e.g., Richard C. Green, Presidential
Address: Issuers, Underwriter Syndicates, and
Aftermarket Transparency, 62 J. Fin. 1529 (2007),
whose theoretical model shows that, in opaque
dealer markets, if the costs of gathering price
information are high for some investors, this can
result in price dispersion. One key feature of this
model is that ‘‘the dealings of a particular customer
with a dealer are not transparent to other
customers,’’ at 1542. See also Richard C. Green, et
al., Dealer Intermediation and Price Behavior in the
Aftermarket for New Bond Issues (EFA 2006 Zurich
Meetings Paper, June 17, 2006) 86 J. Fin. Econ 643,
available at https://ssrn.com/abstract=909352
(retrieved from SSRN Elsevier database), who argue

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implication of the results from this
literature is that price dispersion should
be higher when transparency is lower.
Indeed, there is evidence that the
dispersion in borrowing costs is higher
in securities lending markets with less
transparency, in which information
asymmetry is expected to be higher. For
example, the OFR Pilot Survey shows
that the range of lending fees is higher
in the U.S. equity lending market than
it is in the U.S. Treasury/Agency
lending market, where transparency is
arguably higher.791
Furthermore, the Commission views it
as unlikely that one of the pricing
factors frequently mentioned by
commenters, namely the
creditworthiness or counterparty risk of
the borrower,792 can fully explain the
large range in borrowing costs. Table 1
shows that the median range of fees is
about 400 percent larger than the
median fee itself—implying that some
investors were paying at least four times
as much to borrow the same security on
that differences in investors’ access to information
about municipal bond prices leads to a high level
of price dispersion.
791 Specifically, using data from Table 8 of the
OFR Pilot Survey and defining the range in lending
fees as the difference between the 95th percentile
and the 5th percentile, the range in lending fees,
averaged across the three days in the OFR Pilot
Survey sample, is around 303% of the mean
lending fee in the equity lending market, and 234%
of the mean lending fee in the Treasury lending
market. See supra Part IX.B.2 for further discussion
of why transparency may be higher in the Treasury
lending market.
792 See, e.g., HMA Letter at 2, Overdahl Letter at
6, and ISLA Letter at 2.

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the same day as other investors.793
Based on staff experience, securities
loans are virtually always fully
collateralized, and so counterparty risk
is unlikely to be sufficient to explain
such a large dispersion in borrowing
costs.
Other commenters expressed support
for the notion that price dispersions in
the securities lending market were due
to information asymmetries and a lack
of informational efficiency.794 While at
least one commenter questioned the
need to improve transparency in the
corporate bond and U.S. Treasury/
Agency lending market due to structural
differences between those markets and
the equity market,795 there is evidence
that there is a dispersion of borrowing
costs within these asset classes as well.
Information from the OFR Pilot Survey
indicate a large dispersion of lending
fees and rebates across all asset classes,
including for U.S. Treasury/Agency and
corporate bond securities.796 For the
reasons discussed above, the
Commission believes that the observed
variation in borrowing costs in these
793 The OFR Pilot Survey at Table 8 provides
similar statistics and finds similar dispersion for
U.S. Equities.
794 See, e.g., James J. Angel Letter, at 2 (expressing
his belief that the increased transparency of the rule
would reduce price dispersion in the securities
lending market implying that a lack of transparency
currently causes some of the currently experienced
dispersion in fees).
795 See RMA Letter, at 16.
796 See Table 8 and Table 9 in the OFR Pilot
Survey which shows, for example that on October
9, 2015, the dispersion between the 5th and 95th
percentile fee for treasuries was 200% of the mean
fee, for corporate bonds it was 111%, and for
equities it was 319%.

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markets is likely also at least partially
driven by asymmetric information and a
general lack of price efficiency in the
securities lending market.
4. Structure of the Securities Lending
Market
The securities lending market is made
up of borrowers, lenders, and
intermediaries that can facilitate a
transaction. End borrowers can borrow
securities either through their brokerdealers, or by themselves if they
maintain their own relationships with
lending programs. If they borrow
through their broker-dealer, then they
transact in the Customer market. If they
maintain their own relationships and
borrow directly from lending programs,
then they transact in the Wholesale
market.797 Beneficial owners can either
supply shares to the lending market by
contracting with a lending program, or
they can run their own lending program
and lend directly to entities such as
large hedge funds with which they
maintain relationships. In either case,

such a transaction occurs in the
Wholesale market. Lenders can also be
broker-dealers who lend to end
borrowers. These lenders transact in the
Customer market.
A market participant such as a short
seller wishing to borrow shares usually
does so through its broker-dealer, who
offers to find shares to borrow as part of
its suite of services offered to customers.
A broker-dealer may start by providing
a security loan to its customer with
shares from its own inventory or out of
another customer’s margin account.798
The Commission understands that in
order to facilitate the amount of
borrowing customers wish to do, a
broker-dealer will sometimes have to
find other sources of shares. To that
end, broker-dealers maintain securities
lending relationships with customers in
fully paid accounts as well as
relationships with various external
lending programs.
Additionally, some large institutions,
such as banks, credit unions, pension
funds, and hedge funds, choose to

maintain their own relationships with
lending programs. These entities bypass
broker-dealers to search for borrowable
shares themselves. This option is not
feasible for smaller institutions, who
lack both the scale to make it cost
effective, and the creditworthiness to be
an acceptable counterparty for the
lending programs in the absence of an
intermediary, e.g., a broker-dealer.
The OFR Pilot Survey estimated that
there were approximately $1 trillion of
shares on loan.799 The OFR primarily
focused on the Wholesale market, and
consequently the overwhelming
majority of borrowers were brokerdealers; the OFR Pilot Survey does not
provide much insight into who the end
borrowers are for securities lent by
broker-dealers. Figure 1 provides the
fraction of total securities on loan by
type of borrower based on the OFR Pilot
Survey across three trading days in
2015.800

Figure 1 Fraction of shares on loan by borrower type (2015)
Sate pemion fund.I
1%

Ba•bl Credit
Unions
.14~

There is currently no common source
that those seeking security loans can use
to find shares available to lend, which
is why broker-dealers rely on
relationships with lending programs to
secure loans. This situation has
797 See supra note 708 for further discussion of
the distinction between Wholesale and Customer
loans.
798 The notion that broker-dealers will first source
shares from internal inventory before accessing
lending markets was mentioned in the Proposing

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contributed to high search costs in this
market.801 High search costs imply that
transactions cannot take place without a
costly effort to find a favorable
counterparty. The need for such costly
effort can inhibit market efficiency.
One commenter stated that the level
of opacity in the securities lending
Release (see Proposing Release, 86 FR 69834) and
was supported by at least one comment. See, e.g.,
James J. Angel Letter, at 4 (stating that if ‘‘the broker
has shares available for lending from its customer
margin accounts, it does not need to go out and
borrow any more shares.’’).

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market does not lead to high search cost
or inhibit the efficiency of the securities
lending market, because the level of
detail in data provided by data vendors
has improved drastically, the number of
data vendors in the market has been
growing, and the vast majority of parties
in securities lending markets have
799 See

OFR Pilot Survey at Table 1.
dates are Oct. 9, 2015, Nov. 10, 2015,
and Dec. 31, 2015.
801 See, e.g., Kolasinski (2013), supra note 736.
800 These

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
access to one or more sources of data.802
While these facts are generally
associated with declining search costs
and increased efficiency, they do not, by
themselves, imply low search costs or
an efficient market. As discussed above,
the Commission continues to believe
that the datasets provided by
commercial data vendors are
characterized by incomplete and
potentially biased data.803 As a result,
market participants that want
information on whether a given loan
price or quote is competitive, or how a
given lending agent or broker-dealer is
performing relative to a benchmark, may
need to consult multiple datasets, if
they have access to such data, or request
and receive multiple quotes in order to
confirm that a given quote is consistent
with market conditions. A need to
consult multiple sources of information
implies high search costs. When the cost
of acquiring additional information is
high, it may not be economical to
acquire the information, resulting in less
efficient terms for loans. The Proposing
Release also cited academic research
characterizing the securities lending
market as having high search costs,
which was not rebutted by the
commenter.804 Consequently, the
Commission continues to believe that,
despite the availability of commercial
datasets, opacity in the securities
lending market contributes to high
search costs and inefficiencies in that
market.805
Broker-dealers possess some market
power over their customers. Generally,
broker-dealers assist investors in finding
shares to borrow as part of a suite of
services and the cost of switching to a
new broker-dealer can be high. This
relationship can make it difficult for
investors to change broker-dealers if
they underperform in one area because
it is not just a securities lending
relationship that would be changed, but
the whole suite of broker-dealer services
that would be affected.806
Additionally, the relationship nature
of the lending market favors larger

802 See

IHS Markit Letter, at 13.
supra Part IX.B.2 for further discussion of
issues related to the current availability and
comprehensiveness of securities lending data.
804 See Kolasinski (2013), supra note 736, cited in
the Proposing Release with regard to search costs.
See Proposing Release, 86 FR 69805, 69831, and
69832.
805 See discussion on this point in supra Parts
IX.B.2 and IX.B.3.
806 Some entities, such as some hedge funds, have
multiple prime brokers. For such institutions it

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75703

broker-dealers who can maintain highvolume relationships with more lending
programs. The limited availability of
comprehensive data makes it difficult
for customers to evaluate the
performance of broker-dealers.807
Customers as well as lenders thus rely
on relationships and reputation, a
situation that also tends to favor larger
broker-dealers.
The primary sources of shares to loan
in the Wholesale market are long-term
investors such as investment firms,
pension and endowment funds,
governmental entities, and insurance
companies. These entities generally
make their shares available to lend
either through a lending program run by
a lending agent or by running their own
lending program. Broker-dealers borrow
shares from lending programs in order
to facilitate clearing and settlement on
a net-basis, though they may
additionally source shares for this
purpose from their own inventory, from
fully paid shares, and from customer
margin accounts.808
As described above, a beneficial
owner seeking to lend shares will
generally provide those shares to a
lending agent, who runs a lending
program. There are two broad categories
of lending programs: custodian banks
and third-party lending programs. In the
case of custodian banks, the lending
program is generally offered as part of
their general custodian services.
Both types of lending programs will
generally pool shares across accounts
with which they have lending
agreements to create a common pool of
shares available to lend. As shares are
lent out, the revenue earned from the
pool of shares is generally distributed
across all accounts contributing shares
to the pool of shares on loan on a prorata basis. Pooled lending programs
generally split the fees generated from
lending with the beneficial owners.
Based on the staff’s experience, the
Commission believes that the lending
program will usually take about a third
of the fees earned. In the case of

custodian banks, the custodian bank
may, rather than return the lending
revenue directly to the beneficial owner,
instead apply the beneficial owner’s
portion of the lending revenue to other
fees charged by the custodian bank for
other services.
Lending programs typically
indemnify the beneficial owner from
default by the borrower. This indemnity
gives the lending program an incentive
to ensure the creditworthiness of the
borrower, and a lending program may
assess higher fees to borrowers it deems
as less creditworthy.
Over the past two decades, auctionbased security lending has become an
alternative for lender-borrower
interactions. In this setting, unlike with
the directed lending programs, positions
of different beneficial owners are not
pooled to cater to security-specific
demand from borrowers. Instead, after
determining the desired income
streams, the lender’s entire portfolio, or
its segments, are offered via blind
single-bid auctions.
In some cases, a beneficial owner may
choose to set up its own lending
program. This course is more common
among very large funds that have the
resources to build up the expertise
necessary to operate a lending
program.809
The current relationship and network
structure of lending programs and
broker-dealers favors larger lending
programs that have the resources to
maintain relationships with more and
larger broker-dealers. Thus, the
Commission believes that the market for
lending services is likely dominated by
a few large lending programs, including
those run by the large custodian banks.
The OFR Pilot Survey estimated that
as of the latter part of 2015 there were
approximately $9.5 trillion worth of
shares available for lending.810 Figure 2
provides a breakout of the percent of
shares available for lending provided by
the various entities.

would be less difficult to switch between brokerdealers if one is performing poorly as they could
redirect securities lending business to their top
performing prime-broker.
807 See supra Part IX.B.2 for further discussion of
issues related to the current availability and
comprehensiveness of securities lending data.
808 See supra note 798 and corresponding text for
further discussion of broker-dealers’ sources of
shares for securities loans.
809 Based on a review of N–CEN reports, the
Commission estimates that 226 (out of 684) lenders
do not employ a lending agent. See infra Part X.

Most of these lenders are likely to operate their own
lending programs.
810 Commercial vendors typically report a value
for securities available to loan that is larger than
what is reported in the OFR Pilot Survey. This
difference is likely due to sample construction. The
commercial vendors likely have a larger sample of
lending programs to draw from, particularly the
lending programs based outside of the U.S. See also
supra note 778 for a discussion of issues related to
estimating the number of shares available for
lending.

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Figure 2: Sources of lendable shares (2015)
Othen

11:westmeat

lmu
32%

Gownm.tal entitles
16%

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5. Structure of the Market for Securities
Lending Data and Analytics
The market to collect and disseminate
securities lending data is an outgrowth
of the market for securities lending
market analytics.811 This market
consists of a few established vendors
that specialize in geographic areas (i.e.,
U.S. and non-U.S.) but seek to compete
in all geographic areas. Most vendors
collect the data to support the analysis
business in which they provide databased service to institutions and other
lending programs. Others collect data
through their facilitation of security
loans. As such, the data vendor business
is often an outgrowth of another
business. The Commission understands
that the current practice by commercial
data vendors is to provide preliminary
statistics on the same day based on the
intraday data collected by the vendors,
while the main data are disseminated
one day later.
The Commission believes that the
data provided by the various data
vendors operating in the give-to-get
Wholesale data market are largely
comparable.812 However, the entities
811 See the business model descriptions in IHS
Markit’s 2021 comment letter responding to
FINRA’s Regulatory Notice 21–19, available at
https://www.finra.org/sites/default/files/
NoticeComment/IHS%20Markit_Paul%20Wilson_
21-19_9.30.2021%20-%20IHSM%20Cmt%20Ltr%
20re%20FINRA%20RFC%20Short%20Interest%
20Position%20Reporting.pdf.
812 See Truong X. Duong, et al., The Information
Value of Stock Lending Fees: Are Lenders Price
Takers?, 21 Rev. Fin. 2353, 2353–2377 (2017)
(‘‘Duong, et al., (2017)’’),who provide a comparative
analysis of the datasets of two of the main

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providing data to the vendors are also
their customers. This relationship limits
the market power of the vendors with
respect to their clients who provide data
but results in the clients’ incentives
limiting the competitiveness of the
market.813 This results in the market
being largely inaccessible for many
entities that could use the data for their
own benefit or the benefit of the market
as a whole.814
The give-to-get model for securities
lending data is a significant barrier to
entry to any firm seeking to provide
analytics services regarding Wholesale
loans. Firms cannot provide analytics
services without data, and the biggest
three data vendors have established
relationships with data contributors to
collect data. Such data contributors
have an incentive to also control who
can access that data. Consequently, the
Commission understands that the
market for securities lending data and
securities lending analytics in the
Wholesale space is largely concentrated
among the three biggest data vendors.
One commenter stated that the giveto-get model is ‘‘is not the industry
standard’’ in the securities lending data
market and pointed out that there are
some commercial securities lending
datasets that are available to all
subscribers.815 The Commission

understands that the collection of these
data largely relies on surveying
Customer market participants about
their borrowing experiences. Data
vendors then aggregate and sell these
data, or derivative products that
combine the survey data with other data
sources to provide derived metrics in
areas such as short selling. For example,
the Commission staff understands that,
based on interactions with vendors of
such data, that the customer market
survey data are used largely as an input
to proprietary algorithms that combine
information from multiple data
sources—such as FINRA’s bimonthly
short interest—to produce a short
selling metric that is then used by
consumers.816 Building relationships
with a large number of Customer market
participants is a significant barrier to
entry and thus the Commission
understands that data provision and
analytics regarding customer market
survey data is concentrated among the
top two biggest data vendors.

commercial data vendors and find very high
correlations between the values presented in the
different datasets.
813 See supra Part IX.B.2 for further discussions
of data providers’ incentives when providing data
to data vendors under a give-to-get model.
814 See supra Part IX.B.2 for further discussion of
the current limits to transparency in the securities
lending market.
815 See S3 Partners Letter, at 5.

816 See infra Part IX.B.6 for further discussion of
FINRA’s bimonthly short interest data.
817 See, e.g., Overdahl Letter, at 4, 9; Citadel
Letter, at 5–6. One commenter stated their belief
that the rule would not provide further
transparency into the short interest market because
‘‘not all securities loan trades facilitate a short sale,
and that the securities lending market is not a
mirror of the short interest market’’; See IHS Markit
Letter, at 3. See supra Part IX.B.1 for a discussion

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6. Short Selling Transparency
Multiple commenters stated that
granular securities lending data
generally provide information about
investors’ short selling positions and
strategies.817 This section provides

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information about existing sources of
short selling data to facilitate an
analysis of the impact of the Rule on
short selling transparency.

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Securities Lending Data
Because of the need to borrow
securities to facilitate a short sale,
securities lending data can be used to
gain insight into short interest and short
sentiment, and market participants use
both give-to-get Wholesale data and
customer market survey data on
Customer loans to gain insights into
short selling. For example, some
academics have used securities lending
data to study short selling in published
research.818 Additionally, while access
to Wholesale market data is generally
limited,819 the Commission understands
that some third-party data providers
combine Wholesale market data with
other sources of short selling data, such
as bimonthly short interest data, to
provide retail clients with estimated
short selling metrics. The Commission
also understands that commercial data
vendors use securities lending data as
an input to proprietary algorithms that
combine information from multiple data
sources—such as biweekly short
interest—to produce a short selling
metric that is then used by consumers.
Data on Wholesale securities loans
provide only a noisy approximation of
short interest at the security level. This
is because Wholesale loans are made
largely to facilitate clearing and
settlement on a net basis at a clearing
broker, rather than by transaction or
position. Thus, Wholesale loans are not
traceable to individual short sellers.
Further, the Commission understands
that broker-dealers will usually source
shares to meet their net clearing and
settlement requirements from other
sources before engaging in Wholesale
loans.820
of the potential reasons for borrowing and lending
securities apart from to facilitate a short trade.
818 See, e.g., Steven Lecce, et al., The Impact of
Naked Short Selling on the Securities Lending and
Equity Market (Macquarie Business School
Research Paper, Feb. 1, 2012) at 83, available at
https://ssrn.com/abstract=3591994 (retrieved from
SSRN Elsevier database) stating that ‘‘securities
lending is a commonly used proxy for the level of
covered short selling’’; see also, e.g., Gene D’avolio,
The Market for Borrowing Stock, 66 J. Fin. Econ.
271 (2002).
819 See supra Part IX.B.2 for further discussion of
the give-to-get model.
820 These sources include, e.g., their own
inventory, customer margin accounts, and fully
paid accounts at the broker-dealer with lending
agreements in place. See supra note 798 and
corresponding text for further discussion. Also, the
fact that give-to-get Wholesale market data are not
comprehensive (see supra Part IX.B.2 for further
discussion), means that there is additional noise
with regards to using Wholesale market data to
estimate short sale information.

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The Commission believes that
information about Customer loans is
more likely to be informative about
short selling activity than information
about Wholesale loans.821 This is
because, unlike Wholesale loans,
Customer loans are used to facilitate
individual short positions. The size of a
Customer loan when first created is the
same as the size of a short position as
of the end of the day on which the short
position was created. Should the
customer increase or decrease the size of
their short position, the Commission
understands that the original loan
would be modified accordingly. Thus,
individual Customer loans can be
tracked to reveal the size and changes in
individual short positions. However,
existing Customer market datasets, like
Wholesale market datasets, lack
comprehensiveness.822
Most commercially available datasets
are currently produced with a one-day
lag. As a result of the difference in
settlement cycles between the equity
and securities lending market, there is
therefore typically a three-day lag
between the availability of the securities
lending data and the change in short
interest that corresponds to the
securities loans.823
Bimonthly Short Interest Data From
FINRA
One of the primary data sources for
information about aggregate short
positions is the bimonthly short interest
data collected by FINRA.824 FINRA
collects aggregate short interest
information in individual securities on
a bimonthly basis as the total number of
shares sold short in a given stock as of
821 This is also supported by one commenter, who
states that, ‘‘there is a perfect correlation between
a short sale and the associated Short Sale Linked
Activity, which facilitates the customer fulfilling
the delivery obligations arising from the short sale.’’
See Citadel Letter, at 5. The commenter states that
by ‘‘Short Sale Linked Activity,’’ they are referring
to what the Proposing Release calls the ‘‘retail
market.’’ See Citadel Letter, at 1. This is equivalent
to what is referred to as the Customer market in this
release.
822 See supra Part IX.B.2 for further discussion of
why the Commission believes that Customer market
survey datasets are not comprehensive.
823 See supra note 738 and corresponding text.
This lag will decrease to two days when equity
settlement moves to T+1 on May 28, 2024.
824 See, e.g., Division of Economic and Risk
Analysis, Short Sale Position and Transaction
Reporting 6–7, (June 5, 2014), at 17–18, available
at https://www.sec.gov/files/short-sale-positionand-transaction-reporting0.pdf. This is a study of
the Staff of the U.S. Securities and Exchange
Commission, which represents the views of
Commission staff, and is not a rule, regulation, or
statement of the Commission. The Commission has
neither approved nor disapproved the content of
this study and, like all staff statements, it has no
legal force or effect, does not alter or amend
applicable law, and creates no new or additional
obligations for any person.

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the middle and end of each month.825
In the case of U.S. exchange-listed
stocks, FINRA shares the data with the
listing exchange.826 FINRA then
publishes short interest data for all
exchange-listed and OTC equity
securities on its Equity Short Interest
Data page free for the investing
public.827 Specifically, aggregate
positions in each security are provided
for publication on the seventh business
day after the reporting settlement
date.828
FINRA computes short interest using
information it receives from its brokerdealer members pursuant to FINRA Rule
4560 reflecting all trades cleared
through clearing broker-dealers.829
FINRA Rule 4560 generally requires that
broker-dealers that are FINRA members
report ‘‘short positions’’ in customer
and proprietary firm accounts in all
equity securities twice a month through
FINRA’s web-based Regulation Filing
Applications (RFA) system.830 FINRA
defines ‘‘short positions’’ for this
purpose simply as those resulting from
‘‘short sales’’ as defined in Rule 200(a)
of Regulation SHO under the Exchange
Act.831 Member firms must report their
short positions to FINRA regardless of
position size.832
These short interest data are widely
available and are used by academics and
other market participants. These short
interest data are found to predict future
stock and market returns over the
825 Specifically, the mid-month short interest
report is based on short positions held on the
settlement date of the 15th of each month or, if the
15th falls on a weekend or holiday, the previous
business day. The end-of-month short interest
report is based on short positions held on the last
business day of the month on which transactions
settle. See FINRA, Equity Short Interest Data
Catalog, available at https://www.finra.org/finradata/browse-catalog/equity-short-interest, last
visited Aug. 23, 2023.
826 See FINRA, Short Interest—What It Is, What
It Is Not (Jan. 25, 2023), available at http://
www.finra.org/investors/insights/short-interest.
827 See id. See also FINRA, Equity Short Interest
Data, available at https://www.finra.org/finra-data/
browse-catalog/equity-short-interest/data, last
visited Aug. 24, 2023.
828 See FINRA Equity Short Interest Data Catalog,
supra note 825. See also FINRA, Short Interest
Reporting, available at https://www.finra.org/filingreporting/regulatory-filing-systems/short-interest.
829 Id. (Short interest for a listed security at any
date reported by FINRA is ‘‘a snapshot of the total
open short positions in a security existing on the
books and records of brokerage firms on a given
date.’’).
830 FINRA Rule 4560 excludes short sales in
‘‘restricted equity securities,’’ as defined in Rule
144, from the reporting requirement.
831 See FINRA Rule 4560(b)(1). See supra note
301 for the definition of a short sale.
832 See FINRA, Short Interest Reporting
Instructions (reporting instructions to FINRA
member firms), available at https://www.finra.org/
filing-reporting/short-interest/regulation-filingapplications-instructions, last visited Aug. 23, 2023.

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monthly and annual horizons,
suggesting that the bimonthly short
interest data capture short selling
strategies based on fundamental
research.833 However, the transparency
offered by these data is limited in at
least two ways. First, the information
content is delayed by at least seven
business days, and also does not
provide insight into the timing with
which short positions are established or
covered within the two-week reporting
period. This precludes the possibility of
understanding the behavior of aggregate
short selling in the two weeks leading
up to the reporting date of the positions.
Second, given that the data are
aggregated at the security level, they
prevent the public from understanding
certain aspects of the underlying
proprietary short selling strategies. For
example, the data can’t inform on
whether short positions are distributed
across a large or small number of market
participants.

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Short Selling Volume and Transaction
Data From SROs
This section discusses data that exist
on daily and intraday short volume
data, which provide different
information relative to the bimonthly
short interest data discussed above.834
The bimonthly short interest data
provides an aggregate measure of
outstanding short interest whereas the
data discussed in this section provides
information about the flow of short sales
in the market. It is less useful in
determining total short interest
outstanding because it is not
accompanied by data regarding when
short sales are covered but allows
market participants to observe the actual
trades of short sellers.
Since 2009, many SROs have been
publishing two short selling datasets,
including same-day publication of daily
aggregated short sale volume in
individual securities 835 and publication
833 See, e.g., Peter N. Dixon & Eric K. Kelley,
Business Cycle Variation in Short Selling Strategies:
Picking During Expansions and Timing During
Recessions, 57 J. Fin. Quantitative Analysis 3018
(2022); see also Ekkehart Boehmer, et al., The Good
News in Short Interest, 96 J. Fin. Econ., 80–97
(2010); Stephen Figlewski, The Informational
Effects of Restrictions on Short Sales: Some
Empirical Evidence, 16 J. Fin. Quantitative Analysis
463 (1981).
834 See supra Part IX.B.6 for more information
about FINRA’s bimonthly short interest data.
835 See Division of Economic Research and
Analysis, Securities and Exchange Commission
(DERA), Short Sale Volume and Transaction Data
(June 5, 2014), available at https://www.sec.gov/
answers/shortsalevolume.htm; (showing hyperlinks
to the websites where SROs publish these data). See
also FINRA, Daily Short Sale Volume Files,
available at https://www.finra.org/finra-data/
browse-catalog/short-sale-volume-data/daily-shortsale-volume-files (providing aggregated volume by

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of short sale transaction information
with a delay of up to two months.836
Some SROs make the historical daily
short volume data available to market
participants at a fee.837
Despite offering higher granularity,
there is a concern that the SRO short
volume data may over-represent the
total volume of short sales occurring in
the market. This is because Regulation
SHO provides specific criteria regarding
what is a long sale.838 If a market
participant is unclear whether their
trade would meet all the requirements at
settlement to be marked a long sale,
then they may choose to mark the trade
as short to not run afoul of Regulation
SHO requirements, even if the trade is
likely economically equivalent to a long
sale.839 For instance, the market
security on all short sale trades executed and
reported to a FINRA reporting facility during
normal market hours) and FINRA, Information
Notice: Publication of Daily and Monthly Short Sale
Reports (Sept. 29, 2009), available at http://
www.finra.org/web/groups/industry/@ip/@reg/@
notice/documents/notices/p120044.pdf.
836 See FINRA, Monthly Short Sale Transaction
Files, available at https://www.finra.org/finra-data/
browse-catalog/short-sale-volume-data/monthlyshort-sale-volume-files (providing detailed trade
activity of all short sale trades reported to a
consolidated tape), last visited Aug. 24, 2023. See
also Investor.gov, Short Sale Volume and
Transaction Data, available at https://www.sec.gov/
answers/shortsalevolume.htm. Additional
transaction data have been available at various
times, including transaction data from the
Regulation SHO Pilot, which have been
discontinued by most exchanges in July 2007 when
the uptick rule was removed. See Release No. 34–
55970 (June 28, 2007), 72 FR 36348 (July 3, 2007),
available at https://www.sec.gov/rules/final/2007/
34-55970.pdf. The Pilot data comprised short
selling records available from each of nine markets:
American Stock Exchange, Archipelago Exchange,
Boston Stock Exchange, Chicago Stock Exchange,
NASD, Nasdaq Stock Market, New York Stock
Exchange, National Stock Exchange, and the
Philadelphia Stock Exchange. See SEC Division of
Trading and Markets, Regulation SHO Pilot Data
FAQ, available at https://www.sec.gov/spotlight/
shopilot.htm#pilotfaq.
837 See, e.g., NYSE.com, TAQ Group Short Sale &
Short Volume, available at https://www.nyse.com/
market-data/historical/taq-nyse-group-short-sales
(for short sale data relating to all NYSE owned
exchanges). See Nasdaqtrader.com, Short Sale
Volume and Transaction Reports, available at
https://nasdaqtrader.com/Trader.aspx?id=shortsale
(for short sale data for Nasdaq exchanges); See also
Chicago Board Options Exchange (Cboe.com), U.S.
Equity Short Volume and Trades (for Cboe
exchanges), available at https://datashop.cboe.com/
us-equity-short-volume-and-trades.
838 Rule 200(g) of Regulation SHO specifies when
an order can be marked as long. See also Section
III.B (adopting release of Regulation SHO), available
at https://www.sec.gov/rules/final/3450103.htm#VI.
839 See Proposed rule: Short Position and Short
Activity Reporting by Institutional Investment
Managers, Release No. 34–94313 (Feb. 25, 2022) 87
FR 14950, 14989 (Mar. 16, 2022) at note 230 (citing
2009 Letter from SIFMA commenting on an
alternative short sale price test, and expressing
concern that compliance with Regulation SHO short
selling marking requirements ‘‘will result in a
substantial over-marking of orders as ‘‘short’’ in

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participant may be deemed to own the
security but does not reasonably believe
they can deliver the security in time for
settlement, and thereby must mark the
order as short regardless of their
ownership of the security. Aggregate
short selling volume data and short
selling transactions data typically have
different lags with which they are
available, though aggregate short selling
volume data can be disseminated as
early as the same day of the short
sale.840
B. Economic Effects of the Final Rule
1. Benefits of Increased Transparency in
the Securities Lending Market
The Commission believes that the
primary impact of final Rule 10c–1a will
be to increase transparency in the
securities lending market through
improvements to the
comprehensiveness, breadth,
accuracy,841 and accessibility of
securities lending data. These impacts
will reduce information asymmetries in
the securities lending market and
improve informational efficiency
leading to a more efficient securities
lending market.842
Final Rule 10c–1a will reduce
information asymmetries and improve
informational efficiency in three ways.
First, the data provided by final Rule
10c–1a will be more comprehensive
than the data currently offered by
commercial data vendors because it will
not rely on voluntary data submissions
but will result from mandated
disclosure from both the Wholesale and
Customer segments of the market.843
Second, Rule 10c–1a data will improve
situations where firms are, in fact, ‘‘long’’ the
securities being sold’’).
840 For example, FINRA posts daily aggregate
short volume data for each security no later than
6:00 p.m. ET of the same day on the relevant trade
date; see FINRA, Daily Short Sale Volume Files,
supra note 835. Meanwhile, FINRA posts files
including the transaction time, price, and number
of shares for every off-exchange short sale
transaction in an exchange-listed stock only on a
monthly basis; see FINRA, Monthly Short Sale
Volume Files, supra note 836. See also FINRA,
Information Notice 5/10/19: Understanding Short
Sale Volume Data on FINRA’s website (May 10,
2019), available at https://www.finra.org/rulesguidance/notices/information-notice-051019.
841 Accuracy in this sense refers to less potential
bias in the loans reported and thus in the statistics
obtained from the loans reported. See supra Part
IX.B.2 for a discussion of bias in existing securities
lending datasets and how this can lead to
inaccurate inference.
842 The Commission expects that the benefits of
final Rule 10c–1a will be similar for all reportable
securities lending markets that have a similar need
for additional market transparency. It is possible
that some markets may be more transparent than
others. See infra note 958 for further discussion.
843 See supra Part IX.B.2 for further discussion of
selection issues in commercial securities lending
databases based on voluntary data submissions.

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informational efficiency by including
certain data fields that are not currently
offered by commercial data vendors,
contributing to the breadth of available
securities lending data. In addition,
Rule 10c–1a data will contain detailed
security loan modification information.
Third, the final rule will expand the
accessibility of the data by allowing all
market participants to access Rule 10c–
1a data, possibly subject to a fee.844
The increased transparency from final
Rule 10c–1a will result in several
notable economic benefits. First, the
final rule will reduce information
asymmetries, which will benefit
investors by reducing borrowing costs,
increasing price efficiency, and
increasing competition between brokerdealers and lending programs.845
Second, by reducing the borrowing costs
for some securities, the final rule will
lower the cost of short selling these
securities and improve market
efficiency. Third, improvements in the
information available to various market
participants will lead to a variety of
benefits for these participants, including
increased profits and reduced costs of
business due to easier access to
information and more informed
decisions.
Reduction in Information Asymmetry

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The Commission believes that the
transparency created by final Rule 10c–
1a will reduce information asymmetries
between more centrally connected
securities lending market participants
and those on the periphery. Specifically,
it will reduce the information
asymmetries between broker-dealers
and end borrowers, and between
beneficial owners and lending
programs. This will result in increased
competition between dealers and
between lending programs, ultimately
leading to better loan terms for some
securities.846
The Commission believes that the
transparency created by the final rule
will benefit end borrowers by reducing
the information disadvantage they have
with their broker-dealers when
borrowing shares. Most security loans
844 See infra Part IX.C.3 for a discussion of the
fees that an RNSA could charge to data consumers.
See also supra Part VII.K.3 for further discussion of
final Rule 10c–1a(i), which allows an RNSA to
‘‘establish and collect reasonable fees, pursuant to
rules that are promulgated pursuant to section 19(b)
and Rule 19b–4 of the Exchange Act.’’
845 Consequently, some market participants may
see returns decrease due to more competitive fee
pricing, which may lower securities lending
revenues for some lenders. See infra Part IX.C.4 for
further discussion.
846 A reduction in the cost to borrow may result
in lower securities lending revenues for some
lenders. See infra Part IX.C.4 for further discussion.

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obtained by end borrowers are
facilitated through broker-dealers.847
Rule 10c–1a data will allow end
borrowers to determine the extent to
which their broker-dealers are obtaining
terms that are better, worse, or
consistent with current market
conditions for loans with similar
characteristics. It will facilitate this
comparison by providing
comprehensive transaction-bytransaction information about the cost to
borrow and other loan characteristics
that are currently mostly unavailable to
end borrowers.848 For example, end
borrowers will be able to compare the
lending terms provided by their brokerdealers to the terms of similar loans,
such as loans with the same collateral
and borrower types. End borrowers will
also be able to compare loans of similar
sizes, though with a delay of 20
business days. The Commission believes
that, despite the delay in dissemination,
loan size information will still be useful
for end borrowers, who can use this
information to compare the prices of
their loans to other loans with similar
terms (e.g., size, collateral type, loan
type, etc.), that were effected
approximately one month prior.
Additionally, to the extent that an
RNSA publicly disseminates daily
volume-weighted cost-to-borrow
statistics as part of its requirement to
disseminate daily aggregate information,
these statistics will provide end
borrowers with access to information
about loan prices that incorporates
information about loan size information
even prior to the public dissemination
of loan sizes.849
Similarly, the Commission believes
that the final rule will benefit beneficial
owners by reducing their information
847 See supra Part IX.B.4 for further information
about the market for borrowing services.
848 See supra Part IX.B.2 discussing the lack of
comprehensiveness of both Customer market data
collected through Customer market surveys and
Wholesale market data collected using a give-to-get
model, the latter of which is also often unavailable
to end borrowers due to usage restrictions.
849 See final Rule 10c–1a(g)(5), requiring an RNSA
to disseminate aggregated daily information. In
general, the ability of market participants to use the
aggregate information provided by an RNSA to
compare loan rates across similar loans may depend
on the specific form of loan rate information that
an RNSA chooses to publish. For example, if an
RNSA chooses to publish cost to borrow statistics
that are very granular (e.g., it provides separate
statistics for Customer and Wholesale loans and/or
according to other loan characteristics), then end
borrowers would be able to benchmark their
transactions to these statistics with increased
accuracy. To the extent that an RNSA chooses to
publish less granular statistics, then the end
borrower could still benchmark relative to the cost
to borrow statistics provided by an RNSA, but the
benchmark would be noisier. See also infra Part
IX.C.1 for further discussion of the Commission’s
uncertainty related to an RNSA’s discretion.

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disadvantage with respect to their
lending programs. By allowing
beneficial owners to more easily
benchmark their lending programs
through access to data on loan prices
and other characteristics of recently
transacted security loans, as well as the
statistics provided by an RNSA on the
next business day, the final rule will
provide beneficial owners with an
improved ability to determine the
quality of the loans that their lending
program executes on their behalf
relative to other loans with similar
characteristics. The ability to view the
cost to borrow in both the Customer
markets and Wholesale markets will
also provide beneficial owners with
additional information that they can use
to benchmark the performance of their
lending programs.850
Financial institutions such as banks
and broker-dealers use the securities
lending market in order to manage
collateral needed for other
transactions.851 These entities can face
the same asymmetric information
concerns as do end borrowers and
beneficial owners, and thus an increase
in market transparency may lead
financial institutions to receive better
loan terms, and thus improve their
ability to manage collateral. Banks also
borrow securities to manage their
balance sheets,852 and the Commission
believes that this too will become easier
as a result of the final Rule 10c–1a due
to a more competitive lending market,
leading to the benefit of improved
balance sheet management by banks.
At the same time, as access to
securities lending data increases,
competition for securities lending
analytics may increase as well.853
Increased competition for and
availability of securities lending
analytics would further reduce
information asymmetries by reducing
the cost of and increasing access to
securities lending analytics for both end
borrowers and beneficial owners.
If an end borrower or beneficial owner
believes that a particular broker-dealer
or lending agent is consistently
underperforming, the final rule will
provide that market participant with the
850 See, e.g., supra note 767 and corresponding
text describing how a market participant engaged in
Wholesale lending stated in an interview that they
feel unable to benchmark the performance of their
lending programs using commercial data because
they have very little insight into the Customer
market.
851 See supra Part IX.B.1 for further discussion of
financial institutions’ use of securities loans for
collateral and balance sheet management.
852 See id.
853 See infra Part IX.D.2 for a discussion of the
expected impact of the final rule on competition for
securities lending data analytics services.

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tools to identify such underperformance
and address it with their broker-dealer
or lending agent, or to find a new
broker-dealer or lending agent.854 For
example, a beneficial owner or end
borrower could use the transaction-bytransaction Rule 10c–1a data to create a
bespoke benchmark of recently
transacted loans that are similar to a
loan they wish to effect, and compare
this benchmark to the terms offered by
their lending agent or broker dealer for
that loan. A beneficial owner or end
borrower could also use the daily
information disseminated by an RNSA
about the distribution of loan prices to
assess how the terms offered by their
broker-dealer or lending agent compare
more generally to the distribution of
recently transacted loans in the same
security. An increased ability to
compare loan performance will increase
competition between broker-dealers and
between lending agents, which will
ultimately improve lending terms for
both end borrowers and beneficial
owners.855
The Commission expects improved
terms to be concentrated among
securities that are ‘‘on special’’ and have
higher borrowing costs. This is because
general collateral securities lending is a
low margin business and lending supply
for these securities far outstrips lending
demand.856 Combined, these two factors
mean that there is likely not much room
for fees to improve for general collateral
securities.857 As securities become on
special (i.e., harder to borrow), lending
rates and utilization rates increase.
Higher utilization rates mean that there
are fewer shares available to borrow and
lend. In this environment, high search
854 One commenter questioned the usefulness of
transaction-by-transaction reporting and asserted
that the Proposing Release did not explain how an
investor would make use of these data (see Citadel
Letter, at 9). This part, along with Part VI.C.1.a in
the Proposing Release, discuss the ways in which
investors could use the data. The Commission
acknowledges that not every factor affecting prices,
such as counterparty risk, is accounted for in the
data provided by the final rule. See infra in this part
for further discussion. Furthermore, the ability of
end borrowers to switch broker-dealers may be
limited by switching costs; see infra in this part for
further discussion on switching costs. At least one
commenter expressed concern that the proposed
rule may result in increased costs when switching
lending agents. See CSFME Letter 1, at 5. See infra
Part IX.C.4 for further discussion.
855 See infra Part IX.D.2 for a discussion of the
expected impact of the final rule on competition
between broker-dealers and between lending
programs.
856 See, e.g., State Street Letter, at 5; See also
RMA Letter, at 5, 8 (discussing low margins in
securities lending more generally); See also infra
Part IX.C.4 for additional discussion.
857 See Panel A of Table 1 in supra Part IX.B.3,
showing that for most stocks the lending supply
significantly outstrips demand with median
utilization rates of approximately 12%.

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costs and asymmetric information are
significant contributors to both the level
and dispersion of fees, and reducing
asymmetric information has a better
chance of leading to better terms.858
Beneficial owners that currently lend
shares of hard-to-borrow securities for
rates that are consistently below the
market average could receive higher
lending rates for these securities as their
lending agents both have better access to
information and become more
accountable for their performance due
to beneficial owners also having access
to the same information. Similarly, end
borrowers whose borrowing costs are
currently higher than the market average
for hard-to-borrow securities may see
their borrowing costs decrease as both
their broker-dealers’ information access
and their ability to monitor to their
broker-dealers improve. These two
effects suggest that the dispersion of
borrowing costs for hard-to-borrow
securities will diminish.
That transparency can result in
improved market quality is consistent
with the experience in other markets.
The implementation of TRACE
improved transparency in the corporate
bond market, and research has shown
that TRACE lowered the average cost of
transacting and increased competition
between dealers in this market.859
Additionally, recent research from
Brazil has shown that improving
securities lending transparency led to
lower fees, increased liquidity, and
858 See, e.g., Kolasinski (2013) (finding that when
demand for lendable shares outstrips supply,
lending fees increase and the dispersion of lending
fees is high, particularly when search costs are
high).
859 See, e.g., Amy K. Edwards, et al., Corporate
Bond Market Transaction Costs and Transparency,
62 J. Fin. 1421, 1421–1451 (2007), Michael
Goldstein, et al., Transparency and Liquidity: A
Controlled Experiment on Corporate Bonds, 20 Rev.
Fin. Stud. 235 (2007), Hendrik Bessembinder, et al.,
Market Transparency, Liquidity Externalities, and
Institutional Trading Costs in Corporate Bonds, 82
J. Fin. Econ. 251 (2006), and Hendrik Bessembinder
& William Maxwell, Markets: Transparency and the
Corporate Bond Market, 22 J. Econ. Perspectives
217(2008) (‘‘Bessembinder & Maxwell (2008)’’). In
addition to these papers, the Proposing Release also
cited a paper showing a lower dispersion of
transaction costs in the corporate bond market
following the introduction of TRACE; see Proposing
Release, 86 FR 69837 note 222 and corresponding
text. Since the Proposing Release the Commission
has become aware that this result has been removed
from a more recent version of the paper after results
suggested ‘‘that reduced price dispersion is more
likely attributable to market changes other than
transparency’’; see Michael A. Goldstein, et al,
Dealer Behavior and the Trading of Newly Issued
Corporate Bonds, (June 21, 2021), at 19 n.21,
available at https://ssrn.com/abstract=1022356
(retrieved from SSRN Elsevier database).
Nonetheless, the general result that information
asymmetries can lead to price dispersion in fixedincome and dealer markets has been welldocumented in other literature; see, e.g., the papers
cited in supra note 790.

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increased price efficiency in that
country.860 In both cases, researchers
have identified reduced information
asymmetry as a key mechanism leading
to improved market outcomes.861
While some commenters supported
the applicability of evidence from
TRACE,862 other commenters
questioned the applicability of evidence
from TRACE 863 and from the Brazilian
policy change.864 Specifically,
commenters argued that, because bond
transactions are irrevocable and
fungible, the identity and characteristics
of the counterparty are less relevant to
prices in bond transactions than in
securities loans, and thus the
Commission’s reliance on TRACE
studies to draw inferences about the
securities lending market is
misplaced.865 At least one commenter
disputed the Commission’s use of the
Brazilian policy change to draw
inferences about the potential benefits
of proposed Rule 10c–1 because the
Brazilian policy ‘‘did not involve the
trade-by-trade disclosure of stock
lending terms’’ and is thus not
comparable to the Rule.866 The
Commission continues to believe that
both events provide meaningful
information about the potential impacts
of the final Rule 10c–1, as evidence
from both events illustrates how a
reduction in asymmetric information
between market participants has the
effect of improving market quality.
First, the introduction of TRACE,
which introduced transaction-bytransaction transparency into a market
that previously did not have such
transparency, represents a policy change
that is markedly similar to that under
the final Rule 10c–1a. The Commission
acknowledges that the market setting for
TRACE is different from that of final
Rule 10c–1a, for example, because of the
860 See Fa
´ bio Cereda, et al., Price Transparency in
OTC Equity Lending Markets: Evidence from a Loan
Fee Benchmark, 143 J. Fin. Econ. 569, 569–592
(2022) (‘‘Cereda (2022)’’).
861 See, e.g., Bessembinder & Maxwell (2008), at
226, stating that the results from the academic
literature on the introduction of TRACE shows that
it ‘‘reduced dealers’ information advantage relative
to customers,’’ and that, ‘‘with transaction
reporting, customers are able to assess the
competitiveness of their own trade price by
comparing it to recent and subsequent transactions
in the same and similar issues.’’ See also Cereda
(2022), at 587, stating that their results are
consistent with the idea that ‘‘[g]ood benchmarks
mitigate search frictions by lowering the
informational asymmetry among market
participants.’’
862 See James J. Angel Letter, at 2.
863 See, e.g., Overdahl Letter, at 6; Citadel Letter,
at 8. At least one commenter stated that the
evidence from TRACE was applicable.
864 See Overdahl Letter, at 5–7.
865 See Overdahl Letter, at 6.
866 See Overdahl Letter, at 7.

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importance of counterparty risk in
securities loans prices as compared to
prices of corporate bonds.867 However,
the fact that corporate bond prices are
less sensitive to the identities of the
counterparties than securities loans
does not invalidate using TRACE to
illustrate the effect of decreasing
information asymmetry. Instead, it
simply implies that the baseline
dispersion in corporate bond prices
prior to TRACE was likely less than it
currently is in the securities lending
market.868
Second, while the Brazilian study
takes place in a similar market setting as
Rule 10c–1a (i.e., the securities lending
market) it is true that the policy details
differ. In particular, the Brazilian policy
change involved an increase in
transparency not through the creation of
a transaction-by-transaction report, but
through an increase in the
informativeness of an available loan fee
‘‘benchmark.’’ 869 However, despite the
differences in details, the policy had a
similar target to that of Rule 10c–1a:
namely, an improvement in the
transparency of the securities lending
market.870 The Brazilian study shows
that this increase in transparency
867 See, e.g., discussions in supra Part IX.B.3,
acknowledging that a variety of factors can drive the
pricing of securities loans, including counterparty
risk. The Commission also acknowledged this in the
Proposing Release by noting that counterparty
characteristics played a role in pricing loans; See
Proposing Release, 86 FR 69831. See also Proposing
Release, 86 FR 69837, stating that ‘‘the data would
allow end borrowers to determine the extent to
which their broker-dealer is obtaining terms that are
better, worse, or consistent for current market
conditions for loans with similar characteristics’’
(emphasis added).
868 See supra note 790 for a discussion of
theoretical and empirical evidence that information
asymmetry drives dispersion in prices. It could also
be the case that securities lending transactions are
more sensitive to idiosyncratic factors, such as ‘‘the
identities of the transacting parties’’ as mentioned
by a commenter (see Overdahl Letter, at 6), because
there is a lack of transparency in the market about
what a standardized price for a given set of loan
characteristics should be, which could drive
idiosyncrasies in loan prices. If prevailing market
prices become more generally available, it could be
the case that an increase in competition lessens the
importance of idiosyncratic factors for the pricing
of securities loans. In this case, final Rule 10c–1a
may make the securities lending market behave
more similarly to more fungible markets such as the
corporate bond market, making an analysis of
TRACE more applicable to the securities lending
market.
869 According to the authors, this loan fee
benchmark is publicly reported by a centralized
platform maintained by the Brazilian Stock
Exchange, on which all securities lending
transactions are registered by brokers. See Cereda
(2020), at 570.
870 See Cereda (2020), at 570, referencing
statements from the Brazilian stock exchange that
‘‘ . . . the purpose of this change is to make the
securities lending service ever more transparent, in
order to attract more securities lenders and
borrowers and to meet the demand of institutional
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improved market quality through the
economic channel of reduced
information asymmetry. This study is
thus directly relevant for final Rule 10c–
1a, as the Commission expects that
many of the economic effects of the rule
will be realized through the same
economic channel (i.e., a reduction in
information asymmetry).
Additionally, in support of their
concern over the applicability of TRACE
research, one commenter stated that,
‘‘while there is no reason for the supply
of corporate bonds to decrease in
response to increased trade
transparency, greater transparency in
the securities lending market may well
reduce the lending supply.’’ 871 This
commenter cited industry research
showing that increased short selling
transparency can decrease beneficial
owners’ willingness to lend shares,872 as
well as academic research calling into
question the applicability of TRACE to
securities lending ‘‘since greater loan fee
transparency could reduce the lending
supply.’’ 873
The Commission believes that the
industry study cited by the commenter
has empirical limitations that make it
difficult to extract robust empirical
conclusions from the study. These
limitations are acknowledged by the
author of the study; specifically, the
author states that, during the sample
period, which occurs during the height
of the 2008 financial crisis, ‘‘equity
markets were in a relatively disordered
state,’’ and that ‘‘such extreme change in
markets has the consequence of making
it complicated to establish a control
group of stocks such that all variables,
except regulatory variables, remain
constant. This, in effect, makes it
difficult to attribute causality solely to
the regulatory variables.’’ 874 The
Commission agrees that the extreme
market volatility during 2008–2009
increases the likelihood that the
decrease in beneficial owners’ appetite
to lend out shares documented by the
author may have been driven by other
market events concurrent to but distinct
from changes to regulatory regime for
871 See

Overdahl Letter, at 6.
Overdahl Letter, at 6, citing The Effects of
Short-Selling Public Disclosure Regimes on Equity
Markets (2010), OliverWyman.com, at 4, 16–17,
available at https://www.oliverwyman.com/ourexpertise/insights/2010/feb/the-effects-of-shortselling-public-disclosure-regimes-on-equity.html.
873 See Overdahl Letter, at 9, citing Cereda et al.
(2022).
874 See Oliver Wyman, supra note 872, at 11.
Specifically, the report examines a short selling ban
that took place in the UK between Sept. 18, 2008,
and Jan. 16, 2009, and compares this to a ‘‘pre-ban’’
period between Jan. 1, 2008, and Sept. 17, 2008,
and a ‘‘post-ban’’ period beginning on Jan. 17, 2009.
872 See

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75709

short selling and, as a result, ‘‘causality
is still difficult to prove.’’ 875
The Brazilian study, also cited by the
commenters, occurred during a less
volatile period rendering potentially
cleaner empirical results. The authors of
that study indeed suggest that the loan
supply could decrease ‘‘if the lower loan
fees received by lenders were not
sufficient to cover the potential losses
from not selling a stock when shorting
activity increases.’’ 876 However, later in
that same paragraph, the authors reject
this hypothesis and conclude that their
results were not consistent with
increased transparency affecting
liquidity in the lending market.877
Improved Market Quality Due to Lower
Short Selling Costs
The Commission expects that final
Rule 10c–1a will produce
countervailing effects through its impact
on short selling, but ultimately that the
net result will be positive. On one hand,
the final rule will benefit short sellers
by lower borrowing costs for securities
that are hard to borrow, which will
improve market quality through
increased price efficiency, managerial
oversight, and liquidity.878 On the other
hand, the final rule could potentially
harm market quality by making it easier
for other investors to discern short
sellers’ trading strategies, thereby
discouraging the costly fundamental
research that underlies some short
selling strategies.879 On balance, the
Commission expects that the final rule,
which delays the dissemination of loan
volume information by 20 business
days, is not likely to significantly
expand market participants’ abilities to
discern short selling strategies.
The Commission expects that final
Rule 10c–1a will lower short selling
costs by decreasing borrowing costs,
especially for hard-to-borrow
securities.880 Academic research
875 See

id.
Cereda (2022), at 571. Specifically, the
authors state that their ‘‘findings, however, indicate
that the increased transparency had positive effects
overall; it reduced loan fees, increased lending
volume, did not affect lenders’ total revenue, and
favored more efficient lenders.’’
877 See id.
878 See supra in this part for a discussion on why
the Commission expects the economic effects of the
final rule to be concentrated among hard-to-borrow
stocks.
879 See, e.g., Overdahl Letter, at 3; Citadel Letter,
at 5–7, 11; MFA Letter 3, at 3–4, 8.
880 See discussions in above and below in this
part regarding the impact of the final rule on
borrowing costs. This effect may be concentrated
among stocks that are ‘‘on special’’ and have higher
borrowing costs, in which there are more
opportunities for an increase in price efficiency to
lower fees. See supra in this part for a discussion
on why the Commission expects the economic
876 See

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indicates that, when short selling costs
diminish, investors increase their
fundamental research because it is
easier to trade on any negative
information that they uncover (e.g., poor
earnings).881 This increase in
fundamental research may in turn lead
to better investment decisions by these
investors.882 Additionally, by
facilitating more research, the final rule
will benefit market participants by
improving price discovery. Academic
research shows that short sellers,
through their research, contribute to
price efficiency by gathering and trading
on relevant private information.883
Short sellers also serve as valuable
monitors of management. Extant
research has demonstrated that when
management knows that short sellers
may be studying their firms, they are
less likely to engage in inappropriate or
value-destroying behavior.884 Research
also indicates that when short selling
becomes easier the effectiveness of short
sellers as monitors increases.885
Reducing the costs of short selling
may also have the benefit of increasing
liquidity in the underlying securities
markets. Short sellers are key
contributors to liquidity in both equity
and options markets and existing
research shows that, when short selling
is constrained by tightness in the
securities lending market, the stock
market is less liquid.886 Lower short
selling costs could have potential
benefits for options market liquidity as
well. Securities lending affects liquidity
in the options market through its impact
effects of the final rule to be concentrated among
hard-to-borrow stocks.
881 See Dixon, et al., (2021), supra note 746 and
Peter Dixon, Why Do Short Selling Bans Increase
Adverse Selection and Decrease Price Efficiency?
Rev. Asset Pricing Stud. 122 (2021) (‘‘Dixon
(2021)’’). It is not necessary that the information
uncovered by this research be negative in nature for
this to be true. The possibility of easier securities
borrowing ensures that if the information happens
to be negative, it will still be profitable. Thus, the
risk of engaging in costly research decreases and
more information, both positive and negative, is
uncovered as a result.
882 See infra this part for further discussion on
how increased information for participants in the
securities lending market may increase the
profitability of some investors’ trading strategies
more generally.
883 See, e.g., Jesse Blocher, et al., Connecting Two
Markets: An Equilibrium Framework for Shorts,
Longs and Stock Loans, 108 J. Fin. Econ, 302, 302–
22 (2021) and Dixon (2021) supra note 881.
884 See, e.g., Eric C. Chang, et al., Does ShortSelling Threat Discipline Managers in Mergers and
Acquisitions Decisions?, J. Acct. & Econ. 101223
(2019). See also Massimo Massa, et al., The Invisible
Hand of Short Selling: Does Short Selling Discipline
Earnings Management?, 28 Rev. Fin. Stud. 1701
(2015).
885 See, e.g., Vivian W. Fang, et al., Short Selling
and Earnings Management: A Controlled
Experiment, 71 J. Fin. 1251 (2016).
886 See Dixon, et al. (2021), supra note 746.

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on how easily options market makers
can delta hedge.887 Less costly delta
hedging may therefore increase liquidity
in the options market. Also, since some
price discovery occurs in the options
market, to the extent that the final rule
increases the ease with which investors
can trade in options, the proposal may
further enhance price efficiency in the
options market.888
Commenters to the proposed Rule
10c–1, which did not include a delay in
the dissemination of any information
that would be collected under the rule,
expressed concern that the
dissemination of Rule 10c–1a data could
harm short sellers, and thus U.S.
financial and capital markets in general,
and that this outcome was not analyzed
in the Proposing Release.889 Some
commenters expressed concern that
information about Customer loans
collected under the rule in particular
could be used to determine individual
short positions with a high degree of
accuracy,890 and that this could result in
harm to short sellers,891 resulting in
887 See supra Part IX.B.1 for a discussion of
option market makers’ use of securities lending
markets to engage in delta hedging.
888 See, e.g., David Easley, et al., Option Volume
and Stock Prices: Evidence on Where Informed
Traders Trade, 53 J. Fin. 431, 431–65 (1998); Jun
Pan & Allen M. Poteshman, The Information in
Option Volume for Future Stock Prices, 19 Rev. Fin.
Stud. 871 (2006); Sophie Ni, et al., Stock Price
Clustering on Option Expiration Dates, 78 J. Fin.
Econ. 49 (2005).
889 See, e.g., Overdahl Letter, at 9–11; Citadel
Letter, at 5–7; AIMA Letter 2, at 2; CCMR Letter,
at 1; AIMA Letter 3, at 2; MFA Letter 3, at 3–4, 8.
The Proposing Release acknowledged that the Rule
could diminish the value of collecting and trading
on negative information by revealing some new
short selling information to the market, and that
these dynamics could mitigate some of the benefits
discussed. See Proposing Release, Part VI.C.1.c.
890 See, e.g., Citadel Letter, at 5; Overdahl Letter,
at 4; SIFMA AMG Letter, at 5. Other commenters
expressed concern that the data provided under
proposed Rule 10c–1 could allow for reverse
engineering of trading strategies more generally;
see, e.g., MFA Letter 1, at 8; MFA Letter 2, at 5;
RMA Letter, at 18.
891 Commenters pointed to a number of ways that
short sellers could be harmed, including increased
costs to establishing short positions, particularly
large positions that require time to build up (see,
e.g., Citadel at 6), and increased risks of copycat
strategies (see, e.g., Overdahl Letter, at 9–10; Citadel
Letter, at 6; MFA Letter 1, at 7; AIMA Letter 2, at
2–3), frontrunning (see, e.g., SBAI Letter, at 2),
issuer retaliation (see, e.g., Citadel Letter, at 6),
negative impacts on activities that rely on short
selling for hedging purposes (see, e.g., Citadel
Letter, at 6), and short squeezes (see, e.g., Citadel
Letter, at 6; Overdahl Letter, at 11; MFA Letter 1,
at 7; S3 Partners Letter, at 7). One commenter cites
a number of academic studies supporting the notion
that disclosure of short selling positions can be
harmful to markets, including Truong X. Duong et
al., The Costs and Benefits of Short Sale Disclosure,
53 J. Banking & Fin. 124 (2015) and Stephan Jank,
et al., Flying Under the Radar: The Effects of ShortSale Disclosure Rules on Investor Behavior and
Stock Prices, J. Fin. Econ. 209 (2021) (see Overdahl
Letter, at 8).

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negative outcomes for market quality,
such as reductions in liquidity, price
efficiency and shareholder
engagement.892
The Commission acknowledges these
commenters’ concerns about the effect
of proposed Rule 10c–1 on short sellers,
and believes that these concerns are
mitigated by the final rule’s inclusion of
a delay in disseminating loan size
information.893 Specifically, the
Commission acknowledges that activity
in certain segments of the securities
lending market are tightly linked to
short selling positions, in particular the
market for Customer loans.894 Thus, the
sum of loans identified in Rule 10c–1a
data as being to ‘‘a customer (if the
person lending securities is a broker or
dealer)’’ 895 could give a strong
indication of aggregate short interest.
However, under the final rule, this
information will only be directly
available to Rule 10c–1a data consumers
after a delay of 20 business days,896
which significantly reduces the novelty
of this information compared to the
proposed rule. In particular, this delay
means that the loan size information,
which is the portion of the data most
892 See, e.g., Citadel Letter, at 6; MFA Letter 1, at
2 and 7; SIFMA AMG Letter, at 5 and 7; SIFMA
Letter 1, at 12, 15; AIMA Letter 1, at 2; Overdahl
Letter, at 4; CCMR Letter, at 1. One commenter
referred to increased short selling disclosure as a
wealth transfer that is not necessarily welfare
enhancing. See Overdahl Letter, at 3.
893 The proposed rule, which commenters
expressed concern, would have required market
participants to report transactions to an RNSA
within 15 minutes of the terms being settled with
an RNSA disseminating the data to the public as
soon as practicable thereafter.
894 See supra Part IX.B.6 for further discussion of
why the market for Customer loans is tightly linked
to short selling positions.
895 See 17 CFR 240.10c–1a(c)(7) (‘‘final Rule 10c–
1a(c)(7)’’), which requires a covered person to
report, for a covered securities loan, whether the
borrower is a broker or dealer, a customer (if the
person lending securities is a broker or dealer), a
clearing agency, a bank, a custodian, or other
person. While most loans that facilitate short sales
will likely be associated the category of borrowers
that are ‘‘a customer (if the person lending
securities is a broker or dealer),’’ not all will. Some
large market participants do not use broker-dealers
as an intermediary when sourcing loans; instead,
they maintain relationships directly with lending
programs to source shares when they wish to sell
short. These transactions would show up in the
data as a loan to ‘‘other person.’’ Lastly, to the
extent that a broker-dealer borrows shares to
facilitate their own short selling, the loan would
show up in the data as a loan to a ‘‘broker or
dealer.’’ However, by summing up all loans to ‘‘a
customer (if the person lending securities is a
broker or dealer)’’ and ‘‘other person,’’ market
participants could likely estimate outstanding short
interest with considerable accuracy.
896 Note that, the difference in settlement cycles
between the equity and lending markets means that
the size of equity loans that facilitate short sales
won’t be made public until approximately 22
business days after the short sale occurs in the stock
market. See supra note 738 and corresponding text.

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directly related to short selling activity,
disseminated under final Rule 10c–1a
will generally be less timely than preexisting sources of short selling
transparency, such as FINRA’s
bimonthly short interest data.897
Additionally, the Commission does
not believe that market participants will
have more timely access to indicators of
aggregate short interest from the daily
information disseminated by an RNSA
pertaining to the aggregate transaction
activity for each reportable security.898
This is because the term ‘‘aggregate
transaction activity’’ refers to
information pertaining to the absolute
value of transactions, and excludes
information that could reveal net
transaction activity information.899
Therefore, it would not be possible to
use this information to discern
information about, for example, changes
in net short sale positions.
The loan amount data disseminated
under final Rule 10c–1a will provide
some novel information about short
positions, although only on a look-back
basis after the 20-business-day
dissemination delay has lapsed. In
particular, since each loan likely relates
to a unique market participant, the
public dissemination of such
transaction-by-transaction volume data
under final Rule 10c–1a, albeit delayed,
will provide an indication of the
distribution of short sentiment, i.e.,
whether short interest is concentrated
among a few short sellers with large
positions, or whether it is spread out
over many short sellers.900 It can also
give an indication about when
individual market participants
increased or decreased their short
positions by examining the change in
the size of a loan from the reported data.
As most currently available sources of
short selling information only contain
information about aggregated short
selling activity,901 this could represent
an increase in the granularity of market
participants’ information about past
short positions and, in this way, could
provide information about short sellers’
strategies. Specifically, market
897 See supra Part IX.B.6 for a discussion of the
FINRA bimonthly short interest data which are
made available for publication on the seventh
business day after the reporting settlement dates,
which occurs bimonthly.
898 See final Rule 10c–1a(g)(5), requiring an RNSA
to disseminate aggregated daily information.
899 See supra Part VII.J for further discussion.
900 Note that this may only be possible with noise
to the extent that some borrowers, such as
institutional investors, break their loans up across
multiple prime brokers. See supra note 806 for
more information about the use of multiple prime
brokers by some institutional investors.
901 See discussion of the FINRA bimonthly short
interest data and SRO short selling volume and
transaction data above in Part IX.B.6.

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participants could examine the
historical securities lending data to try
to identify factors that may be indicative
of short selling activity. However, it is
not clear that such an analysis, which
would be inherently noisy, would
provide actionable insights into future
short selling activity that could harm
short sellers’ abilities to profit from
negative information.
Economic Effects From Improved
Securities Lending Data Quality
The Commission believes that final
Rule 10c–1a will increase the
information about the state of the
securities lending markets that is
generally available to market
participants. As discussed in this
section, increased information will
result in benefits in the form of better
decision-making by investors, beneficial
owners and other market participants,
reduced costs of business for brokerdealers, improved performance and
reduced costs for lending programs, new
business opportunities for data vendors,
improvements to shareholder
monitoring and, ultimately, improved
market stability and price discovery
both in the securities lending market
and the market for the underlying
security.902
Overall, the data provided by the final
rule will significantly improve market
participants’ views into lending rates for
various securities. It does so first
through the comprehensiveness of the
data. By mandating the disclosure of
certain information about all securities
loans, the data provided by the Rule
will be comprehensive and thus not
prone to biases that occur due to nonrandom observations.903 Comprehensive
reporting also means that the data
provided by the final rule covers both
the Wholesale and Customer segments
of the market, allowing market
participants to compare trends in both
markets simultaneously. The data will
also be more granular than existing data.
In addition to information about the size
902 One commenter expressed concern that the
Proposing Release did not explain how market
participants would use the data (See Citadel Letter,
at 9). However, the Proposing Release provided
specific examples of how the data could be used
(See Proposing Release, 86 FR 69829, 69836,
69840). These examples, and more, are also
provided throughout the current Economic Analysis
and particularly in this part. Similarly, some
commenters expressed concern that the Proposing
Release did not identify who, other than regulators,
would benefit from certain data (see, e.g., ICI Letter
1, at 9). However, the same discussions of how
market participants would use the data also provide
discussions of how various market participants
would benefit from the data. In this vein, this part
discusses a variety of uses and benefits of Rule 10c–
1a data.
903 See supra Part IX.B.2 for additional discussion
of bias in existing securities lending data.

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of the loan and the loan fee, the data
provided by the final rule contains a
number of other data fields which allow
market participants to parse the data to
analyze the subset of transactions that
are most relevant to their needs.
There are a few dimensions where
data provided by commercial data
providers may be similar to or provide
information not provided by the Rule.
The data provided by the final rule is
disseminated next day, which is similar
to the timeliness of much of the data
provided by the commercial data
providers except that some commercial
data providers offer subsets of intraday
transaction data that is timelier than the
data provided by the final rule.
Additionally, the data provided by the
Rule masks loan size for 20 business
days. Consequently, existing data
providers’ information regarding shares
on loan will be considerably timelier
than the data provided by the Rule.
Lastly, the Rule does not provide
information about utilization rates, and
so market participants wishing to
observe utilization rates will need to
maintain access to commercial datasets.
First, the improvement in securities
lending rate information and the ability
to create bespoke benchmarks will
improve the quality of information that
market participants rely on to make
decisions regarding investment
strategies that require borrowing
securities and the cost of those
strategies.904 An increase in the quality
of information regarding the costs of
borrowing a security may decrease risk
and thereby increase the risk-adjusted
profits of pursuing investment strategies
that require borrowing securities, such
as short sales.905 For example, prior to
a short sale transaction, the end
borrower will be able to get a better
sense of the likely costs associated with
such an investment strategy by
examining the data regarding recently
transacted securities loans, as well as
information provided by an RNSA about
aggregate transaction activity and cost to
borrow.906
Access to Rule 10c–1a data may also
benefit investors by enabling them to
make more informed decisions about
whether to buy, hold, or sell a given
904 See supra in this part for a discussion of how
the final rule will improve transparency through
increased comprehensiveness, breadth, and
accessibility of securities lending data.
905 See supra this part for further discussion of
the expected economic effects of the final rule
through its impact on short selling.
906 See infra this part for a discussion of the
Commission’s uncertainty regarding how the
aggregated information disseminated by an RNSA
will compare to currently available data and the
range of analyses that market participants will be
able to perform using this information.

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security. This will occur as they will
have increased certainty regarding
lending rates and which securities are
most likely to be profitably lent or not,
leading to better risk allocations,
investment decisions, and ultimately
risk-adjusted returns. Extant research
has demonstrated that securities lending
data have information relevant to the
prices of the underlying security.907 By
making securities lending information
both more granular and more accessible
for market participants, final Rule 10c–
1a will enable investors to utilize data
to gain insights into the underlying
security. As investors become more
informed, their investment decisions are
expected to improve.
Additionally, an improved view of
current lending market conditions for
various securities may help inform
beneficial owners in making better
decisions concerning which shares to
make available for lending, potentially
leading to more profitable lending. For
example, to the extent that beneficial
owners do not currently have a clear
means of determining which securities
have high average lending rates Rule
10c–1a data may alert them about
securities with high borrowing costs,
which would enable them to better
optimize which shares in their portfolio
to make available for lending.908
Furthermore, as a result of having better
access to information about the
securities lending market, financial
institutions will be able to improve their
collateral and balance sheet
management.909
Second, a clearer understanding of
lending market conditions, and
specifically lending market rates,
facilitated by the dissemination of Rule
10c–1a data may benefit broker-dealers
by decreasing the search costs incurred
to obtain a locate in order to facilitate
907 See Duong, et al. (2017) supra note 812. This
study shows that, after controlling for the level of
short selling, securities lending fees are predictive
of future stock returns with higher fees associated
with lower future returns. These results imply that,
all things equal, lenders charge higher fees to lend
their shares when they have negative information
about a company. See also Kaitlin Hendrix & Gavin
Crabb, Borrowing Fees and Expected Stock Returns
(Nov. 6, 2020), available at https://papers.ssrn.com/
sol3/papers.cfm?abstract_id=3726227 (retrieved
from SSRN Elsevier database).
908 This decision can be important because
beneficial owners that engage in securities lending
activities consistent with the SEC staff’s current
guidance limit the portion of their portfolios that
can be on loan at any point in time. See supra note
778. This additional information may help a
beneficial owner that is close to its program limit
optimally choose which shares to make available
for lending.
909 See supra Part IX.B.1 for further discussion of
the use of securities lending by financial
institutions for collateral and balance sheet
management.

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a short sale on behalf of a customer.910
The increase in transparency under the
final rule will allow broker-dealers to
better ascertain current prevailing
lending rates for security loans with
certain characteristics prior to calling
lending programs to get competing
quotes. Broker-dealers tend to find loans
for their customers through the network
of lending programs with which they
have relationships, after they have
exhausted their own inventory and
customer margin accounts.911 Rule 10c–
1a data will enable them to determine
with greater ease whether a quote from
a lending program is competitive. It is
possible that new broker-dealers may
choose to enter the market for lending
services 912 because of this reduction in
cost, which may further increase
competition between broker-dealers.913
Third, final Rule 10c–1a will benefit
lending programs by providing a means
by which they may improve the
performance of their lending. Rule 10c–
1a data will provide lending programs
with a source of securities lending
market data that is more comprehensive
than existing commercial data. With
these data, the lending programs will
have an improved ability to determine
prevailing market conditions as they
compete to lend shares, which may
improve their lending performance.
Fourth, more comprehensive,
granular, and accessible securities
lending information may also lead to
additional business opportunities for
commercial securities lending data
vendors.914 In addition to data products,
commercial data vendors also provide
analytics to their customers,915 and may
be able to support these analytics data
services with the data provided by the
final rule. Further, because the
commercial data vendors would be less
dependent on their data providers for
data, they may be able to provide
910 Regulation SHO requires a broker-dealer to
have reasonable grounds to believe that a security
can be borrowed so that it can be delivered on the
date delivery is due before effecting a short sale
order in any equity security. This ‘‘locate’’ must be
made and documented prior to effecting the short
sale. See 17 CFR 242.203(b)(1) and (2). See also Key
Points about Regulation SHO, available at https://
www.sec.gov/investor/pubs/regsho.htm.
911 See supra note 798 discussing broker-dealers’
preferences for sourcing shares for loans. See also
supra Parts IX.B.1 and IX.B.4 discussing the role of
broker-dealers in facilitating borrowing by
customers.
912 See supra Part IX.B.4 for further discussion of
the market for lending services.
913 See infra Part IX.D.2 for further discussion of
the expected effects of the final rule on competition
between broker-dealers.
914 The Commission acknowledges that the final
rule may also result in lost revenue for commercial
securities lending data vendors. See infra Part
IX.C.4 for further discussion.
915 See supra Part IX.B.5.

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analytics to more market participants.
This may result in increased
competition for data analytics services
as the barriers to entry for providing
analytics services decline and new
entrants compete to provide analytics
services.916 While this effect may lower
what the data vendors can charge for
analytics services, to the extent that the
commercial data vendors offer their
customers other securities lending
services, such as execution services, the
final rule may enhance their other
business lines by providing more
comprehensive data to support other
securities lending market services. To
the extent that there is a demand for
covered persons to contract privately
with third party vendors to assist in
reporting under final Rule 10c–1a, this
would likely also lead to additional
business opportunities for commercial
securities lending data vendors, as these
vendors already have experience with
handling and disseminating securities
lending data and could leverage that
experience to offer such services to
customers.917
Ultimately, the improved information
access will result in improved market
quality in the security lending market.
More informed investment decisions
facilitated by the final rule may improve
market stability by allowing investors to
better manage risk. Furthermore, as all
participants in the securities lending
market will be able to obtain better data
on that market, utilize the insights
contained in the data, and then improve
their decisions based on it, the price
discovery process will improve. This
will lead to more efficient prices for
securities loans.918 This improved
information access may also improve
price discovery in the market for the
securities underlying the security loans,
as information about the underlying
security will have a greater opportunity
to incorporate into the price of the
underlying security.919
The requirement to report all of the
data elements under paragraph (c) the
first time the modification of a ‘‘dayone’’ loan (that is, loans in existence
916 See infra Part IX.D.2 for further discussion of
the expected effects of the final rule on competition
for securities lending data analytics services.
917 While covered persons can use third party
vendors to help prepare their reports, such vendors
would not be reporting agents under final Rule 10c–
1a. See supra Part VII.B.2.
918 This effect may be concentrated among stocks
that are ‘‘on special’’ and have higher borrowing
costs, in which there are more opportunities for an
increase in price efficiency to lower fees. See supra
in this part for a discussion on why the Commission
expects the economic effects of the final rule to be
concentrated among hard-to-borrow stocks.
919 See infra Part IX.D.1 for further discussion of
the expected effects of the final rule on price
efficiency.

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
prior to the final rule’s reporting date for
covered persons) occurs will avoid the
exclusion of certain loan information
during the early phases of
implementation.920 This will enhance
the extent to which Rule 10c–1a data
improves informational efficiency
during the earlier phases of
implementation. In the Wholesale
market lending largely facilitates
clearing and settlement, and for
commonly lent securities it is possible
that a broker dealer could have a
continuous need to borrow the security.
In this case the broker dealer likely
would enter into a loan that is kept open
for an extended period of time, but with
frequent size and/or rate modifications
to match their ongoing settlement needs
and market conditions.921 Therefore,
absent such a requirement, all the terms
of such a lending arrangement would
not be fully reportable unless the
existing loan is closed out and a new
one is opened. It could take a
considerable amount of time for this to
occur and thus the data collected by the
Rule would lack the full context for
such loans until they were closed and
then re-entered into. The lack of
information about these loans would
harm data quality because it would
render the data less complete and would
thus limit market participants’ ability to
determine conditions in the lending
market and would thus mitigate the
benefits described in this section.
Ensuring that these loans are included
upon their first modification improves
the quality of the data in the earlier
phases of reporting which would in turn
speed up the time when the benefits
articulated will become fully available
to market participants.
Potential Limits to Benefits and Sources
of Uncertainty

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Commenters mentioned a number of
factors that may limit the extent to
which the rule increases transparency in
the securities lending market, and
thereby limit the associated benefits as
well. However, despite these potential
limitations, the Commission expects
that final Rule 10c–1a will improve the
transparency and efficiency of the
securities lending market, which will
improve market participants’ access to
920 Several commenters sought clarification on
issues related to ‘‘day-one’’ loans. See supra note
429 and corresponding text for a discussion of and
response to these commenters.
921 For example, FIS data on returned securities
suggest that while the average security returned in
the Wholesale market had been on loan for about
a month, some loans were open for up to a year or
more. See also Blackrock Letter, at 9 and supra note
434 and surrounding text.

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information and lower their information
asymmetry.
Commenters noted that loan fees are
determined by a variety of factors, some
of which are not directly included in
Rule 10c–1a data.922 Though the
Commission believes that the final rule
will improve market participants’ ability
to compare loans, the Commission
recognizes that the data provided will
not include information about all of the
factors that are relevant to the pricing of
securities loans. As such, two loans may
appear to be similar based on the Rule
10c–1a data but may not have the same
fees due to factors not recorded in the
data, such as the counterparty risk or
the stability of the portfolio. Some
commenters expressed concern that
failing to provide all information
relevant to pricing would lead the data
to be either not useful, potentially
misleading, or even harmful.923
The Commission recognized in the
Proposing Releases and continues to
acknowledge that Rule 10c–1a data will
not contain all information needed to
perfectly price loans.924 However,
compared to the baseline level of
information available to market
participants, the more granular,
922 See, e.g., Citadel Letter, at 9; Overdahl Letter,
at 6; RMA Letter, at 6; MFA Letter 1, at 5; SIFMA
Letter 1, at 15. See also supra note 780 and
corresponding text.
923 See, e.g., Citadel Letter, at 9, stating that the
‘‘Commission does not explain why it would be
useful for one investor to know what another
investor paid on a loan without knowing any of the
material facts of the other investor’s relationship
with its broker-dealer.’’ Similarly, see RMA Letter,
at 6 (stating that ‘‘there is no reason to believe that
securities lending transactions are fully fungible or
that pricing can be represented in a single ’spot’
market price’’); see Overdahl Letter, at 6 (stating
that ‘‘the fact that one market participant borrowed
a security at a certain rate is not necessarily
informative about the value of a loan with a
different market participant.’’). Furthermore, several
commenters expressed concern that such
information could be misleading. See, e.g., MFA
Letter 1, at 9 (stating that, since ‘‘rates in the
[Customer] Market are based on many variables
specific to a broker-dealer-client contractual
relationship,’’ transaction-by-transaction loan data
‘‘may actually result in a distorted representation of
the actual market.’’). See also ISLA Letter, at 2, who
similarly state that fee/rebate data ‘‘may create an
unrealistic and misleading portrayal of prevailing
rates.’’ See also SIFMA Letter 1, at 14, stating that
‘‘intraday loan-by-loan data can be misleading
based on circumstances unique to certain securities
loan transactions.’’ See also supra note 732 and
corresponding text for a discussion of the variety of
factors that can affect the pricing of securities loans.
Other commenters expressed their opinion that
pricing information would be valuable to market
participants. See, e.g., James J. Angel Letter, at 2–
3.
924 See, e.g., Proposing Release, 86 FR 69839,
recognizing that benefits would be somewhat
limited by the fact that the data does not contain
‘‘all information necessary to perfectly compare the
fees on different loans,’’ but concluding that ‘‘the
proposed Rule improves the ability to compare
loans.’’

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comprehensive, and accessible data
provided by the final rule will improve
market participants’ abilities to compare
loans and provide numerous benefits to
market participants.925 The Commission
does not believe that this information
will be misleading or harmful because,
as the commenters make clear, it is well
understood in this market that the
pricing of loans is determined by many
factors.926 Knowing this, beneficial
owners and end borrowers will be able
to use this information to create, for
example, an expected range of
borrowing costs and use these data to
facilitate conversations with their
lending agent or broker dealer about
why certain loans have prices that they
do, or why a specific loan falls where
it does in the distribution of similar
loans. Further, to the extent that the
distribution of borrowing costs provides
information that is relevant to stock
prices, this information alone could
improve price efficiency in the
underlying securities market.927
One commenter questioned the utility
of information about borrowing costs,
asserting their belief that the cost to
borrow is not as important to the
execution of short sale strategies as
whether there are shares available to
borrow.928 The Proposing Release
acknowledged that information on
shares available is useful to markets.929
Rule 10c–1a data will not specifically
provide information on shares available.
Market participants seeking such
information may need to contract with
current commercial data vendors, if they
can, for estimates of shares available
and utilization rates. However, since
borrowing costs are correlated with the
ease of locating securities to borrow, the
improved access to fee information
provided by the final rule will provide
market participants with increased
information regarding the availability of
shares to lend.930
925 See supra in this part for a discussion of these
benefits.
926 See, e.g., the information provided by
commenters in supra note 732.
927 See, e.g., Duong, et al. (2017), who find that
information derived from securities lending data
can be used to predict stock returns.
928 See S3 Partners Letter, at 9 (stating that ‘‘We
do not believe the Commission has explored if the
costs to borrow are material to the execution of a
short sale strategy. We believe a bigger issue may
be the lack of shares to borrow, not the cost of
borrowing.’’); Other commenters, however, did
believe that loan pricing information would provide
useful and meaningful information. See, e.g., PM
Letter 2, at 3; and James J. Angel Letter, at 1.
929 See, e.g., Proposing Release, 86 FR 69834,
69840.
930 See Kolasinski (2013) supra note 736 (writing
on the link between the cost to borrow and
availability of shares to lend).

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Some commenters expressed concern
that the data may be too granular to be
directly usable by market
participants,931 and at least one
commenter expressed concern that the
final rule could increase information
asymmetries if the complexity of the
data are such that only the largest and
most sophisticated market participants
would be able to benefit.932 The
Commission is mindful that the reports
prepared according to the final rule will
contain a large volume of statistical
data, and as a result it may be difficult
for some market participants to review
and digest the reports. However, by
requiring reporting entities to report
transaction-level information in a
uniform manner rather than aggregated
data, the final rule will make it possible
for market participants and other
interested parties to make their own
determinations about how to group
securities or loans when comparing
across loan transactions. Requiring more
detailed data will also help ameliorate
potential concerns about overly general
statistics, or about the specific
categorization of loans and selection of
aggregated metrics, by allowing market
participants and other interested parties
to conduct their own analysis based on
alternative categorizations of the
underlying data. Should certain market
participants not have the means to
directly analyze the detailed statistics,
third parties, such as commercial
securities lending data vendors, likely
will respond to the needs of investors by
analyzing the disclosures and producing
more digestible information using the
data.933 Additionally, this concern is
mitigated somewhat by the requirement
that an RNSA provide information about
the distribution of loan rates at the
security level,934 which could be more
easily used similar to current data
models.
One commenter suggested that the
inclusion of short positions data would
lead to double counting and could
confuse market participants.935 Short
positions are not required to be
reported, but loans from a broker-dealer
to an end customer—such as might
support a short position—will be
marked in the data as loans to a
931 See, e g., IHS Markit Letter, at 13; RMA Letter,
at 18.
932 See IHS Markit Letter, at 14.
933 See supra Part IX.B.5 for a discussion of
commercial data vendors’ current offering of
securities lending data analytics services, and above
in this part for a discussion of the expected effects
of the final rule on creating new business
opportunities for providers of securities lending
data analytics services.
934 See final Rule 10c–1a(g)(5), requiring an RNSA
to disseminate aggregated daily information.
935 See MFA Letter 3, at 4.

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‘‘customer (if the lender is a brokerdealer).’’ The Commission does not
believe that the inclusion of such data
constitutes double counting because a
loan from a broker-dealer to their
customer (e.g., to facilitate a short sale
and where the broker-dealer is the
lender) is a distinct economic activity
from a loan that the broker-dealer may
engage in as the borrower (e.g., to meet
their own clearing and settlement
obligations).936 The Commission does
not believe that such data will lead to
confusion because these loans are
marked in the data in a way that allows
market participants to separate customer
loans from other loans in their analysis.
One commenter suggested that
including rebate data could lead to
confusion because rebates are often
fixed to benchmarks that can change
from day to day, potentially leading to
many, perhaps daily, modifications of
the loan needing to be submitted and
that the volume of these data could
confuse market participants.937 The
extent to which the commenter’s
concern is realized will be determined
by how an RNSA chooses to structure
the reporting of this variable.938 For
instance, if an RNSA chooses to allow
market participants to report a spread
and a benchmark, then no modifications
would be required to be reported from
day to day unless there were a change
in the negotiated spread or benchmark.
However, if an RNSA chooses to require
market participants to report the total
fee, then market participants would be
required to report changes to the fee if
the benchmark changes, which could
require daily revisions.939 However, the
Commission does not believe that this
will cause confusion. The Commission
expects that market participants know
that rebates can change regularly and
thus revisions would not be unexpected.
Further, gathering loan modification
data is important to facilitate the
accurate computation of statistics
regarding the cost to borrow by an
RNSA and other market participants.
At least one commenter suggested that
some of the benefits of the Rule from
reducing information asymmetries may
be limited as a result of switching
costs.940 The Commission acknowledges
936 See

supra Part IX.B.2.
MFA Letter 3, at 5.
938 See supra Part VII.F.1 for additional
discussion of the reporting of this data.
939 See the last paragraph of Part VII.F.1 and
surrounding text for additional discussion of the
latitude granted to an RNSA in determining the
specific format required for the loan cost
information.
940 See, e.g., Citadel Letter, at 8. One commenter
suggested that switching costs between lenders and
lending agents could increase because of the rule;
See CSFME Letter 1, at 5. The Commission
937 See

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that the cost of switching to a new
broker-dealer can be high,941 and that
high switching costs may make it more
difficult for some end borrowers to
easily switch their broker-dealer for one
that would offer them better terms on a
loan.942 However, at the same time, by
increasing end borrowers’ access to
comprehensive information about the
securities lending market, final Rule
10c–1a will improve end borrowers’
ability to determine which brokerdealers are offering better loan terms, as
well as to negotiate better terms with
broker-dealers. Both of these will
increase the benefits to end borrowers
from switching broker-dealers. Holding
switching costs constant,943 final Rule
10c–1a could thus still result in more
end borrowers finding it beneficial to
switch to better-performing brokerdealers. Furthermore, as discussed in
the Proposing Release,944 even for those
borrowers for which switching brokerdealers would not be cost effective, the
data would provide benchmark statistics
that may enable smaller borrowers to
select higher performing broker-dealers
initially.
The benefits of the final rule may be
limited if the rule results in a reduction
acknowledges this possibility and discusses further
below in Part IX.C.4. See also S3 Partners Letter, at
9, stating ‘‘[p]rice transparency does not change a
borrower’s need to execute a short sale strategy with
the brokers that they already have existing
agreements with.’’ See also supra in this part for a
discussion of studies of the introduction of TRACE
and the impact of transparency on price.
941 See supra Part IX.B.4 for a discussion of costs
related to switching broker-dealers.
942 However, several factors may mitigate high
switching costs. For example, some institutional
investors are likely to have multiple prime brokers,
which would facilitate the transfer of business to
better-performing broker-dealers (see supra note
806), and, for individual investors, transferring
between retail brokers may be less costly, for
example, because some retail brokers will
compensate new customers for transfer fees that
their outgoing broker-dealer may charge them. See,
e.g., Chad Morris, ACAT Fee: Account Transfer Fee
in 2023, Brokerage-Review.com, available at https://
www.brokerage-review.com/discount-broker/acataccount-transfer-fees.aspx, last visited Aug. 28,
2023 (providing a list of fees for different brokers).
The effect of switching costs on competition may
also depend on the variability of the quality of
broker-dealers’ lending services over time. For
example, if the quality of any broker-dealer’s
lending quality varies significantly over time,
customers of those broker-dealers may find it
optimal to switch between broker-dealers with
some frequency, which would increase their overall
switching costs. On the other hand, if the quality
of broker-dealers’ lending services is relatively
constant over time, the number of times that a
customer would optimally want to switch between
broker-dealers would likely be more limited, and in
this case switching costs may be a relatively small
and/or short-term friction.
943 At least one commenter expressed concern
that the proposed rule may result in increased costs
when switching lending agents. See CSFME Letter
1, at 5.
944 See Proposing Release, 86 FR 69837 n.221.

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in the supply of securities loans. A
lower supply of securities loans, for
example, could weaken or even
counteract the rule’s expected effect on
lowering borrowing costs.945 As
previously discussed, the Commission
believes that the empirical evidence
does not show an increase in securities
lending transparency would result in a
decrease in the supply of securities
loans.946 However, another possibility
that was pointed out by commenters is
that the supply of securities loans could
decrease if compliance costs are passed
on to lenders and beneficial owners,
who are then less willing or able to
participate in the securities lending
market as a result.947 The Commission
recognizes that some market
participants, including beneficial
owners, may experience reduced
revenue from securities lending as a
result of the rule.948 However, the
Commission expects that beneficial
owners and lenders will for the most
part benefit from the final rule, as a
result of increased information about
the securities lending market and
reduced information asymmetry.949 This
benefit, which could even encourage
more beneficial owners and lenders to
enter the securities lending market,
would serve to mitigate an increase in
cost and a subsequent decrease in
lending, to the extent that it would
occur.
One commenter stated that securities
lending data would be less useful for
corporate bonds and asset-backed
securities (ABS) because, due to the
‘‘the greater diversity of bond
characteristics, data from one set of
bonds cannot be as easily used as
benchmarks for others,’’ and as a result
‘‘there is little indication that data from
corporate bond or ABS lending
transactions would be sufficiently
useful to justify the reporting costs.’’ 950
As discussed above, the Commission
acknowledges that the data provided
will not include information about all of
the factors that are relevant to the
pricing of securities loans. It is possible

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945 See

supra in this part for discussions of the
Commission’s expectation that the final rule will
lower borrowing costs for some securities.
946 See supra in this part for further discussion for
this literature.
947 See, e.g., State Street Letter, at 4, stating that
‘‘greater costs are also likely to create additional
dis-incentives for institutional investors to
participate in the securities lending market, with
broadly negative implications for liquidity.’’
948 See infra Part IX.C.4 for further discussion of
the expected effect of the final rule on securities
lending revenues.
949 See supra in this part for a discussion of the
expected benefits of the final rule from reduced
information asymmetry between beneficial owners
and lending programs.
950 See RMA Letter, at 16.

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that this limitation on the benefits may
be higher for certain infrequently loaned
securities, such as corporate bonds.
However, the Commission believes that,
even for less liquid lending markets,
Rule 10c–1a will still reduce
information asymmetries and improve
pricing efficiency by facilitating better
benchmarking than is currently
possible, and thus will represent an
improvement relative to the baseline
similar to other assets discussed. For
example, market participants will be
able to use Rule 10c–1a data to pool
information across similar securities
and/or similar time horizons to create
their own bespoke benchmarks for loan
terms.
The commenter also stated that
securities lending data would be less
useful for U.S. Government securities
because ‘‘the market for these products
is already fairly transparent,’’ and thus
‘‘imposing reporting obligations would
not provide sufficient additional data to
justify the compliance burden.’’ 951 As
discussed in the Baseline, the
Commission believes that information
asymmetries in the lending market for
U.S. Government securities loans are
unlikely to be fully addressed by the
currently available datasets, and thus
this market will ultimately still benefit
from an increase in transparency.952
While the adoption of final Rule 10c–
1a will lead to benefits from an overall
increase in transparency, the
Commission acknowledges that, in some
areas, there is uncertainty as to how the
information content of Rule 10c–1a data
will compare to that of existing data.
The requirement for an RNSA to
disseminate daily information about
aggregate transaction activity and
distribution of loan rates will also
provide market participants with
information about the securities lending
market.953 However, how the aggregate
information disseminated by an RNSA
will compare to the information
available from current commercially
available datasets, and the range of
analyses that market participants will be
951 See

RMA Letter, at 16.
952 See supra Part IX.B.2 for further discussion of
the Commission’s understanding of the current state
of transparency in the market for U.S. Government
securities lending. The Commission also
acknowledges that, in addition to the market for
U.S. Government securities lending, there may be
other securities lending markets with higher
transparency. However, the Commission believes
the regulatory benefits discussed in this part will
still apply, as will the benefits for data consumers
from the additional context provided by the Rule
10c–1a data, such as information about whether the
borrower is a broker or dealer, a customer (if the
person lending securities is a broker or dealer), a
clearing agency, a bank, a custodian, or other
person.
953 See final Rule 10c–1a(g)(5).

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able to perform using this information,
will depend on the specific aggregate
statistics that an RNSA chooses to
publish.
The Commission bases its estimates
on an RNSA providing daily
information that is at least as
informative as comparable statistics that
are currently provided by the
commercial datasets. This is because,
consistent with section 19(b) of the
Exchange Act, any changes to an RNSA
rules required by final Rule 10c–1a,
including its Rule 10c–1a information
collection and dissemination practices,
would have to be filed with the
Commission pursuant to section 19(b)
and Rule 19b–4 prior to
implementation.954 Such rules would
also be subject to public comment.955
This process offers market participants
the opportunity to provide feedback on
the potential specific statistical form of
the aggregated daily information based
on, e.g., their experience using
information from commercial datasets.
As such, the daily information provided
by an RNSA could be at least as
informative as those statistics provided
by current data providers. Therefore, at
a minimum, the Commission expects
that the final rule will result in a
positive benefit to market participants
in the form of increased securities
lending market transparency. This is
because, while the aggregate
information released by an RNSA may
be the same or similar to what is
currently provided by commercial
datasets, the comprehensiveness and
accessibility of the Rule 10c–1a data is
expected to be better than that of
commercial data, such that aggregate
information produced using Rule 10c–
1a data can be expected to be better than
that produced using currently available
commercial data.956
2. Regulatory Benefits
Final Rule 10c–1a will improve upon
current data sources by providing an
RNSA (i.e., FINRA) 957 and the
954 See supra Part II.J for further discussion of
how the final rule handles RNSA Rules to
administer the collection of information.
955 15 U.S.C. 78s(b). See also FINRA, FINRA
Rulemaking Process, available at https://
www.finra.org/rules-guidance/rulemaking-process,
last visited Aug. 24, 2023.
956 See supra Part IX.B.2 for a discussion of issues
related to the currently available commercial
securities lending datasets. For example, in contrast
to commercial datasets, since it is not based on
voluntary submissions, final Rule 10c–1a data will
be less likely to be prone to bias, and thus aggregate
information that is constructed using final Rule
10c–1a data will be less prone to biases as well.
957 Currently, FINRA is the only RNSA. Although
the final rule applies to ‘‘an RNSA,’’ this portion of
our analysis describes benefits to and involving

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Commission access to securities lending
information that identifies the parties to
the loans, indicates when a brokerdealer loans its own securities to its
customers, and indicates whether the
purpose of such a loan was to close out
a failure to deliver.958 Further, the
improved access and
comprehensiveness and reduced bias of
the publicly available data will also
accrue to FINRA and the Commission,
as well as any other regulators using
these data. This access will benefit
investors by enhancing regulatory tools
employed to promote fair and orderly
securities markets. In particular,
investors may benefit from improved
surveillance and enforcement uses,
market reconstruction uses, and market
research uses.
Surveillance and Enforcement Uses
The party identities and purpose
information 959 may facilitate better
surveillance by FINRA for regulatory
compliance by its members, and may
improve its ability to enforce such
regulations. Additionally, FINRA will
be able to notify another regulator as
permitted.
For example, for FINRA, the
information on whether the security is
loaned from a broker-dealer’s securities
inventory to its customer 960 may assist
FINRA in determining whether a brokerdealer is charging lending fees or paying
rebates commensurate with the market.
Thus, beneficial owners and end
borrowers, who engage in securities
lending transactions, will be better
protected against potential unfair
pricing of securities loans by brokerdealers. In addition, FINRA can use the
data more generally to assist in its
surveillance of FINRA Rules 4314, 4320,
and 4330 regarding securities lending
and short selling that primarily intend
to reduce information asymmetry in the
securities lending markets. For instance,
the final rule can help FINRA identify
broker-dealers who tend to lend to or
borrow from non-FINRA members to
examine compliance with provisions of
FINRA Rules 4314 and 4330 that entail
agreement, disclosure, and other
requirements for this activity. In
addition, the information on how much
borrowing particular FINRA members
engage in can assist FINRA in
identifying which broker-dealers to
examine for compliance with FINRA
Rule 4320, which contains short sale
delivery requirements. These types of
FINRA so that we can discuss specific FINRA Rules
and practices that will be affected.
958 See final Rule 10c–1a(e).
959 See id.
960 See 17 CFR 240.10c–1a(e)(2) (‘‘final Rule 10c–
1a(e)(2)’’).

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activities will better protect investors by
helping to ensure that entities engaging
in certain securities lending transactions
are authorized to do so and are in
compliance with applicable regulations.
FINRA can also use the information to
monitor when broker-dealers are
building up risk, thereby protecting
broker-dealers’ customers against
potential instabilities. FINRA can use
data on the identity and activity of its
members to provide an early warning
with regard to the behavior of its
members during a short squeeze.
Additionally, the information on
whether the loan is being used to close
out a fail to deliver 961 is relevant to
Rule 204 compliance. Importantly,
being able to estimate the securities
lending revenues and costs of particular
participants may help to fine tune
disgorgement estimations. The
Commission and FINRA can also use
Rule 10c–1a data to oversee brokerdealer compliance with Exchange Act
Rule 15c3–3.962
The Commission believes that the
requirement pursuant to Rule 10c–1a to
identify all parties to securities lending
transactions with LEIs, if such parties
have LEIs, will facilitate the
Commission and FINRA’s efforts to
monitor securities lending.963 Reporting
of LEIs by legal entity securities loan
participants that have LEIs will help
provide a more precise and consistent
means of identification for loan
participants as compared to using loan
participant names and, if available,
CRDs, IARD Numbers, or MPIDs.964 In
that regard, obtaining an LEI requires
that an entity’s identity be verified by a
third party upon issuance of the LEI and
upon annual renewal of the LEI.965
Additionally, LEIs contain ‘‘Level 2’’
961 See

final Rule 10c–1a(e)(3).
17 CFR 240.15c3–3.
963 Examples of other regulatory entities and
jurisdictions that use LEIs include the U.S.
Commodity Futures Trading Commission (‘‘CFTC’’),
Alberta Securities Commission (Canada), European
Markets and Securities Authority, and Monetary
Authority of Singapore. See Global LEI Foundation,
Regulatory Use of the LEI (Aug. 21, 2023), available
at https://www.gleif.org/en/lei-solutions/regulatoryuse-of-the-lei.
964 More than 2.2 million LEIs have been issued.
See Office of Fin. Res., Legal Entity Identifier,
available at https://www.financialresearch.gov/
data/legal-entity-identifier/, last visited Aug. 23,
2023.
965 See Global LEI System, LEIROC.com, available
at https://www.leiroc.org/lei.htm, last visited Aug.
23, 2023. Information associated with the LEI
includes the ‘‘official name of the legal entity as
recorded in the official registers[,]’’ the entity’s
address, country of incorporation, and the ‘‘legal
form of the entity.’’ See Financial Stability Board
(‘‘FSB’’), Options to Improve Adoption of the LEI,
in Particular for Use in Cross-Border Payments (July
7, 2022), available at https://www.fsb.org/2022/07/
options-to-improve-adoption-of-the-lei-inparticular-for-use-in-cross-border-payments/.

information about the linkages between
the entities being identified and their
parent and child entities,966 which can
better enable Commission staff and
market participants to understand the
relationships between various firms
with an eye toward potential
aggregations of risk. Furthermore,
requiring LEI disclosure for loan
participants that have LEIs also will
facilitate the linkage of data reported
about securities loans with any relevant
data, such as data on short sales or
positions, from other sources.967
However, because the Commission is
not requiring loan participants without
LEIs to obtain and report them, the
aforementioned benefits will only arise
for reported securities loans in which
participants have LEIs.
One commenter expressed concern
that, to the extent that there is a wide
variance in interpretation of data, the
rule could result in ‘‘false positive’’
enforcement actions.968 Conversely, the
Commission believes that improvements
in securities lending data will enhance
the ability of FINRA and the
Commission to oversee the securities
lending market and more efficiently
detect potential rule violations, such as
those described above. This will result
in more targeted actions, which will
benefit market participants by resulting
in more efficient oversight.
Market Reconstruction Uses
Final Rule 10c–1a may help regulators
reconstruct market events. For example,
in January 2021, trading in so-called
‘‘meme’’ stocks led to many questions
about securities lending being asked by
lawmakers, investors, and the media as
well as calls by some for increased
regulation in some areas.969 Rule 10c–1a
data will allow for more detailed
evaluations of such events in the future

962 See

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966 See Global LEI Foundation, Level 2 Data: Who
Owns Whom, available at https://www.gleif.org/en/
lei-data/access-and-use-lei-data/level-2-data-whoowns-whom, last visited Aug. 22, 2023.
967 For example, the European Union’s SFTR
requires legal entity parties to securities financing
transactions to provide their own LEIs and the LEIs
of their counterparties to trade repositories. See
ESMA Updates Its Statement on the
Implementation of LEI Requirements for ThirdCountry Issuers Under the SFTR Reporting Regime
(Apr. 13, 2021), available at https://www.esma.
europa.eu/press-news/esma-news/esma-updates-itslei-statement. The EU has numerous LEI
requirements for entities operating in its securities
markets, including, inter alia, for credit and
financial institutions (pursuant to the Capital
Requirements Regulation) and for fund and fund
managers (pursuant to the Alternative Investment
Funds Directive). See id. Likewise, as mentioned,
the CFTC requires counterparties identify
themselves to the agency with LEIs in connection
with swap trades, including long-and-short equity
index swap trades. See 17 CFR 45.6.
968 See S3 Partners Letter, at 8.
969 See, e.g., Proposing Release, 86 FR 69803 n.11.

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
than was possible with existing data
during January 2021. For example,
January 2021 information on market
participants’ securities lending activity
would have provided FINRA and
Commission staff a more timely and
comprehensive view of who was
entering into new loans and who was no
longer borrowing securities. This would
have facilitated a deeper understanding
of how the events were or were not
impacting market participants. Such
analyses can help determine if further
regulatory intervention in markets is
warranted and can inform the nature of
any intervention.
Market Research Uses
Greater access and more
comprehensive data on the securities

lending market will improve the quality
and expand the scope of research by
both academics and regulators, which
will better inform the regulators. In
particular, improving the information
available for their policy decisions will
promote fair, orderly, and efficient
markets and the protection of investors.
For example, the data could facilitate
research on the effectiveness of
regulations such as Regulation SHO or
FINRA Rules 4320 and 4330.
Additionally, research conducted by
academic researchers and market
participants could also improve the
value of public comment letters on
Commission and FINRA proposals,
which will also better inform policy
decisions.

75717

3. Direct Compliance Costs
Final Rule 10c–1a will require various
entities to enter into contracts and
develop recording and reporting
systems to comply with the final rule.
This section provides estimates of those
costs. We note that the Commission has
provided certain estimates for purposes
of compliance with the Paperwork
Reduction Act of 1995 (‘‘PRA’’), as
further discussed below, in Part X.
Those estimates, while useful to
understanding the collection of
information burden associated with the
final rules, do not purport to reflect the
full economic costs associated with
making the required disclosures.

TABLE 2—TOTAL QUANTIFIED COMPLIANCE COSTS
Total initial
industry cost

#
Covered Persons and Reporting Agents ...................................................................
RNSA .........................................................................................................................

609
1

Total annual
industry cost

a $522,590,000

b $233,260,000

c 3,880,000

d 2,760,000

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a $522,590,000 ≈ sum of estimates in infra Table 3 note m and Table 4 note h. The Commission estimates the wage rate associated with
these burden hours based on salary information for the securities information compiled by SIFMA. The estimated wage figure for attorneys, for
example, is based on published rates for attorneys, modified to account for a 1,800 hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead yielding an effective hourly rate for 2013 of $380 for attorneys. See Securities Industry and Financial Markets Association, Management & Professional Earnings in the Securities Industry—2013. These estimates are adjusted for an inflation rate of 29.89% based on the Bureau of Labor Statistics data on CPI–U between Sept. 2013 and May 2023. See U.S. Bureau of Labor Statistics, CPI Inflation Calculator, available at https://www.bls.gov/data/inflation_calculator.htm. Therefore, the current inflation-adjusted effective
hourly wage rates are estimated at $494 ($380 × 1.2989) for attorneys, $409 ($315 × 1.2989) for compliance managers, $338 ($260 × 1.2989)
for senior systems analysts, and $83 ($64 × 1.2989) for compliance clerks.
b $233,260,000 = estimate in infra Table 3 note n.
c 10,924 hours × (0.75 × $338/hour + 0.25 × $409/hour) ≈ $3,880,000. See infra note 1196 and note a.
d 7739.5 hours × (0.75 × $338/hour + 0.25 × $409/hour) + 52 hours × $83/hour ≈ $2,760,000. See infra note 1199 and note a.

Table 2 shows that the Commission
believes that final Rule 10c–1a will
impose a one-time cost of $3.88 million
and ongoing expenses of $2.76 million
on FINRA, the only RNSA. An RNSA
will incur these costs to develop
systems to take and disseminate data
required by the final rule. These include
larger costs associated with creating and
maintaining the infrastructure to enable
providing covered persons and
reporting agents to provide an RNSA
with Rule 10c–1a information and

entering into written agreements with
providing covered persons and
reporting agents, as well as smaller costs
associated with providing such
information to the public.970 These costs
will be somewhat mitigated by the fact
that final Rule 10c–1a requires an RNSA
to disseminate the data ‘‘as soon as
practicable,’’ 971 which gives an RNSA
some flexibility to build systems that
mitigate costs.
Table 2 also shows that covered
persons and reporting agents will, in

aggregate, incur roughly $523 million in
initial costs and $233 million annually
in ongoing costs to comply with the
final rule.972 These costs come from
costs to develop and maintain systems
and from costs to enter into
agreements.973 Tables 3 and 4 break
these costs down by those incurred by
reporting agents, and by covered
persons based on the decision by
covered persons to self-report or use a
reporting agent.

970 As discussed in supra Part VII.B.2, covered
persons, including persons that are not RNSA
members, that elect not to use a reporting agent are
responsible for providing the Rule 10c–1a
information to an RNSA directly and may do so
without becoming RNSA members. Therefore, these
costs may include costs to an RNSA of establishing
connections to persons that are not members of an
RNSA.
971 See final Rule 10c–1a(g)(1).
972 As discussed in supra Part VII.A, the
Commission is adopting an exception to the general
approach that reporting requirements do not apply
to the borrower in a securities lending transaction,

specifying that the borrower is responsible for the
reporting obligation in the instance of a broker or
dealer borrowing fully paid or excess margin
securities from a customer; see final Rule 10c–
1a(j)(1). Absent this exception, reporting obligations
may have fallen on broker-dealer customers who
may not have timely access to the required
information, and may have less familiarity with
reporting information to an RNSA than their broker
or dealer; see supra note 145.
973 The Commission expects that the costs
associated with developing a reporting system to be
lower under the final rule as compared to the
proposed rule as a result of the change from the

proposed rule to impose an end-of-day reporting
requirement. As described by some commenters, an
intraday reporting framework would have required
substantial technology development and cost for
those providing covered persons and reporting
agents that may have lacked the capacity to do so.
See, e.g., SBAI Letter, at 1, and IHS Markit, at 13.
Removing the intraday reporting requirement
removes the need for those providing covered
persons to acquire this capacity, thus lowering at
least their initial burden associated with system
design and configuration. See supra Part IX.B.1 for
further discussion.

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TABLE 3—QUANTIFIED COMPLIANCE COSTS FOR SYSTEMS DEVELOPMENT AND MAINTENANCE INCURRED BY LENDERS AND
REPORTING AGENTS
#

Total initial
industry cost
(millions)

Total annual
industry cost
(millions)

Providing Covered Persons a ...................................................................................................................
Non-Providing Covered Persons e ...........................................................................................................
Reporting Agents i ....................................................................................................................................

b 255

c $272.01

d $122.40

f 248

g 132.27

h 59.52

j 106

k 113.07

l 51.34

Total ..................................................................................................................................................

609

m 517.34

n 233.26

a Providing

covered persons would provide information directly to an RNSA.
estimated number of providing covered persons includes 4 broker-dealer intermediaries, 217 persons that effect a covered securities
loan as the lender when an intermediary is not used, and 34 broker-dealers borrowing fully paid or excess margin securities. See infra Part X.
c 3,000 hours × 255 × (0.75 × $338/hour + 0.25 × $409/hour) ≈ $272,010,000. See infra note 1157 and supra Table 2 note a.
d 1,350 hours × 255 × (0.75 × $338/hour + 0.25 × $409/hour) ≈ $122,400,000. See infra note 1161 and supra Table 2 note a.
e Non-providing covered persons would use a reporting agent to provide information to an RNSA.
f The estimated number of non-providing covered persons would include 31 non-broker-dealer intermediaries and 217 persons that effect a
covered securities loan as the lender when an intermediary is not used. See infra Part X.
g 1,500 hours × 248 × (0.75 × $338/hour + 0.25 × $409/hour) ≈ $132,270,000]. See infra note 1163 and supra Table 2 note a.
h 675 hours × 248 × (0.75 × $338/hour + 0.25 × $409/hour) ≈ $59,520,000. See infra note 1167 and supra Table 2 note a.
i Reporting agents would provide information directly to an RNSA.
j The number of reporting agents includes 97 broker-dealers and 9 clearing agencies. See infra Part X.
k 3,000 hours × 106 × (0.75 × $338/hour + 0.25 × $409/hour) ≈ $113,070,000. See infra note 1180 and supra Table 2 note a.
l 1,350 hours × 106 × (0.75 × $338/hour + 0.25 × $409/hour) + 52 hours × 106 × $83/hour ≈ $51,340,000. See infra notes 1181 and 1191
supra Table 2 note a.
m $517.34 million ≈ sum of estimates in supra notes c, g, and k.
n $233.26 million ≈ sum of estimates in supra notes d, h, and l.
b The

Table 3 shows that covered persons
and reporting agents would incur an
aggregate of roughly $517 million in
initial costs and $233 million annually
in ongoing costs to develop and
maintain systems for reporting
securities lending information. These
include larger costs associated with
developing and reconfiguring their
current systems to capture the required
data elements, as well as smaller costs

associated with implementing changes
and monitoring systems, most of which
would be incurred by covered persons
who provide the Rule 10c–1a
information to an RNSA instead of
relying on a reporting agent to do so.974
It is possible that some providing
covered persons could privately
contract with third party vendors to
assist them with their reporting
obligations.975 The potential for third

party vendors, such as existing
securities lending data vendors, to
leverage their existing experience with
collecting and disseminating securities
lending data as well as economics of
scale could result in lower compliance
costs. If this is the case, the compliance
costs for providing covered persons
could be lower than what is reflected in
Table 3.

TABLE 4—QUANTIFIED COMPLIANCE COSTS OF ENTERING INTO AGREEMENTS
Agreement
counterparty

#
Non-Providing Covered Persons a ........................
Reporting Agents d ................................................

b 248

Total initial
industry cost

Total annual
industry cost

c $3,670,000

............

Reporting Agent ...................................................
Person who Provides 10c–1a Information ...........
RNSA ....................................................................

g 8,800

$0
0
0

354

...............................................................................

h 5,250,000

0

d 106

Total ...............................................................

f 1,570,000

a See

supra note Table 3 note e.
supra note Table 3 note f.
c 30 hours × 248 × $494/hour ≈ $3,670,000. See infra note 1171 and supra Table 2 note a.
d See supra note Table 3 note i.
e See supra note Table 3 note j.
f 30 hours × 106 × $494/hour ≈ $1,570,000. See infra note 1185 and supra Table 2 note a.
g 1 hour × 106 × $83/hour ≈ $8,800. See infra note 1188 and supra Table 2 note a.
h $5,250,000 ≈ sum of estimates in supra notes c, f, and g.

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b See

974 In addition, there may be costs for reporting
entities associated with determining whether a loan
is a covered securities loan according to final Rule
10c–1a(j)(2), including whether a particular security
is a reportable security. However, these costs are
likely to be negligible, as many covered persons and
reporting agents, including broker-dealers, are
already required to determine whether a security is
reportable to the CAT, TRACE, or RTRS are part of
their compliance with other regulatory obligations.
The Commission believes that many covered
persons that do not have the resources or expertise
to determine whether a security is a reportable
security will be likely to use reporting agents, who,
as broker-dealers and/or clearing agencies, will

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likely have access to this information. These costs
may also include costs to covered persons that are
not members of an RNSA of establishing
connections to an RNSA. See supra note 970. We
do not expect significant additional costs to result
from the requirement to report information once a
loan modification occurs after that loan qualifies for
reporting. This is because the primary costs
associated with the rule are those associated with
developing and reconfiguring their current systems
to capture the required data elements. The variable
cost of each individual transmission to an RNSA is
expected to be very small. This requirement is not
expected to impact the need for reporting agents to
develop and maintain systems for reporting

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securities lending information, because reporting
agents will be required to develop these systems to
meet the other provisions of the final rule. Rather,
this will simply require the inclusion of some
additional data transfers that occur largely around
the reporting date. Since the cost of individual
transmissions are expected to be small, this aspect
of the final rule is expected to have a small impact
on the compliance costs of the rule.
975 Note that, while covered persons can use third
party vendors to help prepare their reports, such
vendors would not be reporting agents under final
Rule 10c–1a. See supra Part VII.B.2.

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Table 4 shows that covered persons
and reporting agents will incur an
aggregate of $5.25 million in initial costs
and $0 annually in ongoing costs to
enter into agreements for reporting
securities lending information. These
include costs associated with drafting,
negotiating, and executing agreements
with counterparties, most of which will
be incurred by covered persons that
directly employ a reporting agent. There
will not be ongoing costs because, once
an agreement is signed, there will be no
need to modify the written agreement or
take additional action after it is
executed.
One commenter expressed concern
some of the compliance costs incurred
by lending agents could be passed along
to lenders and beneficial owners,
including funds and their
shareholders.976 The Commission
acknowledges that it is possible that
some compliance costs may be passed
along to beneficial owners, for instance,
in the form of higher fees charged for
lending services or lower pro-rated
lending revenue.977 Compliance costs
may also be passed along by brokerdealers to end borrowers in the form of
higher borrowing costs.978 Ultimately,
the extent to which either beneficial
owners or end borrowers may bear some
of the costs of complying with final Rule
10c–1a will depend on the extent to
which covered persons, including
lending agents and broker-dealers, pass
on their compliance costs to their
customers and/or split these costs across
different types of customers. However,
this effect is expected to be mitigated by
the fact that the projected compliance
costs of the final rule as a fraction of an
estimate of the total lending fee revenue
generated is likely small enough to be
within the bounds of a positive profit
margin.979
In addition to the above enumerated
costs, the estimated 361 reporting
entities (i.e., providing covered persons
and reporting agents), as well as
subscribers to Rule 10c–1a data, may be
976 See, e.g., ICI Letter 1, at 10 (stating that ‘‘fund
shareholders will absorb part of the substantial
costs of Rule 10c–1 . . . these costs ultimately will
come directly out of the pockets of beneficial
owners, including funds and their shareholders, to
the detriment of their long-term interests’’). See also
State Street Letter, at 5 (stating that the rule
‘‘approach has the practical effect of imposing all
systems-related cost for the new reporting mandate
solely on agent lenders and their clients (i.e.,
institutional investors, such as pension plans and
mutual funds)’’).
977 See supra Part IX.B.4 for a description of the
market for lending services.
978 This possibility is discussed further in infra
Part IX.C.4.
979 See estimates in infra note 993.

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required to pay fees to an RNSA.980 The
fees that these entities may be required
to pay will depend on a number of
factors, including the number of
reporting entities and subscribers, along
with how an RNSA will choose to split
any such fees between these different
types of entities.
Some commenters expressed concern
that an RNSA would have monopoly
pricing power over the resulting data.981
However, any fee that an RNSA would
charge must be consistent with the
Exchange Act and rules thereunder, and
are subject to Commission review,
notice and public comment.982
Consequently, the Commission believes
that an RNSA is unlikely to exert
monopoly pricing in terms of fees for
the data, and that their fees will be
reasonably related to costs. As shown in
Table 2, the Commission expects an
RNSA to incur ongoing costs of $2.76
million per year. If the 361 providing
covered persons and reporting agents
were the only entities to subscribe to the
data, dividing the cost incurred by an
RNSA by the 361 entities results in an
annual fee per reporting entity of
approximately $7,600, or approximately
$633 per month. This cost would
decrease to the extent that entities other
than covered persons choose to
subscribe to Rule 10c–1a data, which
would allow an RNSA to spread its
costs across more entities. At the same
time, this estimate represents a lower
bound on the estimated fees levied by
an RNSA as an RNSA likely will need
to recoup some of the initial fixed costs
associated with administering the
data.983
980 One commenter stated that the ‘‘the estimated
costs are understood to be incomplete’’ in the
Proposing Release because ‘‘the RNSA (i.e., FINRA)
is also entitled to recover its costs from market
participants who report securities lending
transactions to the RNSA.’’ See CSFME Letter 1, at
4. However, this possibility was acknowledged by
the Commission in the Proposing Release. See
Proposing Release, 86 FR 69843, stating that ‘‘the
estimated 409 reporting entities would also be
required to pay reporting fees to the RNSA.’’
981 See, e.g., Bloomberg L.P. Letter, at 4; HMA
Letter, at 11.
982 RNSA rule filings are subject to notice,
comment and Commission review pursuant to
section 19(b) of the Exchange Act and Rule 19b–4.
An RNSA must demonstrate that proposed fees
satisfy the Exchange Act requirements under
section 15A(b), including that such proposed fees
equitably allocate reasonable dues, fees and other
charges among members and issuers and other
persons using the SRO’s facilities. Further, such
proposed fees cannot not impose any burden on
competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act.
983 The numbers provided in this section are
estimates. To the extent the Commission has overor underestimated burden hours or hourly costs, or
the number of entities subject to each reporting
requirement, the actual compliance costs may be
higher or lower. However, the Commission views

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One commenter stated that, by
considering proposed Rule 10c–1 ‘‘in
isolation’’ from other recent
Commission rules, ‘‘the Commission is
not providing a comprehensive picture
of the compliance and other direct
costs,’’ and that ‘‘these costs will
aggregate and will burden market
participants with higher costs when
considered jointly.’’ 984 But, consistent
with its long-standing practice, the
Commission’s economic analysis in
each adopting release considers the
incremental benefits and costs for the
specific rule—that is, the benefits and
costs stemming from that rule compared
to the baseline. In doing so, the
Commission acknowledges that in some
cases resource limitations can lead to
higher compliance costs when the
compliance period of the rule being
considered overlaps with the
compliance period of other rules. In
determining compliance periods, the
Commission considers the benefits of
the rules as well as the costs of delayed
compliance periods and potential
overlapping compliance periods.
We considered here whether recently
adopted rules identified by commenters
that affect market participants subject to
the final rule 985 have overlapping
implementation timeframes with the
final rule. We found, however, that the
compliance dates for these rules do not
the estimates provided herein as best estimates
based on the information currently available to the
Commission.
984 See Overdahl Letter, at 15. Another
commenter stated that because ‘‘[t]he resources of
market participants are not infinite,’’ that
commenter ‘‘believe[s that] unnecessary and
aggressively timed regulatory changes will impact
costs, complexity, competition and the ability of
smaller market participants to enter into or remain
in the markets.’’ ICI Letter 2, at 12. See also AIMA
Letter 3, at 4 (recommending that rule adoptions
‘‘should be appropriately sequenced and their
compliance periods appropriately aligned’’ so that
‘‘market participants’’ will not face ‘‘unnecessary
costs’’); Citadel Letter, at 10 (noting the Commission
‘‘has not assessed the cumulative impact of its
myriad of recent position and activity disclosurerelated proposals on market participants’’).
985 Specifically, we considered the Amendments
to Form N–PX Adoption, the Settlement Cycle
Adoption, the May 2023 SEC Form PF Amending
Release, and the Beneficial Ownership Amending
Release. We expect that few if any entities subject
to the May 2023 SEC Form PF Amending Release
will face direct reporting obligations, and thus incur
compliance costs, under final Rule 10c–1a. Form PF
is required for private fund advisers. See supra Part
IX.B. We do not expect private fund advisers to face
direct implementation costs under final Rule 10c–
1a, although we acknowledge that their lending
programs and/or broker-dealers may pass along
compliance costs to them. Entities subject to the
Amendments to Form N–PX Adoption, the
Settlement Cycle Adoption, or the Beneficial
Ownership Amending Release could have reporting
obligations under final Rule 10c–1a; however we
anticipate no or little overlap between the
implementation periods for those rules and this
one.

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significantly overlap with the expected
industry compliance dates of final Rule
10c–1a,986 and therefore we do not
expect significant effects on compliance
costs arising from overlapping
compliance periods. We acknowledge
that to the extent such overlap occurs,
there could be costs, but we do not
expect these to be significant costs.987
The Commission does not believe that
loan participants will incur costs
associated with obtaining and renewing
LEIs, because only those loan
participants that have non-lapsed LEIs
will be required to report them. One
commenter stated that borrowers should
be required to obtain an LEI if they do
not already have one, because the lack
of an LEI would make it more
challenging to identify entities.988 We
agree that wider LEI adoption and
reporting would likely lead to more
consistent and precise identification of
legal entities, which could enhance
analysis of the reported information.989
We also recognize that any mandatory
LEI reporting requirement for LEIeligible loan participants would also
generate additional costs for loan
participants that do not currently have
them, although such costs would likely
be modest.990
4. Other Costs

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Increase in Borrowing Costs
The Commission acknowledged in the
Proposing Release that increased
compliance costs could lead to some
consolidation in the securities lending
market and impose some costs on
market participants, including
potentially higher prices associated with
reduced competitive pressures.991
However, the Commission believes that
this effect by itself is unlikely to lead to
986 See supra Part VIII on the compliance date for
this final rule, and supra notes 726 through 728 for
compliance dates of other recent rules discussed
here.
987 See also infra Part IX.D.2 (discussing possible
effects of overlap on competition).
988 See IHS Markit Letter, at 9.
989 We note in this regard the recently enacted
Financial Data Transparency Act of 2022, which
directs the Commission and other financial
regulators to establish data standards for collections
of information. See James M. Inhofe National
Defense Authorization Act for Fiscal Year 2023,
117–263, tit. LVIII, 136 Stat. 2395, 3421–39 (2022).
990 A U.S. entity can currently obtain and renew
an LEI from one of eleven LEI operating units. See
Global Legal Entity Identifier Foundation, Get an
LEI: Find LEI Issuing Organizations, available at
https://www.gleif.org/en/about-lei/get-an-lei-findlei-issuing-organizations, last visited Aug. 29, 2023.
One LEI operating unit currently discloses an initial
fee of $60 and a renewal fee of $40. See Bloomberg
LEI, Frequently Asked Questions, ‘‘Fees, Payments
& Taxes,’’ Bloomberg LEI v. 1.4.71, available at
https://lei.bloomberg.com/docs/faq#what-fees-areinvolved, last visited Aug. 29, 2023.
991 See Proposing Release, 86 FR 69843.

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higher overall borrowing costs due to
the fact that the value of securities
available to be loaned generally far
exceeds the total value on loan.992 For
general collateral securities, which
make up the majority of loans, a modest
decline in shares available to lend
would not eliminate the slack in the
market and thus would not likely
increase fees. For securities ‘‘on special’’
with less available supply relative to
demand, it is possible that a decline in
shares available to lend could result in
higher borrowing costs for some
securities. However, the Commission
believes that, to the extent that it occurs,
these fee increases would likely be
small and have minimal downstream
economic effects. This minimal effect is
expected for two reasons. First, the
projected compliance cost of the final
rule is a relatively small fraction of the
likely total lending fee revenue
generated, which makes it likely that
most broker-dealers and lending
programs would continue to earn a
positive profit margin after accounting
for these costs.993 Second, academic
research suggests that very small
increases in lending fees are unlikely to
result in significant downstream
economic effects.994 As a result, the
992 See Panel A of Table 1 above in Part IX.B.3,
showing that for most stocks the lending supply
significantly outstrips demand with median
utilization rates of approximately 12%.
993 Averaging the fees across all three surveyed
days from Table 8 of the OFR Pilot Survey and then
multiplying those fees by the average dollar value
of securities lent across all three days surveyed
produces an estimated $2.7 billion in lending fees
collected in 2015. These fees only account for the
Wholesale market, so multiplying this estimate by
two to, conservatively, account for fees collected in
the Customer market yields an estimate of $5.4
billion in lending fees collected annually. See
supra, in Part IX.C.3, the total direct compliance
costs associated with the Rule are approximately
$236 million per year. Under a conservative
assumption that 100% of the direct compliance
costs will be transferred to borrowers in the form
of higher fees spread equally across all loans, this
would increase lending fees by $236 million/$5.4
billion ∼ 4.7%. For perspective, for U.S. equities the
OFR Pilot Survey reports the average lending fee
across the three days surveyed was approximately
33 basis points (bps). A 4.7% increase in this
lending fee would be an increase of 1.44 basis
points. For U.S. Treasury/Agency securities, the
average lending fee reported in the OFR Pilot
Survey was approximately 16 bps. A 4.7% increase
in this lending fee would be 0.70 bps. These
numbers are estimates and could be somewhat
higher or lower depending on various assumptions.
If lenders absorb some of the direct compliance
costs, the increase in fees will be smaller; if the total
size of shares on loan increases, the increase would
be smaller still. If the increase becomes
concentrated among just a subset of stocks, such as
general collateral stocks, the increase in fees would
be larger. Regardless, these calculations illustrate
that the economic magnitude of an increase in
lending fees is likely to be small.
994 Research shows that an exogenous shock to
the lending supply affects loan prices, but that the
downstream effects of these fee changes are modest

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Commission expects that any increase
in borrowing costs that may result from
consolidation among broker-dealers or
lending programs would be minimal,
and therefore likely offset by a
simultaneous decrease in borrowing
costs due to improved transparency and
efficiency in the securities lending
market which, as described above, are
expected to concentrate among stocks
that are on special.995
Lower Revenues From Securities
Lending
Commenters expressed concern that,
to the extent that lenders are not able to
pass on compliance costs to borrowers
through increased fees, the rule could
lead to decreased profit from securities
lending for some market participants.996
However, the Commission estimates
that, as the projected compliance cost of
the final rule is a relatively small
fraction of the likely total lending fee
revenue generated, most market
participants will continue to be able to
earn a positive profit margin from
securities lending.997
In addition, as acknowledged in the
Proposing Release, a reduction in
information asymmetry may result in
reduced revenue for some brokerdealers and lending programs in at least
two ways.998 First, a reduction in
securities lending revenues could occur
or non-identifiable. See Dixon, et al. (2021), supra
note 746. See also Steven N. Kaplan, Tobias J.
Moskowitz, & Berk A. Sensoy, The Effects of Stock
Lending on Security Prices: An Experiment, 68 J.
Fin. 1891 (2013). The loan fee effects reported in
these studies tend to be multiples of the potential
loan fee effects discussed in this section.
Consequently, the resulting economic impact of any
such fee increase would also likely be
correspondingly smaller.
995 See supra Part IX.C.1 discussing the expected
effects of the final rule on lowering borrowing costs
for investors, as well as for a discussion on why the
Commission expects the economic effects of the
final rule to be concentrated among hard-to-borrow
stocks.
996 See, e.g., State Street Letter, at 5 (stating that
‘‘there is, in our view, no practical way for agent
lenders to try to recuperate even a portion of these
new costs from borrowers through changes to
existing market pricing conventions. In effect
therefore, the costs associated with the
establishment and maintenance of the reporting
system for securities lending transactions
envisioned by the Commission will substantially
narrow, if not eliminate, existing revenue streams
for agent lenders and their clients in what is already
a low margin business.’’); See also RMA Letter, at
8 (stating that ‘‘for structural reasons, Lending
Agents are also unlikely to be able to fully pass on
the costs of implementation to borrowers,’’); CSFME
Letter 1, at 4–5 (stating that ‘‘most beneficial owners
participate in securities lending to generate
marginal income. If lenders are forced to bear the
final cost of compliance with Rule 10c–1, they may
find their margins so thin that they can no longer
justify their lending activities, pulling their
liquidity from the market.’’).
997 See supra note 993 for a description of this
estimate.
998 See Proposing Release, 86 FR 69837.

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because end borrowers and beneficial
owners will have more information
about the state of the lending market. As
a result, broker-dealers and lending
programs who consistently
underperform, the market may lose
customers to better-performing brokerdealers and lending programs or begin
offering better terms to their customers.
Both possibilities represent a reduction
in revenue for some broker-dealers and
lending programs. It is possible that
some broker-dealers and lending
programs may choose to exit some or all
of the market for lending services as a
result of this loss of revenue.999 The loss
of revenue will in part be a transfer to
the end borrowers and beneficial
owners that switch to better-performing
lending programs and better-performing
broker-dealers, as well as the betterperforming lending programs and
broker-dealers that attract additional
customers. The Commission is not able
to quantify the potential loss in revenue
that could occur for underperforming
broker-dealers and lending programs
because the Commission is not able to
quantify the extent to which these
broker-dealers and lending programs’
current revenues are driven by
asymmetric information.1000
Second, lending programs may also
experience reduced profitability through
the lower rates offered by broker-dealers
to their customers.1001 If a given lending
program has become skilled in
cultivating relationships with brokerdealers currently willing to pay higher
fees, then the increased competition that
broker-dealers face as a result of the rule
may lead to lower overall fees being
999 See infra Part IX.D.2 for a discussion of the
implications of the final rule for competition
between broker-dealers.
1000 As discussed in supra Part IX.B.3, the
observed dispersion in loan fees may give a rough
upper bound on the extent to which loan fees are
driven by asymmetric information, which may
provide some insights into a potential loss in
revenue due to the reduction of asymmetric
information. For example, the results from Table 1
showed that the most that some borrowers pay
above the median market loan price for loans of the
same security is around 400%. However, this would
be an extreme upper bound, as the vast majority of
borrowers, to the extent they overpay, would
overpay less than 400% above median market
prices, the dispersion loan fees is likely driven by
factors other than asymmetric information (see
supra note 789), and it is not necessarily the case
that the final rule will fully eliminate the impact
of asymmetric information on loan fees.
1001 See, e.g., ICI Letter 1, at 10 (stating that ‘‘fund
shareholders will absorb part of the substantial
costs of Rule 10c–1. . . these costs ultimately will
come directly out of the pockets of beneficial
owners, including funds and their shareholders, to
the detriment of their long-term interests.’’).
Furthermore, while the Commission expects the net
impact of the final rule on borrowing costs to be
negative, see supra Part IX.C.4 for a discussion of
the possibility that compliance costs may increase
borrowing costs.

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charged for security loans—lowering the
total lending revenue produced by
securities lending.1002 While the
Commission expects that beneficial
owners will benefit from the final Rule
as a result of the reduction in
information asymmetry,1003 in some
cases lower lending revenues and
potentially increased costs may reduce
the revenue earned by some beneficial
owners.1004 As acknowledged in the
Proposing Release, this would represent
a partial transfer from beneficial owners
to the end borrowers who may receive
better terms on average as a result of
decreased information asymmetries.1005
Ultimately, the Commission is not able
to quantify the net impact of the rule on
beneficial owners’ lending revenues, as
the Commission is not able to quantify,
among other items, the extent to which
end borrowers may receive better terms
on average as a result of decreased
information asymmetries.1006
Lower Revenues for Securities Lending
Data Vendors
Commenters expressed concern that
the increase in securities lending
information provided by the rule will
also result in costs in the form of lost
revenue for commercial securities
lending data vendors, which could lead
some data vendors to pare back their
product offerings.1007 The Commission
acknowledges that this may occur for a
number of reasons. First, commercial
data vendors may pare back their
offerings if demand for their products
decreases because their customers
switch to using Rule 10c–1a data.
Second, some market participants who
currently contribute data under a giveto-get model may find it less worthwhile
to do so when the rule provides an
alternative source of data. This effect
would diminish the quality of the giveto-get data currently provided by
commercial data vendors and may lead
to fewer market participants being
willing to purchase the data. Both of
these effects could result in lower
revenues. To the extent that data
1002 See

id.
supra Part IX.C.1 for a discussion of how
a decrease in information asymmetries will benefit
end borrowers and beneficial owners.
1004 See supra note 976 and corresponding text
for a discussion of how compliance costs may affect
beneficial owners to the extent that they are passed
on to them by lending programs.
1005 See Proposing Release, 86 FR 69837. See
supra Part IX.C.1 for a discussion of the expected
effects of the final rule on reducing information
asymmetries between end borrowers and brokerdealers.
1006 See supra note 1000 for further discussion of
a potential rough estimate of the extent to which
securities lending prices are driven by asymmetric
information.
1007 See, e.g., Overdahl Letter, at 4.
1003 See

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vendors do pare back their product
offerings and/or if the quality of their
data products are diminished, then this
could reduce transparency in the
securities lending market in cases where
these datasets contain information that
is not collected and disseminated by the
final rule, such as utilization rates and
shares available to lend.
The Commission believes that a
potential mitigating factor that may
reduce or even offset the severity of this
loss in revenue will be that commercial
data vendors may offset some of the
impact of lowered demand for their data
by enhancing their related data analytics
businesses using Rule 10c–1a data.1008
Furthermore, to the extent that
customers value the availability of
information about securities available to
lend and utilization rates, the fact that
commercial data vendors will continue
to have superior access to this
information 1009 will likely mitigate or
even offset a decrease in demand, as
investors would continue to purchase
commercial datasets in order to gain
access to this information. The
Commission is unable to quantify the
potential impact of the final rule on
securities lending data vendors’
revenues because this would require
knowledge of the baseline level of such
revenues, which the Commission does
not have access to and about which
commenters did not provide
information.
Miscellaneous Costs
Some commenters expressed concern
that the rule requires the reporting of
sensitive information and thus could
present a risk to individuals in the case
of a data breach.1010 The Commission
recognizes that the final rule collects
sensitive information and that the costs
of a data breach could can be
substantial.1011 These costs include, but
1008 See supra Part IX.C.1 for further discussion
of the expected effects of the final rule in creating
new business opportunities for providers of
securities lending data analytics services.
1009 Note, however, that the information about
shares available to lend collected by commercial
data vendors is likely subject to the issues
discussed in supra Part IX.B.2, including selfselection biases and a lack of comprehensiveness.
1010 See, e.g., IIB Letter, at 11; Charles Schwab
Letter, at 2.
1011 See, e.g., Proposed Rule, Cybersecurity Risk
Management Rule for Broker-Dealers, Clearing
Agencies, Major Security-Based Swap Participants,
the Municipal Securities Rulemaking Board,
National Securities Associations, National
Securities Exchanges, Security-Based Swap Data
Repositories, Security-Based Swap Dealers, and
Transfer Agents (‘‘Proposed Cybersecurity Rule’’),
88 FR 20212 (Apr. 5, 2023) (‘‘In 2020, the average
loss in the financial services industry was $18.3
million, per company per incident. The average cost
of a financial services data breach was $5.85

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are not limited to, the following: (1)
trading losses that could occur due to
the revelation of private trading
strategies or economic positions which
may enable identifying and trading
opportunistically around such
strategies, such as facilitating a short
squeeze; (2) business disruptions that
could occur if the data breach results in
temporary system down time; (3) data
breach response costs as market
participants must devote resources to
determining how to respond to the data
breach; and (4) reputational harm to an
RNSA. While the potential costs of a
breach, to the extent that one occurs
could be severe, RNSAs, as well as
ATSs and SROs, are currently subject to
existing regulations that aim to improve
the resiliency and oversight of securities
market technology infrastructure, such
as Regulation Systems Compliance and
Integrity (‘‘Regulation SCI’’).1012
Adherence to regulations that seek to
ensure the resiliency and integrity of
technology systems can reduce the
probability of a data breach and mitigate
the costs associated with a breach,
should it occur.
Some commenters expressed concern
that the rule could inhibit innovation in
securities lending, such as the potential
adoption of blockchain technology, by
diverting resources away from
innovation and towards compliance.1013
While such diversion is possible, we
expect that market participants will
continue to pursue innovation that
creates a competitive advantage or for
which there is a market demand. One
commenter suggested that innovations
such as blockchain technology could
obviate the need for transaction
reporting systems.1014 The Commission
acknowledges this possibility; however,
such innovations would need to
overcome the market failures described
earlier in this analysis.1015
One commenter expressed concern
that, ‘‘with lenders dependent upon
their agents for reporting to the RNSA,
the rule could make it more difficult for
lenders to switch agents.’’ 1016 To the
extent that there would be any bespoke
reporting services offered by lending
agents, it is possible that the final rule
million.’’) (citing Jennifer Rose Hale, The Soaring
Risks of Financial Services Cybercrime: By the
Numbers, Diligent (Apr. 9, 2021).
1012 See 79 FR 72252. See also SEC, Spotlight on
Regulation SCI, available at https://www.sec.gov/
spotlight/regulation-sci.
1013 See, e.g., RMA Letter, at 8; ISLA Letter, at 3.
1014 See, e.g., RMA Letter, at 8 (stating that
‘‘financial technologies like blockchain that could
ultimately obviate the need for special transaction
reporting systems and make transactions viewable
on their native ledgers.’’).
1015 See supra Part IX.A.2.
1016 See CSFME Letter 1, at 5.

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could increase a lender’s dependence on
their lending agent, and thus marginally
increase their costs of switching agents.
However, the Commission expects this
increased cost, to the extent it occurs, to
be minimal. The Commission expects
that many covered persons, including
lending agents, will rely on reporting
agents to provide the Rule 10c–1a
information directly to an RNSA. This
would generally result in an unbundling
of lending and reporting services, such
that an increased dependence on a
lending agent for their reporting services
would be unlikely. To the extent that a
lender requests or requires bespoke
reporting services from their lending
agent, that lender could examine such a
service among the package of lending
services—including reporting services—
that a prospective agent offers, and
decide accordingly while taking into
account the potentially higher costs of
switching to a new lending agent.
To the extent that there are entities
that would like to serve as reporting
agents but are not currently registered as
broker-dealers,1017 the cost of registering
as a broker-dealer may be another cost
associated with the final rule.1018
However, the final rule does not require
any entity to serve as a reporting agent,
and as such this cost would only accrue
to those entities that make the business
decision to become a reporting agent. It
is likely that an entity that is not
currently registered as a broker or dealer
will only make the business decision to
become a reporting agent if they believe
that the cost of registering as a brokerdealer is more than offset by the revenue
that they will earn as a reporting agent.
5. Reduced Benefits From Alternative
Arrangements
Economically Similar Arrangements
The Commission recognizes a risk
that the comprehensiveness of Rule
10c–1a data, and hence the benefits that
accrue due to the comprehensive nature
of the data, could be diminished to the
extent that market participants choose
to use arrangements that are
economically similar to securities
lending agreements. For example,
market participants may substitute repo
for securities lending agreements.1019
This substitution may occur because a
fixed term cash collateralized securities
loan is economically very similar to a
1017 One commenter that is not a broker-dealer
requested that the Commission allow non-brokerdealers to become reporting agents because they
already have connections to firms for the reporting
of securities loans. See S3 Partners Letter, at 12.
1018 See final Rule 10c–1a(ii)(A), requiring a
reporting agent to be a broker or dealer.
1019 See supra note 776 for a definition and
discussion of repo contracts.

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repo.1020 While the Commission is
unaware of short sales of equities
currently being facilitated by repo
contracts, the Commission understands
that in fixed-income it is fairly common
for entities wishing to short sell a bond
to facilitate that transaction with a repo
instead of a securities loan.
The Commission believes that this
risk varies across asset classes. In
equities, the Commission believes that
the current risk of such migration may
be minimal because of the lack of a
well-developed repo market for equities.
However, this risk may increase if the
market for equity repos becomes more
developed in the future.1021 Among
fixed-income securities the risk is
substantially greater due to a welldeveloped repo market for fixed-income
securities and the established practice of
using both securities loans and repo
transactions to facilitate short sales of
fixed-income securities. In all asset
classes, if the final Rule 10c–1a leads to
improvements in the functioning of the
securities lending market, then the risk
of migration may diminish to the extent
that improved efficiency in the
securities lending market diminishes
the incentive to transfer activity to
potentially less developed repo markets.
Should this substitution affect a
significant volume of securities lending,
certain benefits and costs discussed
above may decline. The less
comprehensive data could reduce the
extent to which the Rule reduces any
biases or gaps in the data. For instance,
market participants who use the data to
price securities loans will have a less
accurate and potentially biased view of
the market, which will limit the benefits
from increased transparency.1022
Additionally, regulators using the data
to determine lending market conditions
at the time of, for example, a Reg SHO
1020 See supra note 777 for evidence of this from
the OFR Pilot Survey.
1021 The Commission views it as unlikely that the
equity repo market will develop to a similar extent
as the fixed income repo market in the near future.
Repos are primarily used for short term finance and
due to the volatility of equities relative to fixedincome securities, equities are a significantly riskier
collateral type, limiting their appeal as ‘‘collateral’’
for short term finance.
1022 See supra Part IX.C.1 for a discussion of
expected benefits from the final rule related to
increasing the transparency of the securities lending
market. One commenter states that the benefits of
the rule are likely to be limited for fixed-income
(see RMA Letter, at 16; see also supra note 950),
which, as discussed in this section, is also the asset
class most likely to see circumvention through the
use of repo markets. As discussed in supra Part
IX.C.1, the Commission expects the fixed-income
market to benefit from the final rule. However, to
the extent that this asset class sees lower overall
benefits from final Rule 10c–1a, this would also
serve to limit the amount to which the benefits of
final Rule 10c–1a would be lowered as a result of
circumvention.

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
violation will be using less precise
data—limiting the benefits of Reg SHO
enforcement. On the other hand, such
substitution could reduce compliance
costs for some. Obviously, those
substituting into repo will incur lower
compliance costs from the final rule,
including one-time implementation
costs if they replace all securities
lending with repo. Further, a significant
substitution will reduce the ongoing
costs of an RNSA because an RNSA will
not have to collect and process as many
transaction reports.
Cross-Border Application
One commenter expressed concern
that ‘‘an overly broad or ambiguous
reach of Proposed Rule 10c–1 could
reduce liquidity and place U.S.
intermediaries . . . at a competitive
disadvantage,’’ because ‘‘market
participants—particularly those outside
of the United States—might determine
to limit or cease trading or interacting
with U.S. intermediaries (or leave the
U.S. markets all together) in order to
prevent public disclosure of their
transactions.’’ 1023 The Commission
acknowledges some market participants
could be incentivized to restructure
their activities to avoid reporting.
Specifically, in an effort to avoid having
their lending activities fall within the
reach of section 10(c), participants
could relocate overseas any of their
current U.S.-based conduct that
constitutes effecting, accepting, or
facilitating a lending transaction.
However, the Commission believes that
this risk is low. As pointed out by the
same commenter, there are
disincentives for market participants to
move lending activity outside of the
U.S. market, including ‘‘the depth and
liquidity of the U.S. market,’’ as well as
few incentives for ‘‘U.S. asset managers
to prefer non-U.S. lenders that are
themselves subject to similar reporting
requirements in their home
jurisdictions.’’ 1024
C. Impact on Efficiency, Competition,
and Capital Formation
1. Efficiency
In the securities lending market, the
availability of Rule 10c–1a data for
market participants will lead to more
efficient prices for securities loans.1025
1023 See

supra note 660, citing HSBC Letter 1.
supra note 660, citing HSBC Letter 2.
1025 See supra Part IX.C.1 for a discussion of how
an increase in transparency in the securities lending
market will improve market efficiency. More
efficient prices do not imply that all securities loans
will have the same price. There are many factors
that affect the cost of a securities loan and can lead
to a range of prices for securities loans. See supra
note 780 and corresponding text.

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1024 See

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The reduction in asymmetric
information in the market for lending
programs and broker-dealers may also
make those markets more efficient.1026
Additionally, the Commission believes
that final Rule 10c–1a may have
secondary effects that will increase
price efficiency in the underlying
securities markets and option
markets.1027 Also, the increased ease
with which banks and other financial
institutions will be able to manage
collateral and balance sheets as a result
of the final rule 1028 could lead to
increased efficiency in their functioning
and in those markets in which they play
a role.
2. Competition
The Commission believes that the net
impact of final Rule 10c–1a on
competition is difficult to predict, in
that some aspects will likely increase
competition and some aspects will
likely reduce competition. Competition
will likely be impacted in the markets
for broker-dealer services, lending
programs, and securities lending data
vendors.
The Commission believes that one
effect from the final rule’s reduction of
information asymmetry between end
borrowers and broker-dealers, and
between beneficial owners and lending
programs, will be to increase
competition between broker-dealers and
between lending programs.1029 A
reduction in information asymmetry
will permit better monitoring of the
performance of these entities by their
respective customers, and will likely
force these entities to do more to match
the performance of their competitors, to
1026 See supra Part IX.C.1 for a discussion of the
final rule’s expected benefits from reducing
asymmetric information in the securities lending
market.
1027 See supra Part IX.C.1 for a discussion of the
final rule’s expected benefits for markets related to
the securities lending market, and for a discussion
of the final rule’s benefits for the underlying
securities market from reducing short selling costs.
1028 See supra Part IX.C.1 for a discussion of the
final rule’s expected benefits from improved
financial management for financial institutions.
1029 See supra Part IX.C.1 for a discussion of the
expected effects of the rule in terms of reducing
information asymmetries between end borrowers
and broker-dealers, and between beneficial owners
and lending programs. See also supra note 855 and
corresponding text. The requirement to report
information once a loan modification occurs after
that loan qualifies for reporting will further support
the benefits of the final rule, including reduced
information asymmetries and enhanced price
competition, by helping to ensure a level playing
field during the earlier phases of implementation.
This provision will prevent lenders that have a
higher number of long-term loans that did not
initially qualify for final Rule 10c–1a reporting from
gaining a competitive advantage by being able to see
the loans of other market participants without
disclosing the terms of their own loans. See supra
Part IX.C.1.

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the extent that they do not already do
so. One commenter stated that the effect
of the final rule on competition between
broker-dealers may be attenuated by the
presence of high switching costs.1030
The Commission does not believe that
switching costs for most market
participants are high enough such that
this is a likely outcome.1031
Furthermore, the increased ability for
broker-dealers to monitor conditions in
the lending market may encourage new
broker-dealers to enter the market,
further increasing competition for
broker-dealer services. This same
argument may be true for platforms that
engage in securities lending. Improved
data may allow for better evaluation of
the performance of such platforms and
may also lower barriers to entry for new
platforms, thus enhancing competition
among securities lending platforms.
Commenters expressed concern that
competition in the securities lending
market could decrease if lenders are
driven out of the market because of
compliance costs.1032 The Commission
does not believe that compliance costs
are such that this would be a likely
scenario because the projected
compliance costs associated with final
Rule 10c–1a are likely to be a relatively
small fraction of total lending fee
revenues.1033 At the same time, the
reduction in asymmetric information in
the securities lending market that will
result from the final rule may diminish
broker-dealer and lending program
profits to the extent that it reduces their
current information advantage over their
customers.1034 To this end, some brokerdealers and lending programs whose
profitability primarily depends on
economic inefficiencies associated with
asymmetric information may exit the
market for facilitating securities loans.
The Commission also recognizes that,
given the significant fixed costs of
implementing the systems required by
the final rule for lending programs to
report to an RNSA, some smaller 1035
1030 See

Citadel Letter, at 8.
supra Part IX.C.1 for a discussion of why
switching costs may be limited.
1032 See, e.g., RMA Letter, at 5.
1033 See supra note 993 and corresponding text
for an estimate of compliance costs as a fraction of
securities lending revenues.
1034 See supra Part IX.C.4 for further discussion.
This was also acknowledged by the Commission in
the Proposing Release; See Proposing Release, 86
FR 69837, stating that a ‘‘reduction in information
asymmetry could result in reduced revenue for
some broker-dealers and lending programs.’’
1035 The term ‘‘smaller’’ in the Economic Analysis
does not mean that these are ‘‘small businesses’’ or
‘‘small entities’’ for purposes of the Regulatory
Flexibility Act. See infra Part XI. Rather, smaller is
meant to convey the size of these entities in relation
1031 See

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lending programs and broker-dealers
may consolidate or exit the lending
market. The Commission believes that a
mitigating factor leading to less
consolidation is that the current
relationship and network structure of
lending programs and broker dealers
already favors larger lending programs
and broker-dealers who have the
resources to maintain relationships with
more and larger securities lending
counterparties. Consequently, the
Commission believes that the market for
lending programs and broker-dealer
security borrowing services is already
likely dominated by larger lending
programs and broker-dealers that the
Commission does not believe will cease
operating as a result of these fixed
costs.1036 The Commission recognizes
that smaller lending agents may have
unique business models that are not
currently offered by competitors, but the
Commission believes a competitor could
create similar business models if
demand were adequate.1037
The Commission believes that the
dissemination of Rule 10c–1a data
collected under the final rule will
change the competitive landscape for
securities lending data analytics
services by increasing opportunities for
enhancing products and services that
depend on securities lending data and
lowering barriers to entry concerning
who can provide those services.1038
Increased competition in this space will
likely lead to more options for
consumers of analytics services, lower
prices, and improved analytics services.
The new information available through
an RNSA as a result of the final rule will
to larger market participants engaged in securities
lending transactions.
1036 An additional mitigating factor in the case of
broker-dealers is that the Commission views it as
likely that smaller broker-dealers currently contract
with larger broker-dealers to help facilitate
securities loans for their customers, and thus, may
be able to easily contract with these larger brokerdealers to also act as a reporting agent on their
behalf. This dynamic may limit the potential for
new entrants to the broker-dealer space to compete
with established broker dealers.
1037 The Commission believes that this effect will
be enhanced under the final rule as compared to the
proposed rule. While proposed Rule 10c–1 only
allowed a ‘‘bank, clearing agency, broker, or dealer’’
to act as a lending agent or ‘‘intermediary’’ (see
proposed Rule 10c–1(a)(1)(i)(A)), the final rule
applies the term ‘‘intermediary’’ more broadly to
‘‘any person that effects a covered securities loan
on behalf of the lender’’ (see final Rule 10c–
1a(j)(1)(i)). Permitting other types of persons who
can act as lending agents in addition to banks,
clearing agencies, brokers, or dealers will support
the ability of new lending agents to enter the
market, promoting competition in the market for
lending services.
1038 See supra note 853 and corresponding text.
However, the Commission acknowledges that the
final rule may result in some loss of revenue or
product quality for some commercial data vendors.
See supra Part IX.C.4.

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produce an alternative to existing data
vendors’ commercial securities lending
data products. Existing data vendors
may retain a competitive advantage,
however, as they will likely continue to
have access to information on
utilization rates and shares available for
lending, which are not provided by the
final rule.
Some commenters expressed concern
that the rule would cause lending
activity to migrate overseas to avoid the
reporting obligation under final Rule
10c–1a, which would make the U.S.
securities lending market less
competitive.1039 While it is possible that
some market participants could move
their activity to other jurisdictions in
attempt to circumvent the reporting
obligation of final Rule 10c–1a, the
Commission believes that it is unlikely
that this would occur on a large scale.
This is because the final Rule imposes
a reporting obligation on any qualifying
loan regardless of whether the person is
located abroad or is a non-U.S. person
when the transaction occurs.1040
In addition, as stated above, some
commenters requested the Commission
consider interactions between the
economic effects of the proposed rule
and other recent Commission rules, as
well as practical realities such as
implementation timelines. One
commenter stated that because ‘‘[t]he
resources of market participants are not
infinite,’’ that commenter ‘‘believe[s
that] unnecessary and aggressively
timed regulatory changes will impact
costs, complexity, competition and the
ability of smaller market participants to
enter into or remain in the
markets.’’ 1041 As discussed above, the
Commission acknowledges that
simultaneous compliance periods may
in some cases increase costs. This may
be particularly true for smaller entities
with more limited compliance
resources. This effect can negatively
impact competition because these
entities may be less able to absorb or
pass on these additional costs, making
it more difficult for them to remain in
business or compete. However, we
determined that the rules highlighted by
commenters either did not impose
implementation costs on the same
entities as this final rule and/or had
compliance dates that did not
significantly overlap with the expected
industry compliance dates of this final
rule, and therefore we do not expect
these effects on competition to be
1039 See,

e.g., HSBC Letter 1, at 5.
supra Part VII.M for further discussion of
the cross-border applicability of final Rule 10c–1a.
1041 See ICI Letter 2, at 12. See also supra Part
IX.B.6 for a description of related comments.
1040 See

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significant.1042 We acknowledge that to
the extent such overlap (in scope or
timing) occurs, there could be costs
which could affect competition, but we
do not expect these costs to be
significant.
3. Capital Formation
The Commission believes that the
impact of final Rule 10c–1a will have
mostly positive effects on capital
formation. In particular, improved price
discovery in securities markets 1043 and
improved balance sheet management by
financial institutions 1044 could facilitate
improvements in the provision of
capital. In addition, to the extent that
the final rule reduces the costs of short
selling it may facilitate more effective
discovery of negative information that
in turn could lead to more efficient
allocation of capital.1045 However, to the
extent that the Rule increases the cost of
short selling for some stocks in some
situations, it could also lead to less
efficient allocation of capital in these
instances.1046
D. Alternatives
1. Report Loan Sizes Without a Delay
The Commission considered an
alternative requiring that an RNSA
disseminate loan sizes at the same time
as it disseminates all other loan
information (i.e., without a 20-businessday delay). This alternative would
increase the timeliness of securities
lending information available to the
public, which could improve market
quality by reducing information
asymmetries as well as providing
additional transparency to the securities
lending market. However, it could also
harm market quality by providing novel
information about short positions with a
greater timeliness than the short selling
information that is currently
available.1047
To the extent that the aggregate costto-borrow statistics that an RNSA
publicly disseminates are volumeweighted, these statistics will provide
end borrowers with access to
1042 See

also supra Part IX.C.3.
supra Part IX.C.1 for further discussion
of the expected benefits of the final rule from
increased transparency in the securities lending
market, including improvements in price discovery.
See also supra Part IX.D.1.
1044 See supra Part IX.C.1 for further discussion
of the expected benefits of the final rule related to
improved financial management for financial
institutions.
1045 See supra Part IX.C.1.
1046 See supra Part IX.C.1 discussing instances
where the cost of short selling could increase,
consistent with the views of some commenters.
1047 See supra Part IX.B.6 for further discussion
of the timeliness of current sources of short selling
information.
1043 See

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information about loan prices that
incorporates information about loan
sizes even prior to the public
dissemination of loan sizes.1048
However, disseminating securities loan
sizes as well as modifications of
securities loan sizes on the next
business day after a loan is effected or
modified would allow market
participants to produce their own
custom cost-to-borrow metrics that are
most tailored to their business needs.
This would allow market participants to
focus on the aspects of the market that
are most relevant to their business
needs. This effect would increase the
benefits of final Rule 10c–1a from
increased transparency in the securities
lending market.1049
However, the information could also
be used to estimate short selling
positions with more accuracy than is
possible under the final rule. A market
participant wishing to gain insight into
short selling sentiment could aggregate
the sizes of all open loans that are
associated with categories of borrowers
that are likely to be short sellers.1050 If
information about these loans is
available the day after the loans are
effected then, given the settlement
cycles for equity short sales and equity
loans,1051 this would be equivalent to
three business days after an equity short
sale took place. These data would be
considerably timelier than existing short
interest data such as the FINRA data.
Additionally, market participants could
follow individual short positions with a
three-business-day lag for equity short
positions. This is a capacity that is not
possible using existing data. This could
be accomplished by tracking individual
loans that are marked as being to a
customer if the lender is a broker dealer.
While the identity of the borrower
would not be available to the public,
market participants could discern
1048 If an RNSA chooses to publish cost to borrow
statistics that are very granular and, for example,
provide separate statistics for Customer and
Wholesale loans and/or according to other loan
characteristics, then end borrowers would be able
to benchmark their transactions to these statistics
with increased accuracy. To the extent that an
RNSA chooses to publish less granular statistics,
then the end borrower could still benchmark
relative to the cost to borrow statistics provided by
an RNSA, but the benchmark would be noisier.
1049 See supra Part IX.C.1 for further discussion
of the expected benefits of the final rule from
increasing the transparency of the securities lending
market.
1050 See supra note 895 and corresponding text
for more information about, since activity in the
Customer market for securities loans are tightly
linked to short selling positions, the sum of loans
identified in the Rule 10c–1a data as being to ‘‘a
customer (if the person lending securities is a
broker or dealer)’’ could give a strong indication of
aggregate short interest.
1051 See supra note 738 and corresponding text.

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whether changes in short interest were
due to changes across many positions or
few.
This additional information that
market participants could extract about
short selling could enable copycat
investing strategies that seek to mimic
what the short sellers do. This could
increase the costs of establishing a short
position, thus making it costlier for
short sellers to profit from their
research. If the profitability of research
diminishes, there is the risk that less
market research could be performed
and, if this occurs, there could be
negative impacts on market quality and
corporate monitoring.1052
2. Alternative Timeframes for Reporting
or Dissemination
The Commission also considered an
alternative requiring different
timeframes for reporting or
disseminating the securities lending
transaction information.
First, the Commission considered
requiring covered persons to provide an
RNSA with Rule 10c–1a information
earlier than the end of each business
day on which a covered securities loan
is affected.1053 For example, the
Commission could require covered
persons to provide an RNSA with
information about a loan within a fixed
period after the loan has been effected,
such as 15 minutes. This alternative
would increase the timeliness of
securities lending information,
potentially increasing some of the
benefits of final Rule 10c–1a, such as
regulators’ access to this information for
regulatory and surveillance use.1054
Furthermore, if an RNSA were required
to make the information publicly
available as soon as practicable after an,
e.g., 15-minute reporting timeframe, this
could increase the benefits of the final
rule for transparency in the securities
lending market by making the data
available up to one business day sooner
than under the final rule.1055 It would,
however, likely increase compliance
costs to an RNSA as they would be
required to build out systems capable of
intraday dissemination.
At the same time, several commenters
pointed out numerous costs associated
with more timely and frequent
reporting. For example, some
1052 See supra Part IX.C.1 for further discussion
of the potential negative consequences of revealing
short sellers’ strategies.
1053 See final Rule 10c–1a(c).
1054 See supra Part IX.C.2 for further discussion
of the regulatory benefits of the final rule.
1055 See supra Part IX.C.1 for further discussion
of the expected benefits of the final rule from
increasing transparency in the securities lending
market.

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commenters suggested many loan terms
are not finalized until the end of the
day,1056 and so a 15 minute reporting
requirement increases the risk that the
data provided by the final rule could be
less accurate and more prone to errors
that would later have to be corrected,
which would mitigate the usefulness of
the final rule. This alternative would
also require greater compliance costs
because, as commenters also pointed
out, securities lending systems would
need greater adaptations to comply with
a more stringent reporting time
horizon.1057
The Commission could also require
covered persons to provide an RNSA
with Rule 10c–1a information later than
the end of each business day on which
a covered securities loan is effected, for
example, by the end of the next business
day after a covered securities loan is
effected. This alternative may lead to
lower compliance costs, as reporting
entities would have more time to
prepare the Rule 10c–1a information for
reporting; however, the Commission
believes that longer reporting horizons
would likely not decrease the cost
substantially due to the automated
nature of the securities lending
transactions and the need to build out
systems regardless. Furthermore, a
longer reporting horizon would delay
the dissemination and availability of
securities loan information, potentially
reducing some of the benefits of the
final rule.
In general, because securities loan
terms cannot be disseminated until after
they are reported, alternative reporting
timeframes reflect different tradeoffs
between the value of disseminating
security loan terms close to the time that
the loan is effected, and the compliance
costs associated with reporting loans at
shorter time horizons.
The Commission also considered
alternatives requiring an RNSA to
distribute the collected data required in
paragraph (c) at different horizons, such
1056 See, e.g., SIFMA AMG Letter, at 4 (stating
that ‘‘the securities lending market is not an
‘intraday market,’ as the terms are not settled at the
exact time a loan ‘is agreed to by the parties.’
Rather, terms such as collateral type, fees, and even
loan size are worked out between the parties before
ultimately being settled, typically at the end of the
business day’’); Charles Schwab Letter, at 2 (stating
that ‘‘some loans are not finalized until the end of
the trading day’’); BlackRock Letter, at 2 (stating
that ‘‘the nature of the securities lending markets
poses a number of logistical hurdles that will make
intraday reporting impractical’’).
1057 See, e.g., IHS Markit Letter, at 13 (stating that
‘‘most lenders will not be able to meet the 15minute requirement without substantial technology
development and cost’’); Charles Schwab Letter, at
2 (stating that ‘‘the proposed 15-minute reporting
window would . . . [create] a significant
operational burden on firms’’).

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as by the end of the following day.1058
This alternative would allow an RNSA
to process the data during regular
business hours, potentially limiting the
amount of data validation an RNSA
could perform prior to distributing the
data. However, this would delay market
participants’ abilities to benefit from
Rule 10c–1a data by at least a business
day. Furthermore, given the automated
nature of the data, the compliance costs
associated with this alternative are not
likely to be significantly lower than
those associated with the final rule.
Alternative dissemination timeframes
reflect different tradeoffs between price
discovery and price efficiency benefits
on one hand and harmful information
leakage on the other, as well as the cost
of reporting at a faster or slower
horizon.
An alternative dissemination timeline
could require delayed dissemination of
size information about large loans (i.e.,
loans larger than a certain size
threshold) while disseminating size
information about smaller loans the next
business day. This alternative would
provide more information to the market
than the final rule because it would not
mask the size of smaller loans, and thus
could enhance the final rule’s benefits
due to increased transparency.1059
However, this alternative would
increase the amount of novel
information about short positions that
the market could learn from Rule 10c–
1a data, which would increase the risk
of negative effects due to over-exposing
short selling information.1060 This
alternative would also increase the
complexity of the Rule as
determinations would need to be made
regarding the optimal threshold size
level, as well as how to handle loan
modifications that could potentially
move a given loan size above or below
the given threshold.

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3. Only Require Dissemination of
Aggregate or Wholesale Statistics
The Commission also considered an
alternative whereby an RNSA would
produce only aggregate statistics and no
transaction-by-transaction reports.1061
1058 The final rule requires an RNSA to
disseminate transaction-level information (apart
from loan size) as soon as practicable, but no later
than the morning of the business day after the
covered securities loan is affected. See final Rule
10c–1a(g). For a discussion of an alternative in
which loan size information is released without a
delay, see supra Part IX.E.1.
1059 See supra Part IX.C.1.
1060 See supra Part IX.C.1 for further discussion
of the potential negative consequences of revealing
short sellers’ information.
1061 This was suggested by some commenters.
See, e.g., RMA Letter, at 4; SIFMA Letter 1, at 3–
4, MFA Letter 3, at 4–5.

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Specifically, an RNSA could aggregate
transaction data elements and produce
various aggregated statistics at the end
of the business day following the date
that the loans were effectuated, without
disseminating the raw transaction-bytransaction data.
This alternative would not change the
reporting requirements for covered
persons relative to the final rule and
thus would have the same initial and
ongoing compliance costs as the final
rule for covered persons. This
alternative would be somewhat less
costly to implement for an RNSA than
the final rule, which requires an RNSA
to produce daily aggregate
information,1062 similar to this
alternative, but also requires
dissemination of loan-by-loan
information, which this alternative
would not do.
This alternative would increase the
amount of information available to the
public relative to the baseline and thus
would mitigate information
asymmetries relative to the baseline.
Aggregate statistics would also make it
more difficult for market participants to
use the data to discern information
about short positions, which would
reduce the risk of exposing short selling
strategies relative to the adopted
Rule.1063
However, only having daily aggregate
data would not provide the same
transparency benefits as final Rule 10c–
1a. Without comprehensive transaction
data, it would be more difficult for
market participants to study and
understand pricing dynamics in the
securities lending market. The
alternative would also make it more
difficult for end investors to determine
if the terms that their broker-dealer
offers are consistent with current market
terms for similar loans, rendering it
more difficult for investors to evaluate
the performance of their broker-dealer.
Similarly, without transaction data,
beneficial owners would be hampered
in their ability to determine whether the
terms for loans secured by their lending
agents were consistent with market
conditions for loans with similar
characteristics, rendering it more
difficult for beneficial owners to
evaluate the performance of their
lending agents. A lack of publicly
disseminated transaction data may also
hinder broker-dealers from determining
if the terms being offered by a lending
agent for a loan are consistent with
market conditions for similar loans.
1062 See

final Rule 10c–1a(g)(5).
supra Part IX.C.1 for further discussion
of the potential negative consequences of revealing
short sellers’ information.
1063 See

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These effects would reduce the benefits
of final rule for improved competition.
The diminished transparency of this
alternative relative to the final rule may
also lead to less improvement in the
efficiency of the securities lending
market, leading to fewer benefits for
traders in the form of increased trading
profits.1064 This alternative would also
hamper research into the securities
lending market by some market
participants and academics, relative to
the final rule, by preventing researchers
from performing analysis using
individual transactions.
The Commission also considered
several alternatives related to the
applicability of the rule to market for
Customer loans, including an alternative
in which Customers loan are excluded
from reporting requirements, and an
alternative in which Customer loans are
reported, but not disseminated to the
public. One commenter stated that ‘‘the
Commission should limit the Proposal
to the ‘wholesale’ market,’’ because
including Customer market loans in a
securities lending reporting regime
would be akin to a ‘‘transaction-bytransaction short sale public reporting
regime.’’ 1065
The Commission believes that
limiting the applicability of the rule for
Customer loans would significantly
limit the benefits of the rule for
increasing transparency in the securities
lending market. In particular, end
borrowers would not benefit from a
reduction in their information
disadvantage vis-a`-vis their brokerdealers in the securities lending
market.1066 As a result, the effects of the
rule on competition between brokerdealers, which would be expected to
lower borrowing costs for hard-toborrow stocks and thus reduce costs for
short sellers, would not materialize.1067
Market participants would also not be
able to use Rule 10c–1a data to compare
trends in both the Wholesale and
1064 See supra Part IX.C.1 for a discussion of how
improvement in securities lending information
could lead to increased profits for some investors
by increasing their certainty regarding investment
strategies that require borrowing securities.
1065 See Citadel Letter, at 11. The commenter
refers to Short Sale Linked Activity, by which the
commenter stated that they are referring to what the
Proposing Release calls the ‘‘retail market’’ (see
Citadel Letter, at 1). The Economic Analysis uses
the terms Wholesale market and Customer market
to make clear the implications of the final rule for
the different segments of the market. See also MFA
Letter 3, at 4 (stating that ‘‘it is critical that the
Proposed Securities Lending Rules be revised to
capture only wholesale securities lending activity’’).
1066 See supra Part IX.C.1 for a discussion of the
expected effects of the final rule on reducing
information asymmetry.
1067 See supra Part IX.C.1 for a discussion of the
expected effects of the final rule on short sellers.

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Customer markets simultaneously.1068
Furthermore, while the Commission
acknowledges that information about
Customers loans can correspond closely
to information about short positions,1069
the Commission believes that concerns
about whether the dissemination of
Customer loan information will harm
short sellers are largely addressed by
requiring that an RNSA delay public
disclosure of the loan amount by 20
business days. This modification should
significantly reduce the novelty of the
information disseminated under the
final rule regarding short sellers’
positions, such that it is less timely than
pre-existing sources of short selling
transparency, such as FINRA’s
bimonthly short interest data.1070
Second, excluding Customer loans
from reporting requirements altogether
would not only reduce the benefits of
the rule from increased transparency as
described above, but would also reduce
the regulatory benefits of the rule, as the
Commission and FINRA would no
longer benefit from an improved ability
to use Rule 10c–1a data for surveillance
and enforcement, market reconstruction,
and market research in Customer
segment of the lending market.1071
Furthermore, it is unclear whether the
costs of the rule for short sellers would
be significantly reduced by the
exclusion of Customer loans from
reporting requirements compared to
excluding them from dissemination, as
the commenter’s concerns related to the
inclusion of Customer loans stem
primarily from the public dissemination
of this information.

increased transparency.1072 It could also
benefit consumers of Rule 10c–1a data
by lowering barriers to entry for firms to
start providing securities lending
analytics services, as they could
incorporate shares available into their
analysis without purchasing data from
the current commercial data vendors.
This could lead to benefits in the form
of increased competition for securities
lending analytics.1073
However, commenters opposed the
inclusion of shares available on the
grounds that any measure of shares
available would be inherently noisy.1074
The Commission does not believe that
requiring reporting entities to report
shares available would result in a
measure that is inherently noisier than
the current estimates provided by
commercial data vendors, which
research shows can be informative.1075
As such a measure would be more
comprehensive than existing estimates,
it would likely be more informative than
existing data estimates. However, the
Commission acknowledges that any
estimate of shares available to lend
would be noisy for numerous reasons,
including the reasons mentioned by
commenters,1076 and that this noise
limits the benefits of requiring the
reporting of information about shares
available to lend.
This alternative would also increase
the costs to the commercial data
vendors that currently offer utilization
rate and shares available information
because it would provide market
participants with alternate access to
such information. This effect could

4. Require Reporting of Shares Available
To Lend and Shares on Loan

1072 See supra Part IX.C.1 for further discussion
of the expected effects of the final rule on increase
transparency in the securities lending market.
1073 See supra Part IX.D.2 for further discussion
of the final rule’s expected effects on competition
between securities lending data analytics firms.
1074 See, e.g., AIMA Letter 1, at 2; SIFMA AMG
Letter, at 8, 11; CASLA Letter, at 2; MFA Letter 3,
at 6–7.
1075 See, e.g., Dixon, et al. (2021) supra note 746.
1076 See, e.g., SBAI Letter, at 2 (stating that ‘‘funds
managed under 1940 Act regulations have
restrictions on their approach to securities lending
(e.g., limit on lending: A fund may not have on loan
at any time securities representing more than onethird of the fund’s total value), thereby not allowing
an accurate calculation of ’securities available to
lend’ on an individual security basis’’);’’ MFA
Letter 1, at 10 (stating that ‘‘while a lender’s
portfolio holdings may be eligible securities for
lending, they are unlikely to be ‘available to lend’
at all times.’’); See also SIFMA Letter 1, at 15
(stating that ‘‘the number of securities in accounts
of customers who have agreed to participate in a
fully paid lending program and margin customer
accounts will lead to a gross over-inflation of the
number of securities available to lend. Customer
margin inventory can be impacted due to volatility
of customers (e.g., market makers and hedge funds)
who often move positions in and out quickly.
Customer balances often change and can also swing
between debits/credits, resulting in positions being
locked/released.’’).

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The Commission also considered an
alternative requiring market participants
to report shares available to lend and
shares on loan to an RNSA. An RNSA
would then produce aggregate statistics
by security regarding shares available to
loan and shares on loan. This alternative
would increase the amount of
information available to market
participants regarding conditions in the
securities lending market, which would
increase the benefits of the rule from
1068 See supra Part IX.C.1 for a discussion of this
benefit.
1069 See supra Part IX.B.6 for further discussion
of why the market for Customer loans is tightly
linked to short selling positions.
1070 See supra Part IX.B.6 for a discussion of the
FINRA bimonthly short interest data which are
made available for publication on the seventh
business day after the reporting settlement dates,
which occur bimonthly.
1071 See supra Part IX.C.2 for a discussion of the
expected regulatory benefits associated with final
Rule 10c–1a.

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75727

lower demand for the data currently
provided by commercial data vendors,
leading to a loss of business for these
data vendors.1077
Regarding shares on loan information,
the Commission believes that the benefit
of requiring covered person to report
aggregate information about shares on
loan would also be limited, as this
information is rendered somewhat
redundant by the requirement that an
RNSA disseminate aggregated
transaction activity information for each
security.1078 At the same time, requiring
covered persons to report aggregate
information about both shares on loan
and shares available would increase the
compliance costs relative to the final
rule by requiring an additional report
(i.e., a report on aggregated securities
lending activities) to be reported to an
RNSA in addition to the transaction-bytransaction securities lending data.
5. Restrict Covered Persons to BrokerDealers
The Commission also considered an
alternative requiring only brokerdealers, rather than any person that
qualifies as a ‘‘covered person’’ under
the definition in the rule,1079 to report
securities lending transactions to an
RNSA. The Commission believes that
this alternative would be less costly
overall than final Rule 10c–1a.
Specifically, covered persons that are
not broker-dealers would not incur any
of the costs of reporting. As a result,
fewer entities would incur costs.
Further, most broker-dealers already
have connections to FINRA, the only
RNSA, so the overall implementation
costs associated with connecting to an
RNSA for the purposes of reporting
would be lower.
In addition, because most brokerdealers currently have relationships
with FINRA, the Commission
preliminarily believes that this
alternative could be implemented
sooner, allowing the market and market
participants to benefit from an increase
securities lending transparency
sooner.1080
However, under this alternative, Rule
10c–1a data would not provide a
comprehensive view into the securities
lending market. Even though brokerdealer activity makes up a significant
1077 See supra Part IX.C.4 for further discussion
of the final rule’s expected effects on securities
lending data vendors’ revenues.
1078 See final Rule 10c–1a(g)(5).
1079 See final Rule 10c–1a(j)(1) for a definition of
‘‘covered person.’’
1080 See supra Part IX.C.1 for further discussion
of the expected benefits from the final rule
stemming from increased transparency in the
securities lending market.

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percentage of securities lending
transactions in the Customer market, the
alternative would exclude market
participants such as lending programs
that are significant players in the
securities lending market, particularly
in the Wholesale market.1081 Thus, the
alternative would obscure a large swath
of the Wholesale market, making it more
difficult for lending institutions, for
example, to benefit from securities
lending transparency because the
included data would provide a less
relevant benchmark.
Requiring only broker-dealers to
report data could also create a
competitive advantage for non-brokerdealer entities that engage in securities
lending. Such entities would not be
required to report their transactions and
thus would have lower costs. They
would also be in a position to attract
business from borrowers or beneficial
owners seeking to keep their
transactions out of the public view,
further tilting the competitive landscape
in their favor. This could create an
uneven playing field for entities
engaged in the securities lending
market, diminishing the benefits of the
rule for competition and transparency.

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6. Expand Reporting Agents Beyond
Broker-Dealers and Clearing Agencies
The Commission also considered an
alternative expanding who can act as a
reporting agent to entities other than
broker-dealers and clearing agencies.1082
Commenters expressed concern that
restricting reporting agents to only
broker-dealers would result in conflicts
of interest between broker-dealers acting
as reporting agents on the one hand, and
beneficial owners and lenders who
transact with these broker-dealers in the
primary market on the other.1083 Since
information about an entities’ lending
activities is likely to correspond closely
to that entities’ inventory levels, it is
possible that such a risk of information
leakage may be a significant cost for
some lenders and lending agents who
are ‘‘highly concerned about visibility
into inventory levels.’’ 1084
Furthermore, expanding reporting
agents to entities other than brokerdealers and clearing agencies would
serve to increase the number of entities
that would compete to provide lenders
1081 See, e.g., Table 3 in the OFR Pilot Survey,
which estimates that loans from broker-dealers only
account for around 1.57% of shares on loan and
around 1.33% of shares available to loan in the
Wholesale market.
1082 See final Rule 10c–1a(j)(4) for a definition of
‘‘reporting agent.’’
1083 See, e.g., IHS Markit Letter, at 2, 10–11; S3
Partners Letter, at 12.
1084 See IHS Markit Letter, at 2.

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and lending agents with reporting
services. Thus, expanding the eligibility
of reporting agents would serve to
promote more competition in this
market,1085 potentially leading to lower
fees for lenders and lending agents that
would rely on these reporting agents for
these services.
However, the Commissions believes
that expanding reporting agent
eligibility beyond broker-dealers and
clearing agencies would increase the
costs associated with the rule. The
Commission’s oversight over reporting
agents that are neither broker-dealers
nor clearing agencies could be limited,
which could shift the costs of
monitoring reporting agents for accuracy
and compliance onto the lenders and
lending agents that would hire them.
This would serve to increase covered
persons’ ongoing costs.
In addition, to the extent that covered
persons are concerned about contracting
with broker-dealers as reporting agents
because of potential conflicts of interest,
to the extent that there are clearing
agencies that would act as reporting
agents, these covered persons could
contract with these entities.
Furthermore, covered persons are not
restricted from contracting privately to
use third-party vendors to assist in
reporting.1086 Therefore, those market
participants that are concerned about
revealing sensitive inventory
information to broker-dealers but would
still benefit from reporting assistance
could privately contract with third-party
vendors. Since covered persons could
not rely on third-party vendors to fulfill
their regulatory obligations,1087
contracting with a third-party vendor for
assistance in reporting may require
covered persons to incur some amount
of monitoring costs; however, this
option should provide covered persons
with additional flexibility and a way to
potentially mitigate reporting costs.1088
7. Publicly Releasing the Information in
10c–1a(e)
The Commission also considered an
alternative requiring public disclosure
of the information in Rule 10c–1a(e),
namely available identifiers for each
1085 This was supported by commenters. See, e.g.,
HMA Letter, at 8 (stating that ‘‘having separate
reporting agents who are not brokers may enable
lenders to more freely shop amongst multiple,
competing lending agents’’).
1086 Note that, while covered persons can use
third party vendors to help prepare their reports,
such vendors would not be reporting agents under
final Rule 10c–1a. See supra Part VII.B.2.
1087 See id.
1088 See supra Part IX.C.3 for a further discussion
about how contracting with third party vendors
may allow covered persons to lower their
compliance costs.

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party to the transaction, whether the
security is loaned from a broker’s or
dealer’s securities inventory to a
customer of such broker or dealer, and
if known whether the loan is being used
to close out a fail to deliver.
Information on who the parties to the
transaction are and whether a broker or
dealer is lending to its own customer
could refine the context around the
other data elements in Rule 10c–1a that
are public. Such refinement would be
likely to alter trading strategies, which
could have both positive and negative
effects on market quality. For example,
this information could allow the market
to identify the positions of large short
sellers. Empirical studies support the
idea that short sellers are informed,
suggesting that additional information
about short selling could help investors
better value securities.1089 Professional
traders might seek to profit by
developing trading strategies based on
signals from the identities of those
borrowing securities, particularly those
borrowing a high volume. In addition,
the information could be used to reduce
the search costs in the securities lending
market.
However, the information on whether
the security loan is being used to close
out a fail to deliver may be of little use
to anyone other than regulators. At this
time, the Commission is unaware of
potential non-regulatory uses of such
information that would be beneficial to
the market.
The alternative would result in higher
costs to an RNSA, to those who access
the data, and to participants in the
securities lending market. An RNSA
would incur higher costs to release the
greater volume of data and those who
access the data would incur higher costs
to import and process the data. Trading
strategies incorporating the identities of
borrowers and lenders could negatively
impact those borrowers and lenders in
ways that could ultimately degrade
price efficiency. In particular,
identifying large short sellers could
facilitate ‘‘copycat strategies’’ that seek
to profit by copying the activity of
others believed to have better
information or by trading ahead of
them.1090 If it facilitates such trading
1089 See, e.g., Joseph E. Engleberg, et al., How are
Shorts Informed?: Short Sellers, News, and
Information Processing, 105 J. Fin. Econ. 260
(2012); David E. Rapach, et al., Short Interest and
Aggregate Stock Returns, 121 J. Fin. Econ. 46
(2016). However, one academic study finds that
prices react to short sales even when short sales are
not transparent to the market. See Michael J.
Aitken, et al., Short Sales Are Almost
Instantaneously Bad News: Evidence from the
Australian Stock Exchange, 53 J. Fin. 2205 (1998).
1090 See SEC Division of Economic Research and
Analysis (DERA), Short Sale Position and

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
strategies, releasing the identities of
short sellers could act as a constraint on
fundamental short selling, reducing the
incentives to conduct fundamental
research.1091 Less fundamental research
could potentially result in over- or
underpricing, because prices would not
incorporate information short sellers
would have otherwise collected and
traded on. Revealing the identities of
participants and when they are
borrowing to close failures to deliver in
the securities lending market could also
result in pressure on lenders to recall
loans or negative campaigns against
short sellers.1092
8. Additional Information in the
Reported or Disseminated Information

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The Commission also considered
alternatives requiring additional data
fields to be reported and requiring an
RNSA to compute derived fields for
public dissemination.
For example, the Commission could
require entities to report in their lending
transactions whether a given loan was
transacted on their own behalf, or on
behalf of a customer, i.e., whether the
loan was transacted on a principal or
agent basis. This alternative would
allow FINRA and the Commission to
oversee compliance with various
regulations. These data could allow for
the review of transactions that occur by
an entity on a principal and agent basis
to look for systematically different terms
between the two different types of
transactions by the same broker-dealer.
Such differences may flag to regulators
that broker-dealers are not fulfilling
their obligations and may be in violation
of existing rules. Requiring such data
would add complexity and additional
cost to the rule. However, these costs
may be minimal for broker-dealers, who
are FINRA members, as the Commission
understands that FINRA members
already collect much of this
information.1093 The Commission is
unaware of any regulation or rule
requiring non-FINRA members to
collect this information, and this
alternative may significantly increase
costs for non-FINRA members who
would be required to build out systems
to collect and report such information.
Transaction Reporting (May 5, 2014), available at
https://www.sec.gov/files/short-sale-position-andtransaction-reporting%2C0.pdf, at 52–53.
1091 See Sanford J. Grossman & Joseph E. Stiglitz,
On the Impossibility of Informationally Efficient
Markets, 70 Am. Econ. Rev. 393 (1980), available
at https://ssrn.com/abstract=228054 (retrieved from
SSRN Elsevier database).
1092 See supra Part IX.C.1 for further discussion
of the potential negative consequences of revealing
short sellers’ information.
1093 See, e.g., FINRA Rule 4314.

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As discussed in the Proposing
Release,1094 the Commission considered
including in Rule 10c–1a(e) information
on whether, if the lender is a broker or
dealer, the securities are borrowed from
customers who have agreed to
participate in fully paid lending
programs or from securities owned in its
margin customers’ accounts. Such
information could help protect investors
by improving the efficiency of
surveillance of, for example, compliance
with Rule 15c3–3(b)(3) related to
providing the lender collateral to secure
the loans of securities when brokerdealers lend shares from fully paid or
excess margin securities from
customers. However, the Commission
has since come to understand that it
may not be feasible for broker-dealers to
identify which customers’ shares are
being loaned.1095
9. Only Allow an RNSA To Charge Fees
to Data Reporters
The Commission also considered an
alternative that would allow an RNSA to
charge fees to reporters of Rule 10c–1a
information, but not to subscribers to
access the securities lending data. The
effect on costs of this alternative would
be that any fees levied by an RNSA to
help pay for costs to collect and
disseminate the data would shift onto
covered persons providing data to an
RNSA. The Commission believes that
many of the market participants
providing data to an RNSA under the
final rule will also be consumers of the
data. If all 361 entities providing data
were the only entities to subscribe to the
data, for these market participants it is
unclear how much difference this shift
in fees would make. However, to the
extent that more market participants
subscribe to the data, prohibiting an
RNSA from this additional source of
revenue would likely result in higher
reporting fees than under the final rule.
This alternative would potentially
increase the benefits of the final rule for
increased transparency, in that
providing access to Rule 10c–1a data for
free may increase the number of market
participants who access it.1096 However,
TRACE has been successful in
mitigating inefficiencies in the corporate
bond market despite the fact that it is
1094 See

Proposing Release, 86 FR 69846.
e.g., James J. Angel Letter, at 3 (stating
that shares available for lending from a brokerage
firm’s customers’ margin accounts are in ‘‘fungible
bulk’’ and that ‘‘the firm may not even have
identified which customer’s shares are being loaned
out when it makes its delivery’’ to the DTC to settle
its net delivery obligation).
1096 See supra Part IX.C.1 for further discussion
of the expected benefits from the final rule on
increased transparency in the securities lending
market.

75729

only available for fee.1097 Furthermore,
the Commission expects that most of the
entities likely in a position to affect the
securities lending market or to use
information from the securities lending
market to affect other markets would
subscribe to the data regardless of
whether there was a cost to subscribing.
Therefore, the Commission does not
believe that disallowing an RNSA from
charging fees to data subscribers would
result in significant additional benefits
to the securities lending market relative
to the final rule.
10. Longer Holding Period Requirement
The Commission also considered an
alternative requiring an RNSA to retain
and make publicly available the data for
a period longer than the 5 years
specified (e.g., 10 or 20 years). This
alternative would ensure that the data
are available to regulators and market
participants at longer horizons. For
instance, if regulators or market
participants wanted to evaluate how the
lending market reacts to different
market events, such as across the
business cycle, then five years of data
may not be sufficient. The average
business cycle is 3–5 years, and so to
study the dynamics of the lending
market across the business cycle would
require at least 10 years, if not more, of
data. Additionally, because there is
likely persistence in conditions in the
securities lending market, a five-year
time horizon may not be sufficient for
certain statistical analyses.1098
Improved understanding of the
dynamics of the securities lending
market across various market conditions
may benefit both regulators and
investors by providing more precise
information with which to make
regulatory and investment decisions—
enhancing many of the benefits
described above.1099 For example,
longer term data may enable superior
statistical analysis by market
participants of the dynamics of the
securities lending market in various
environments, which in turn may lead
to better investment decisions and thus
improved market performance.
Additionally, the Commission could use
longer term data to provide more precise
estimates of damages in, for example
Reg SHO violations or violations of

1095 See,

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1097 See supra Part IX.C.1 for a discussion of
empirical evidence that the introduction of TRACE
improved efficiencies in the corporate bond market.
1098 Persistence in conditions implies that
observations are not independent. When this is the
case even relatively large datasets may lack
statistical power for some modeling applications,
such as factor models. The solution in such cases
is to significantly increase the sample size.
1099 See supra Parts IX.C.1 and IX.C.2.

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Exchange Act Rule 15c3–3 (Customer
Protection Rule), to calculate
disgorgement.
The Commission believes that the
alternative would impose additional
costs on an RNSA not required by the
final rule in terms of storing and
maintaining historical data. However,
since the final rule already requires an
RNSA to build systems to collect and
disseminate five years of data, these
costs would likely be relatively small
because the Commission understands
that the cost of storing data is relatively
small compared to the cost of producing
and maintaining the systems needed to
collect, process, and disseminate the
data.
While the final rule allows FINRA to
destroy the data after five years, the
Commission believes that it is unlikely
that FINRA would do so. This is
because the cost of retaining the data is
likely relatively small and the data may
have commercial value. For instance, an
RNSA could levy additional fees for
access to historical data. If this is the
case, and an RNSA chooses to keep the
historical data under the final rule, then
the cost difference to an RNSA between
the final rule and this alternative would
likely be minimal given that this
alternative would require an RNSA to
comply with a requirement that they
may already choose to do on their own.

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11. Longer Implementation Period
The Commission considered
alternatives that would allow for a
longer implementation period. Several
commenters requested implementation
periods of 18 or 24 months,1100 which
may be longer than the final rule’s
implementation period.1101 Some
commenters requested a phased-in
approach to implementation, for
example, by first only requiring
information to be reported for certain
types of securities, or initially delaying
the public dissemination of data.1102
The Commission recognizes that a
longer implementation period would
give reporting entities additional time
and flexibility while building out the
systems necessary to facilitating the
reporting required under the final rule,
1100 See, e.g., SIFMA Letter, at 4 (recommending
‘‘an 18-month build-out period following the
RNSA’s finalization of the technical specifications
for reporting’’); Fidelity Letter, at 5 (recommending
a two-year implementation period).
1101 See final Rule 10c–1a(f) and supra Part VIII
for additional discussion of the implementation
timeline.
1102 See, e.g., Chamber of Commerce Letter, at 4
(recommending at ‘‘phased implementation by asset
class’’) and SIFMA Letter 1, at 4 (recommending ‘‘a
staged reporting regime to allow regulators
sufficient time to analyze collected data before
public dissemination of any information’’).

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which may allow a more efficiency
allocation and resources and thus
reduce their implementation costs.
Similarly, delaying the public
dissemination of data would give an
RNSA additional time and flexibility to
build out systems related to
dissemination, which may reduce their
implementation costs.
However, the Commission also
recognizes that any delay in the
implementation period would also
delay the realization of the benefits of
final Rule 10c–1a, both those related to
increased transparency in the securities
lending market,1103 as well as the
regulatory benefits.1104 Furthermore,
while an initial delay in the public
dissemination of the data would
maintain the regulatory benefits of the
rule, as regulators would still have
access to the data, other market
participants’ access to the information
would be delayed, which would delay
the benefits of the Rule related to
increased transparency. Thus, a choice
of implementation period requires
balancing the need to allow for
sufficient time to build out reporting
systems, on the one hand, and ensuring
that market participants have timely
access to Rule 10c–1a information on
the other.
12. Report to the Commission Rather
Than to an RNSA
The Commission also considered an
alternative requiring that covered
persons disclose Rule 10c–1a
information directly to the
Commission—for example, through
EDGAR, rather than to an RNSA. Such
an alternative could alter which entities
incur costs and would likely increase
overall costs relative to the final rule
because, for example, many entities who
possess reporting capabilities to an
RNSA, e.g., members of FINRA, would
need to establish comparable reporting
relationships with the Commission. In
particular, many broker-dealers already
have connectivity to FINRA systems
that support the kind of submission
process required for providing Rule
10c–1a information.1105 Establishing
similar connectivity with EDGAR may
require additional effort for covered
persons compared to the proposal.
Additionally, FINRA has expertise
creating repositories similar to that
called for in the final rule, suggesting
1103 See supra Part IX.C.1 for a discussion of the
benefit of the final rule related to increased
transparency in the securities lending market.
1104 See supra Part IV.C.2 for a discussion of the
regulatory benefits of the final rule.
1105 For example, FINRA’s TRACE system.

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that the final rule will likely be more
efficient than this alternative.
The Commission is uncertain of how
some benefits of this alternative would
compare to certain benefits of the final
rule. Specifically, while this alternative
would not alter the content of the data
in the final rule, the accessibility and
timeliness of the data under this
alternative depend on how the
Commission would develop the
functionality for distributing the data. In
particular, we cannot at this time assess
whether the alternative would result in
more or less timely or accessible data or
if the differences would be meaningful.
For example, data obtained from the
Commission could be less accessible if
the Commission could not develop
functionality allowing market
participants to access the data with the
same ease an RNSA could provide,
given an RNSA has more experience
collecting and disseminating similar
data (e.g., TRACE). Thus, this
alternative could result in significantly
higher compliance costs than the final
rule.
Additionally, the regulatory benefits
of the alternative relative to the final
rule will depend on whether the
Commission chose to grant an RNSA
direct access to the confidential data. If
the Commission chose to do so, then the
regulatory benefits of this alternative
would be the same as the current
proposal. If the Commission chose not
to grant an RNSA access to the
confidential data, then the regulatory
benefits would decline significantly as
many of the regulatory benefits, such as
improved monitoring of broker-dealers
for compliance with various legal
requirements, require access to the
confidential data.1106 Thus, the
regulatory benefits of the rule could be
severely diminished.
13. Report Through an NMS Plan
Because the nature of securities
lending data is similar to the transaction
data governed by the NMS data plans,
such as the CT Plan,1107 the
Commission considered proposing a
new NMS Plan to set up a reporting and
dissemination process that mirrors the
CT Plan. Reporting entities could report
the data to Transaction Reporting
Facilities operated by competing
1106 See supra Part IX.C.2 for further discussion
of the expected regulatory benefits of the final rule.
1107 Joint Industry Plan; Order Approving, as
Modified, a National Market System Plan Regarding
Consolidated Equity Market Data, Release No. 34–
92586, 86 FR.44142 (Aug. 11, 2021), available at
https://www.sec.gov/rules/sro/nms/2021/3492586.pdf, appeal filed, Nasdaq Stock Market LLC
v. SEC, No. 21–1167 (D.C. Cir. Aug. 9, 2021).

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consolidators,1108 who would
consolidate and distribute the data for a
fee. The NMS Plan would set the fee
paid by (or rebate collected by) the
reporting entities to (or from) the
competing consolidators for the
collection of the data.1109 We did not
receive public comments addressing
this alternative.
This alternative is more likely than
the final rule to improve the
competitiveness of the market for
securities lending data. Under this
alternative, current data vendors, who
have experience collecting and
disseminating securities lending
information, could compete as
competing consolidators for securities
lending data and have the same access
to the supply of consolidated data as
any other competing consolidator,
including an RNSA or SRO. Conversely,
as final Rule 10c–1a gives RNSAs the
authority to implement rules regarding
the format and manner of collection and
dissemination of Rule 10c–1a data,1110
the final rule may be more likely to
result in a situation in which a current
vendor may need to compete with an
RNSA that has exclusive access to the
raw Rule 10c–1a data. However, since
final Rule 10c–1a does not require the
reporting of shares available to lend,1111
to the extent that commercial data
vendors’ superior access to information
about shares available to lend and
utilization rates provides them with a
competitive advantage under the final
rule,1112 it may not necessarily be the
case that this alternative would result in
significantly better outcomes for current
data vendors than the final rule. This
alternative would, however, reduce the
barriers to entry in the market for
securities lending data because all new
1108 A competing consolidator is a ‘‘securities
information processor required to be registered
pursuant to 17 CFR 242.614 (‘‘Rule 614’’) or a
national securities exchange or national securities
association that receives information with respect to
quotations for and transactions in NMS stocks and
generates a consolidated market data product for
dissemination to any person.’’ 17 CFR
242.600(b)(16).
1109 The Proposing Release described this
alternative slightly differently, with the data
collected by an SRO rather than by competing
consolidators. On further consideration we believe
the scenario described here is more likely because
it is similar to the Market Data Infrastructure rule,
but both scenarios would result in economic
competition on data price, and we considered both
versions of this alternative.
1110 See supra Part VII.I for further discussion.
1111 See supra Part IX.C.1 for further discussion
related to the fact that Rule 10c–1a data will not
specifically provide information on shares
available.
1112 See supra Part IX.D.2 for further discussion
of the impact of the final rule on competition in the
market for securities lending data and analytics.

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entrants would have access to the same
data for consolidation and distribution.
This alternative could provide for the
public dissemination of securities
lending transaction information without
the reliance on an RNSA alone. It could
also leverage the processes of the NMS
Plan, but would require compliance
costs by one or more SROs that chose
to set up and operate a Transaction
Reporting Facility. Fees for reporting
transactions could offset such
compliance costs. While the
Commission cannot be sure how these
fees under this alternative would
compare to the fees under the final rule,
competition between competing
consolidators could result in reporting
facilities that are more efficient than
that of an RNSA. However, as most
SROs (including all of the national
securities exchanges) do not necessarily
have expertise that is specific to the
dissemination of securities lending data,
compliance costs may be higher than
those proposed under the CT Plan, for
which national securities exchanges do
have relevant experience as they
disseminate equity market data through
their proprietary data feeds. A need to
coordinate between multiple SROs in
order to establish an NMS Plan may also
imply higher coordination costs in this
alternative as compared to the final rule.

75731

Certain provisions of final Rule 10c–
1a contain ‘‘collection of information’’
requirements within the meaning of the
Paperwork Reduction Act of 1995
(‘‘PRA’’).1113 The hours and costs
associated with complying with the
final rule’s reporting requirements,
RNSA rule implementation
requirements, publication of data
requirements, and data retention
requirements, as applicable, constitute
PRA burdens.
In accordance with the PRA, the
Commission is submitting the final rule
amendments to the Office of
Management and Budget (‘‘OMB’’) for
review.1114 The Commission published
a notice requesting comment on these
collections of information requirements
in the Proposing Release and submitted
these requirements to the OMB for
review in accordance with the PRA. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a currently valid control
number. The title and control number

for these collections of information are
OMB Control No. 3235–0788.
The Commission received limited
comments on the PRA burden estimates
included in the Proposing Release.1115
One commenter stated that the
Commission has covered most of the
impacts of the proposed rule.1116
Another commenter stated that the
proposed rule’s reporting regime would
require considerable time to develop,
test, launch, and monitor.1117
Comments on specific parts of the
Proposing Release’s PRA burden
estimates are discussed below, in this
part, as they relate to the particular PRA
burden estimates that are the subject of
those comments. The Commission
acknowledges the PRA burdens that will
be assumed by covered persons,
reporting agents, and RNSAs in
complying with the final rule, and its
estimates of the collection of
information for the amendments, as
adopted, have been updated from the
estimates included in the Proposing
Release, as appropriate, with the
updated estimates based on the
modifications in the final rule,
comments received, and more recently
available data.
The information collections are
necessary to remediate certain issues
present in the securities lending market.
As discussed above, in Part I, the
Commission is adopting amendments to
close securities lending data gaps and
increase market efficiency. Final Rule
10c–1a is designed to increase the
transparency of information available to
brokers, dealers, and investors with
respect to the loan or borrowing of
securities. Additionally, final Rule 10c–
1a is designed to provide an RNSA with
data that might be used for in-depth
monitoring and surveillance. Further,
the data elements are designed to
provide regulators with information to
understand whether broker-dealers are
building up risk; what strategies brokerdealers use to source securities that are
lent to their customers; and what loans
broker-dealers provide to their
customers with fail to deliver positions.
To achieve these objectives, the
Commission is adopting the
requirements discussed above, in Parts
VII.A through M. Under final Rule 10c–
1a, certain persons are required to report
information about securities loans to an
RNSA. The final rule also requires that
an RNSA make certain information
provided to an RNSA, along with daily
information pertaining to the aggregate

1113 44 U.S.C. 3501 through 3521. The burdens
associated with the information collection
requirements are referred to as ‘‘PRA burdens.’’
1114 See 44 U.S.C. 3507(d); 5 CFR 1320.11.

1115 See, e.g., CSFME Letter 1, at 3; IHS Markit
Letter, at 13.
1116 IHS Markit Letter, at 13.
1117 See MFA Letter 3, at 8.

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transaction activity and distribution of
loan rates for each reportable security,
publicly available. Further, the final
rule requires certain confidential
information to be reported to an RNSA
to enhance RNSA oversight and
enforcement functions.
A. Respondents
As a preliminary matter, the opacity
of the securities lending market makes
estimating the number of respondents
difficult. Indeed, as discussed above, an
objective of Rule 10c–1a is to close the
data gaps in this market.1118 Despite
these data gaps, the Commission has
estimated the number of respondents
who are a covered person, reporting
agent, or RNSA.
As described in detail below, in this
part, the respondents under final Rule
10c–1a are: (1) covered persons and (2)
reporting agents capturing the
applicable Rule 10c–1a information and
providing it to an RNSA, in the format
and manner required by the applicable
rule(s) of such RNSA, and within the
time periods specified in paragraphs (c)
through (e) of the final rule, as
applicable to the covered securities
loan; 1119 and (3) an RNSA complying
with the final rule’s requirements to
implement rules regarding the format
and manner of its collection of Rule
10c–1a information, publish the
information specified in final Rule 10c–
1a(g) in accordance with the time frames
required for such publication, and retain
and make available to the Commission,
or any other persons designated by the
Commission, certain specified
information. Given the differences in
the information collections applicable to
these parties, as discussed below, in this
part, the discussion of burdens
applicable to covered persons and
reporting agents are separated from the
discussion of those applicable to an
RNSA.
1. Covered Persons
As discussed above, in Part VII.A,
under final Rule 10c–1a(j)(1), a covered
person is any intermediary other than a
clearing agency when providing only
the functions of a central counterparty
1118 See

supra Part I; see also supra Part IX.B.2.
Proposing Release separated such
persons into the following categories: lending
agents, reporting agents, and lenders that would not
employ a lending agent. The final rule differs from
the proposed rule in that different categories of
persons are used to describe those who have or may
have a reporting requirement, as applicable, and as
discussed above, in Parts VII.A and VII.B.
Therefore, the categories of persons included
herein, as well as the estimates, vary from those
included in the Proposing Release. For instance,
this release uses the term ‘‘intermediaries,’’ which
is comparable to the Proposing Release’s use of the
term ‘‘lending agents.’’

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1119 The

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pursuant to Rule 17Ad–22(a)(2) of the
Exchange Act or a central securities
depository pursuant to Rule 17Ad–
22(a)(3) of the Exchange Act; any person
that agrees to a covered securities loan
as a lender when an intermediary is not
used unless paragraph (j)(1)(iii) of the
final rule applies; or a broker or dealer
when borrowing fully paid or excess
margin securities pursuant to Rule
15c3–3(b)(3) of the Exchange Act.
In the Proposing Release, the
Commission estimated, based on a
review of Forms N–CEN filed with the
Commission that identify the lending
agents used by investment companies,
that there would be 37 lending agent
intermediaries, 3 of which would
provide information directly to an
RNSA and 34 of which would provide
information to a reporting agent.1120
Using updated figures based on a review
of Forms N–CEN filed with the
Commission, it is estimated that there
are 35 intermediaries. Of the 35
intermediaries identified, four are
broker-dealers. Broker-dealers have
experience providing information
directly to RNSAs. The Commission
estimates that those four intermediaries
would provide information directly to
an RNSA. The other 31 intermediaries
are not broker-dealers. Therefore, the
Commission estimates that they would
provide information to a reporting agent
rather than establish connectivity
directly to an RNSA.
In the Proposing Release, the
Commission estimated, based on the
number of funds within investment
companies that do not employ a lending
agent based on a review of Forms N–
CEN filed with the Commission, that
there would be 278 lenders that would
not employ a lending agent, 139 of
which would provide information to an
RNSA and 139 of which would provide
information to a reporting agent.1121
One commenter stated that this was an
underestimate that accounted for only
those lenders that are registered with
the Commission.1122 The Commission
agrees with the commenter and is
updating the estimate regarding
unregistered entities, which comprise
approximately 67 percent of the
securities available for lending.1123 The
unregistered portion of the securities
lending market, therefore, is estimated
to be 1,389 entities.1124 However,
1120 Proposing

Release, 86 FR 69822.
Release, 86 FR 69822–23.
1122 See CSFME Letter 1, at 3.
1123 See OFR Pilot Survey, Table 2, at 7. (($2.519
trillion + $1.563 trillion + $663 billion + $1.585
trillion)/$9.443 trillion * 100% ≈ 67%).
1124 (684 registered investment companies that
agree to a covered securities loan as the lender ×
(0.67/0.33) ≈ 1,389 unregistered entities.
1121 Proposing

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according to the OFR Pilot Survey, only
about 15 percent of securities loans are
not intermediated and go directly to end
borrowers.1125 Therefore, it is estimated
that the number of unregistered lenders
that would not use an intermediary is
208 entities.1126 Accordingly, the
Commission estimates that there are 434
persons that agree to a covered
securities loan as the lender when an
intermediary is not used, based on a
review of Forms N–CEN filed with the
Commission showing the number of
investment companies that do not
employ an intermediary.1127 Consistent
with the estimated ratio included in the
Proposing Release,1128 of these 434
persons, the Commission estimates that
217 persons will provide information to
an RNSA (including by using a thirdparty vendor) and that 217 persons will
provide information to a reporting
agent.
As discussed above, in Part VII.A,
paragraph (j)(1)(iii) was added to the
proposed rule to specify that, if a broker
or dealer is borrowing fully paid or
excess margin securities in the covered
securities loan, the broker or dealer is
required to provide the Rule 10c–1a
information to an RNSA. Based on a
review of FOCUS Reports Part II, Item
4350, it is estimated that there are 34
brokers or dealers borrowing fully paid
or excess margin securities pursuant to
Rule 15c3–3(b)(3) of the Exchange Act.
Consistent with the estimate for the
number of intermediaries who are
brokers or dealers and would provide
information directly to an RNSA, the
Commission estimates that the 34
brokers or dealers borrowing fully paid
or excess margin securities would
provide information directly to an
RNSA.
Consistent with the estimate included
in the Proposing Release,1129 the
Commission is not estimating that
persons who agree to a covered
securities loan on behalf of themselves
or another person and employ a lending
agent assume any PRA burdens because
those persons would not be responsible
for providing information to an RNSA.
Accordingly, the Commission estimates
that 503 covered persons 1130 will be
1125 See

OFR Pilot Survey, at 7–8.
unregistered entities × 0.15 ≈ 208
unregistered entities.
1127 226 registered investment companies that
agree to a covered securities loan as the lender
when an intermediary is not used + 208
unregistered entities = 434 persons that effect a
covered securities loan as the lender when an
intermediary is not used.
1128 Proposing Release, 86 FR 69823.
1129 See Proposing Release, 86 FR 69822.
1130 35 intermediaries + 434 persons that agree to
a covered securities loan as the lender when an
intermediary is not used + 34 brokers or dealers
1126 1,389

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subject to PRA burdens under final Rule
10c–1a(a). As set forth in paragraph
(a)(1) of the final rule, any covered
person who agrees to a covered
securities loan on behalf of itself or
another person is required to provide
Rule 10c–1a information directly to an
RNSA; 1131 however, a covered person
may enter into a written agreement with
a reporting agent for the reporting agent
to provide information to an RNSA.1132
Of the 503 covered persons, the
Commission estimates that 255 are
providing covered persons 1133 and that
248 are non-providing covered
persons.1134

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2. Reporting Agents
Under the proposed rule, the term
‘‘reporting agent’’ referred specifically to
certain broker-dealers. In the Proposing
Release, the Commission estimated,
based on the number of broker–dealers
that lent securities in 2020, that there
would be 94 reporting agents.1135 Under
final Rule 10c–1a(j)(4), a reporting agent
means a broker, dealer, or registered
clearing agency that enters into a
written agreement with a covered
person under final Rule 10c–1a(a)(2).
Based on the number of broker-dealers
that lent securities as of December 2022
(97),1136 as well as the number of
registered clearing agencies in 2023
(9),1137 it is estimated that there are 106
borrowing fully paid or excess margin securities
pursuant to Rule 15c3–3(b)(3) of the Exchange Act
= 503 covered persons.
1131 For the purposes of the PRA estimates
included in this release, such covered person is
referred to as a ‘‘providing covered person.’’
1132 For the purposes of the PRA estimates
included in this release, such covered person is
referred to as a ‘‘non-providing covered person.’’
1133 4 broker-dealer intermediaries + 217 persons
that agree to a covered securities loan as the lender
when an intermediary is not used and will provide
information to an RNSA + 34 brokers or dealers
borrowing fully paid or excess margin securities =
255 providing covered persons.
1134 31 non-broker-dealer intermediaries + 217
persons that agree to a covered securities loan as
the lender when an intermediary is not used and
will provide information to a reporting agent = 248
non-providing covered persons.
1135 Proposing Release, 86 FR 69822.
1136 These persons likely have experience
providing RNSAs with information through other
trade-reporting requirements and have experience
with securities lending. It is possible that some of
these broker-dealers may choose not to be a
reporting agent and that other persons may choose
to be a reporting agent. Given uncertainty and a lack
of granular data about the current market, however,
the Commission continues to believe that an
estimate based on the number of broker-dealers that
lent securities in is reasonable with regard to the
estimate of the number of reporting agents. See
Proposing Release, 86 FR 69822.
1137 See Cybersecurity Risk Management Rule for
Broker-Dealers, Clearing Agencies, Major SecurityBased Swap Participants, the Municipal Securities
Rulemaking Board, National Securities
Associations, National Securities Exchanges,
Security-Based Swap Data Repositories, Security-

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reporting agents 1138 that may be subject
to PRA burdens under final Rule 10c–
1a(b).
3. RNSA
Under final Rule 10c–1a(j)(5), an
RNSA is an association of brokers and
dealers that is registered as a national
securities association pursuant to
section 15A of the Exchange Act.
Consistent with the estimate included in
the Proposing Release,1139 it is
estimated that there is one RNSA that
will be subject to PRA burdens under
paragraphs (f), (g), and (h) of the final
rule.
B. Collection of Information Related to
Covered Persons
Final Rule 10c–1a applies to any
covered person who agrees to a covered
securities loan on behalf of itself or
another person. Under final Rule 10c–
1a(a)(1), a covered person who agrees to
a covered securities loan on behalf of
itself or another person shall provide to
an RNSA the Rule 10c–1a information,
in the format and manner required by
the applicable rule(s) of such RNSA,
and within the time periods specified in
paragraphs (c) through (e) of the final
rule. As discussed above, in this part,
this type of covered person is referred
to as a providing covered person.
However, a covered person may rely on
a reporting agent to fulfill the covered
person’s reporting obligations under
final Rule 10c–1a(a) if the covered
person: (1) enters into a written
agreement with the reporting agent that
agrees to provide the Rule 10c–1a
information to an RNSA on behalf of
such covered person, in accordance
with the requirements set forth in Rule
10c–1a(b)(1), and (2), provides the
reporting agent with timely access to the
Rule 10c–1a information. As discussed
above, in this part, this type of covered
person is referred to as a non-providing
covered person.
One commenter stated that the
Commission should consider that not all
‘‘reporters’’ have licenses to multiple
instrument identifiers required for
reporting, meaning that smaller firms
Based Swap Dealers, and Transfer Agents, Release
No. 34–97142 (Mar. 15, 2023), 88 FR 20212 (Apr.
5, 2023), 88 FR 20294. For purposes of this PRA
burden estimate, all registered clearing agencies are
included as respondents who are reporting agents.
A registered clearing agency may elect not to be a
reporting agent, in which case the PRA burden
estimate may decrease due to the decrease in
number of respondents.
1138 97 broker-dealers that lent securities + 9
registered clearing agencies = 106 reporting agents.
This estimate differs from that included in the
Proposing Release because the final rule adds
registered clearing agencies to the list of persons
who are eligible to be reporting agents.
1139 See, e.g., Proposing Release, 86 FR 69829.

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75733

would need to purchase additional data
licenses and thereby add to their cost
structure.1140 As discussed above, in
this part, unlike providing covered
persons who are estimated to have
experience in providing information
directly to an RNSA, persons who do
not have the necessary licenses and
systems are estimated to use a reporting
agent as non-providing covered persons
for purposes of the PRA estimates.
Therefore, as non-providing covered
persons, they are not estimated to
acquire any additional licenses for
purposes of compliance with the final
rule.
The below analysis is separated into
categories of persons who may provide
the Rule 10c–1a information to an
RNSA.1141 These categories are
providing covered persons and nonproviding covered persons.1142 Both
providing covered persons and nonproviding covered persons assume PRA
burdens in complying with final Rule
10c–1a(a)(1).
1. Providing Covered Persons
In the Proposing Release, the
Commission estimated that lending
agents who would be required to
provide Rule 10c–1 information to an
RNSA and lenders who run their own
securities lending program rather than
employ a lending agent and provide
Rule 10c–1 information directly to an
RNSA would assume certain burdens
related to developing and reconfiguring
their current systems to capture the
required Rule 10c–1 information. The
Proposing Release referred to such
persons as ‘‘providing lending agents’’
and ‘‘self-providing lenders,’’
respectively. The PRA burden estimates
for providing lending agents and selfproviding lenders are summarized in
PRA Table 1 of the Proposing
Release.1143
a. Initial Burden
Providing covered persons assume
PRA burdens related to developing and
1140 See

IHS Markit Letter, at 13.
more fully discussed below, there would
be some variation between covered persons that are
in the same category. The analysis provided herein
is organized so that the discussion of covered
persons who share commonalities allows for a
logical presentation and discussion of burdens. This
structure for the analysis is consistent with that
provided in the PRA included in the Proposing
Release. See Proposing Release, 86 FR 69822 n.130.
1142 As an example of variability between covered
persons in the same category, the parties within the
intermediary category and a person that agrees to
a covered securities loan as a lender when an
intermediary is not used may choose to employ a
reporting agent. As discussed below, this choice
will result in information collection burdens being
different for covered persons within the same
category.
1143 Proposing Release, 86 FR 69827.
1141 As

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reconfiguring their current systems to
capture the required Rule 10c–1a
information.1144 Providing covered
persons, in complying with the final
rule, will also be required to establish
connections that will allow them to
provide the information to an RNSA,
which involves establishing connections
with an RNSA and the persons on
whose behalf they are lending
securities.
As stated in the Proposing
Release,1145 the PRA burden for this
requirement is similar to that of
establishing the appropriate systems
and processes required for collection
and transmission of the required
information in complying with the
CAT 1146 because of the general
similarity between the systems
established under that rule and the
systems that would be required to be
established under final Rule 10c–1a.
One commenter argued that the
Proposing Release’s operational PRA
burden estimates were inappropriate
because the CAT would not capture
loan modifications.1147 However, the
PRA burden estimates included in the
Proposing Release accounted for loan
modifications.1148 Further, the
Commission continues to believe that
the CAT-related burden estimates serve
as an appropriate basis for the PRA
burdens associated with compliance
with the final rule, as both the CAT and
final Rule 10c–1a require the provision
of trade information to a third-party
information repository.1149 The systems
complying with final Rule 10c–1a will
be significantly less complex than those
required by the CAT because the
systems required for compliance with
final Rule 10c–1a will need to capture
less information overall.1150

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1144 While

providing covered persons may
already track the data elements as a part of the
regular course of business, capturing this
information would be a new regulatory
requirement.
1145 See Proposing Release, 86 FR 69823.
1146 See Joint Industry Plan, Order Approving the
National Market System Plan Governing the
Consolidated Audit Trail, Release No. 34–79318
(Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘CAT
Approval Order’’), 81 FR 84921.
1147 CSFME Letter 1, at 3.
1148 See, e.g., Proposing Release, 86 FR 69822.
1149 The burden estimates included in the CAT
Approval Order are based on a study of cost
estimate calculations. See CAT Approval Order, 81
FR 84857.
1150 17 CFR 242.613 (‘‘Rule 613(c)(1)’’) of the
Exchange Act requires the CAT NMS Plan to
provide for an accurate, time-sequenced record of
certain orders beginning with the receipt or
origination of an order by a broker-dealer, and
further documenting the life of the order through
the process of routing, modification, cancellation,
and execution (in whole or in part) of the order.
Final Rule 10c–1a requires the reporting of loan
modification data, as applicable, but does not

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The PRA burden estimates for systems
development and monitoring are based
on the burdens applicable to non-Order
Audit Trail System (‘‘OATS’’) reporters
under the CAT.1151 The Commission
determined to use this estimate due to
the factors it considered, as part of the
CAT Approval Order, in categorizing
firms and estimating burdens.1152 NonOATS reporters were estimated to
assume the least amount of burdens
under the CAT NMS Plan due to the
limited scope of their reportable
activity.1153 In addition, non-OATS
reporters assumed new reporting
burdens in complying with the CAT,
similar to how providing covered
persons will assume new PRA burdens
in complying with the final rule’s
reporting requirements. Based on the
overall size of the securities lending
market and the number of providing
covered persons that may provide
information directly to an RNSA, the
Commission believes that the volume of
securities lending transactions for
providing covered persons will be, on
average, of a similar scope to the volume
of reports estimated by non-OATS
reporters under the CAT Approval
Order.
In the Proposing Release, the
Commission, estimated that each
providing lending agent and selfproviding lender would assume 3,600
PRA burden hours in developing and
reconfiguring their current systems to
capture the required data elements, with
a total industry-wide burden of 511,200
hours.1154 One commenter stated that
most lenders will not be able to meet the
proposed 15 minute reporting
requirement without substantial
technology development and cost.1155
As discussed above, in Part VII.G.1, the
change from the proposed rule to
impose an end-of-day reporting
requirement should help to reduce the
number and frequency of reports that
would otherwise be required to be
provided to an RNSA throughout the
day. An intraday reporting system
would have required a level of
automation and data processing
capacity that some providing covered
persons would not currently have
require that order information be provided to an
RNSA. Additionally, more trades that are reportable
to the CAT are executed than securities lending
transactions.
1151 CAT Approval Order, 81 FR 84887.
1152 See Proposing Release, 86 FR 69823.
1153 The CAT Approval Order estimated that nonOATS reporters would have fewer than 350,000
reportable events each month. CAT Approval
Order, 81 FR 84928.
1154 10,800 hours assumed by providing lending
agents + 500,400 hours assumed by self-providing
lenders = 511,200 total hours.
1155 IHS Markit Letter, at 13.

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implemented. Implementing an end-ofday reporting requirement in place of
the intraday reporting requirement
removes the need for those providing
covered persons to acquire this level of
automation and processing capacity,
thus lowering at least their initial
burden associated with system design
and configuration. Therefore, the
Commission estimates that providing
covered persons each will assume 3,000
PRA burden hours in developing and
reconfiguring their current systems to
capture the required data elements,1156
with a total industry-wide burden of
765,000 hours.1157
b. Ongoing Annual Burden
Once a providing covered person has
established the appropriate systems and
processes required for the collection and
provision of the Rule 10c–1a
information to an RNSA,1158 it is
estimated that providing covered
persons will assume ongoing annual
PRA burdens associated with, among
other things, providing the Rule 10c–1a
information to an RNSA, monitoring
systems, implementing systems
changes, and troubleshooting errors.
The Commission estimates that the
ongoing annual PRA burden will be
equivalent to the ongoing burden
estimated for non-OATS reporters in the
CAT Approval Order, as adjusted for the
change from the proposed intraday
reporting requirement to the end-of-day
reporting requirement, for the same
reasons discussed above with respect to
automation and processing. In the
Proposing Release, the Commission,
estimated that each providing lending
agent and self-providing lender would
assume 1,350 PRA burden hours
associated with monitoring systems,
1156 In the CAT Approval Order, the Commission
estimated that, on average, the initial burden for
non-OATS reporters would be two full-timeequivalent (‘‘FTE’’) employees working for one year
(2 FTEs × 1,800 working hours per year = 3,600
hours). See CAT Approval Order, 81 FR 84938.
Consistent with the estimate included in the
Proposing Release, the estimate used in this release
is based on the CAT Approval Order’s estimate for
non-OATS reports due to the similarities between
the requirements applicable to providing covered
persons under final Rule 10c–1a and the
requirements applicable to non-OATS reporters
under the CAT Approval Order. However, in light
of the change from the proposed intraday reporting
requirement to an end-of-day reporting
requirement, as discussed above, in this paragraph,
it is appropriate to adjust the estimate to the
following: 2 FTEs × 150 working hours per month
× 10 months = 3,000 burden hours. The figure for
150 working hours was determined by dividing
1,800 working hours by 10 months.
1157 3,000 hours × 255 providing covered persons
= 765,000 hours.
1158 Such process of providing the applicable
Rule 10c–1a information to an RNSA is estimated
to be highly automated, so the Commission is
including the burden for doing so in this estimate.

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
implementing systems changes, and
troubleshooting errors, with a total
industry-wide burden of 191,700
hours.1159 Consistent with the
Proposing Release, it is estimated that
each providing covered person will
assume 1,350 PRA burden hours per
year,1160 leading to a total industry-wide
ongoing annual burden of 344,250
hours.1161

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2. Non-Providing Covered Persons
In the Proposing Release, the
Commission estimated that lending
agents who enter into a written
agreement with a reporting agent to
provide information to an RNSA (‘‘nonproviding lending agents’’) and lenders
that directly employ a reporting agent
would assume certain burdens related to
developing and reconfiguring their
current systems to capture the required
Rule 10c–1a information, as well as in
entering into an agreement with a
reporting agent. The PRA burden
estimates for non-providing lending
agents and lenders that directly employ
a reporting agent are summarized in
PRA Table 1 of the Proposing
Release.1162 As discussed above, in Part
IX.A.1, in light of the rule text changes
from the proposed rule, the PRA
burdens included in the Proposing
Release with regard to such persons are
estimated in this release with regard to
non-providing covered persons.
Non-providing covered persons will
assume distinct PRA burdens from those
applicable to providing covered
persons. First, non-providing covered
persons will assume fewer initial and
ongoing PRA burdens related to systems
development and monitoring because
non-providing covered persons will not,
for purposes of compliance with final
Rule 10c–1a(a), need to establish
connectivity to an RNSA and may have
flexibility with regard to the format in
which it provides the Rule 10c–1a
information to the reporting agent.
Second, non-providing covered persons
will assume the initial burden of
negotiating and executing a written
agreement with the reporting agent, as
1159 4,050 hours assumed by providing lending
agents + 187,650 hours assumed by self-providing
lenders = 191,700 hours.
1160 In the CAT NMS Plan Release, the
Commission estimated that, on average, the ongoing
annual burden non-OATS reporters would be 0.75
FTE employees (0.75 FTEs × 1,800 working hours
per year = 1,350 burden hours). See CAT Approval
Order, 81 FR 84938. The Commission is using this
estimate because of the similarities between the
requirements applicable to providing covered
persons under the final rule and the requirements
applicable to non-OATS reporters under the CAT
NMS Plan.
1161 1,350 hours × 255 providing covered persons
= 344,250 hours.
1162 Proposing Release, 86 FR 69827.

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required by final Rule 10c–1a(a)(2) but
are not estimated to assume an ongoing
annual PRA burden associated with
such written agreement.
a. Systems Development and Monitoring
i. Initial Burden
Non-providing covered persons will
assume the initial burden of developing
and reconfiguring their current systems
to capture Rule 10c–1a information.
Non-providing covered persons will
assume fewer PRA burdens than
providing covered persons will because
non-providing covered persons may
have the flexibility to collaborate with a
reporting agent to determine the most
efficient means of establishing systems
that comply with the final rule’s
reporting requirements. For example, if
agreed to by both the non-providing
covered person and the reporting agent,
the non-providing covered person could
have the flexibility to provide to the
reporting agent the applicable Rule 10c–
1a information that does not meet the
specific format requirements of an
RNSA if the reporting agent is able to
reformat the information once received.
Given these and other potential
efficiencies, the Commission estimates
that a non-providing covered person
will assume half of the initial burden
hours that a providing covered person
will assume to develop and reconfigure
their current systems to capture the Rule
10c–1a information. The Commission,
therefore, estimates that each nonproviding covered person will assume
an initial PRA burden of 1,500 hours,
leading to a total industry-wide initial
PRA burden for this requirement of
372,000 hours.1163 This method of
deriving the burden hours for noncovered persons is consistent with that
used in the Proposing Release with
regard to non-providing lending agents
and lenders that directly employ a
lending agent.1164 However, as
discussed above, in Part IX.B.1, the
estimated number of initial burden
hours assumed has been lowered in
light of the change from the proposed
intraday reporting requirement to an
end-of-day reporting requirement.
1163 1,500 hours × 248 non-providing covered
persons = 372,000 hours.
1164 See Proposing Release, 86 FR 69824, 69826.
The estimated PRA burden included in the
Proposing Release was 1,800 hours per providing
lending agent or Lender that would directly employ
a reporting agent, with an initial industry-wide PRA
burden of 311,400 hours. 61,200 hours for nonproviding lending agents + 250,200 hours for
lenders that would directly employ a reporting
agent = 311,400 total hours.

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75735

ii. Ongoing Annual Burden
Once a non-providing covered person
has established the necessary systems
and processes for the collection and
provision of the Rule 10c–1a
information to the reporting agent, such
person will assume ongoing annual PRA
burdens associated with, among other
things, providing the data to the
reporting agent, monitoring systems,
implementing systems changes, and
troubleshooting errors.1165 As with the
initial PRA burden estimate for the
systems development and monitoring
requirement, the ongoing annual PRA
burden estimate for non-providing
covered persons is estimated to be less
than that for providing covered persons
because non-providing covered persons
may have the flexibility to collaborate
with a reporting agent to determine the
most efficient means of establishing
systems for purposes of compliance
with the final rule. For example, the
reporting agent could design programs
that create direct links to a nonproviding covered person’s systems to
facilitate the gathering of information
such that ongoing intervention would
not be required by the non-providing
covered person. In addition, nonproviding covered persons and
reporting agents could negotiate terms
that may allow the non-providing
covered person to avoid providing
certain Rule 10c–1a information that
can be gleaned from another data
element, such as an issuer’s legal name
if a security has a valid CUSIP.
Given these and other potential
efficiencies, the Commission estimates
that a non-providing covered person
will assume half of the ongoing annual
PRA burden that a providing covered
person will assume with regard to the
development and reconfiguration of
current systems to capture the Rule 10c–
1a information. The Commission,
therefore, estimates that each nonproviding covered person will assume
an ongoing annual PRA burden of 675
hours,1166 leading to a total industrywide ongoing annual PRA burden for
this requirement of 167,400 hours.1167
This method of deriving the ongoing
burden hours for non-providing covered
persons is consistent with that used in
the Proposing Release with regard to
non-providing lending agents and
1165 See final Rule 10c–1a(a)(2)(ii) (requiring that
the covered person provide the reporting agent with
timely access to the Rule 10c–1a information).
1166 1,350 hours (ongoing burden applicable to
providing covered persons) × 50% = 675 hours.
1167 675 hours × 248 non-providing covered
persons = 167,400 hours.

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations

lenders that directly employ a reporting
agent.1168
b. Entering Into Written Agreement
With Reporting Agent
Final Rule 10c–1a(a)(2)(i) requires a
covered person to enter into a written
agreement with a reporting agent in
order to rely on the reporting agent to
fulfill the covered person’s reporting
obligations under paragraph (a)(1) of the
final rule. In meeting this requirement,
non-providing covered persons may
assume initial PRA burdens associated
with drafting, negotiating, and executing
the agreements.
These agreements are estimated to be
standardized across the industry
because the data elements are consistent
for all persons.1169 The Commission
estimates that the only terms that may
require negotiation are price and the
format in which the information will be
provided. To account for negotiation
and any administrative tasks related to
processing and executing agreements,
the Commission is estimating that nonproviding covered persons will spend
30 hours on this task.1170 Accordingly,
the Commission estimates that the total
industry-wide initial PRA burden
attributed to this requirement is 7,440
hours.1171 However, consistent with the
Proposing Release, there should be no
associated ongoing annual PRA burden
once the agreement is signed, as the
final rule does not separately impose a
requirement to modify the written
agreement or take additional action after
the agreement is executed.

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D. Collection of Information Related to
Reporting Agents
Under final Rule 10c–1a(b), any
reporting agent that assumes the
reporting obligation on behalf of a
1168 See Proposing Release, 86 FR 69824, 69826.
The estimated PRA burden included in the
Proposing Release was 675 hours per providing
lending agent or lender that would directly employ
a reporting agent, with an ongoing industry-wide
PRA burden of 116,775 hours. 22,950 hours for nonproviding lending agents + 93,825 hours for lenders
that would directly employ a reporting agent =
116,775 total hours.
1169 See final Rules 10c–1a(c) through (e).
1170 Each covered person is estimated to execute
one such agreement because of the efficiencies
gained from using only one reporting agent and the
commoditized information that would be provided.
Accordingly, the estimate of 30 hours would be the
initial PRA burden required for one agreement. This
estimate is consistent with that included in the
Proposing Release. See Proposing Release, 86 FR
69824.
1171 30 hours × 248 non-providing covered
persons = 7,440 hours. This method of deriving the
initial burden hours for non-providing covered
persons is consistent with that used in the
Proposing Release with regard to non-providing
lending agents and Lenders that directly employ a
lending agent. See Proposing Release, 86 FR 69824,
69826–27.

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covered person pursuant to Rule 10c–
1a(a)(2) shall do all of the following: (1)
provide such Rule 10c–1a information
to an RNSA, in the format and manner
required by the applicable rule(s) of
such RNSA, and within the time periods
specified in paragraphs (c) through (e) of
the final rule; 1172 (2) establish,
maintain, and enforce written policies
and procedures that are reasonably
designed to provide the Rule 10c–1a
information to an RNSA on behalf of the
covered person in the format and
manner required by the applicable
rule(s) of an RNSA, and within the time
periods specified in paragraphs (c)
through (e) of the final rule; 1173 (3)
enter into a written agreement with an
RNSA that permits the reporting agent
to provide Rule 10c–1a information to
an RNSA on behalf of the covered
person; 1174 (4) provide an RNSA with a
list naming each covered person on
whose behalf the reporting agent is
providing Rule 10c–1a information to an
RNSA and provide an RNSA with any
updates to the list of such persons by
the end of the day such list changes; 1175
and (5) preserve for a period of not less
than three years, the first two years in
an easily accessible place, the Rule 10c–
1a information obtained by the reporting
agent from the covered person pursuant
to Rule 10c–1a(a)(2), including the time
of receipt, and the corresponding Rule
10c–1a information provided by the
reporting agent to an RNSA, including
the time of transmission to an RNSA,
and the written agreements under
paragraphs (a)(2) and (b)(3) of the final
rule.1176
Reporting agents will assume PRA
burdens associated with their
compliance with three requirements in
final Rule 10c–1a(b).1177 First, to
1172 See

final Rule 10c–1a(b)(1).
final Rule 10c–1a(b)(2).
1174 See final Rule 10c–1a(b)(3).
1175 See final Rule 10c–1a(b)(4).
1176 See final Rules 10c–1a(b)(1) through (b)(5).
1177 The Rule 10c–1a information provided to an
RNSA would be the same; however, certain aspects
of the requirements applicable to reporting agents
differ slightly from those applicable to providing
covered persons. For example, reporting agents,
unlike providing covered persons, will need to
design systems to establish connectivity with the
non-providing covered persons on whose behalf
they are providing information to an RNSA. In
addition, reporting agents, unlike providing covered
persons, are required under final Rule 10c–1a(b)(4)
to provide to an RNSA the identity of the person
on whose behalf it is providing Rule 10c–1a
information. Further, reporting agents, unlike either
type of covered person—providing covered person
or non-providing covered person—are required to
establish, maintain, and enforce reasonably
designed written policies and procedures to provide
information to an RNSA. See final Rule 10c–
1a(b)(2). Despite these differences, the estimates
used in the CAT approval Order are an appropriate
basis from which to estimate the burdens for
1173 See

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facilitate the provision of Rule 10c–1a
information to an RNSA, reporting
agents will assume burdens related to
the development and monitoring of
systems. This includes establishing,
maintaining, and enforcing written
policies and procedures that are
reasonably designed to provide the Rule
10c–1a information to an RNSA on
behalf of the covered person in the
format and manner required by the
applicable rule(s) of an RNSA, and
within the time periods specified in
paragraphs (c) through (e) of the final
rule. It also includes the provision of an
updated list of persons on whose behalf
they are providing Rule 10c–1a
information. Second, reporting agents
will assume burdens in entering into
written agreements with non-providing
covered persons. Third, reporting agents
will assume burdens in entering into
agreements with an RNSA to provide
Rule 10c–1a information on behalf of a
non-providing covered person.
1. Systems Development and
Monitoring
Reporting agents will provide Rule
10c–1a information to an RNSA on
behalf of non-providing covered
persons. In doing so, because reporting
agents will need to change their internal
systems to collect the Rule 10c–1a
information, they will assume initial
PRA burdens related to developing and
reconfiguring their current systems to
capture the required data elements. In
addition, reporting agents will need to
establish, maintain, and enforce written
policies and procedures that are
reasonably designed to provide Rule
10c–1a information to an RNSA on
behalf of non-providing covered
persons, in the format and manner
required by the applicable rule(s) of an
RNSA, and within certain time periods
specified paragraphs (c) through (e) of
the final rule.1178 Because reporting
agents will provide to an RNSA the
same type of Rule 10c–1a information
that providing covered persons will
provide,1179 the Commission estimates
that the initial and ongoing annual PRA
burdens related to the development and
monitoring of systems that facilitate the
provision of Rule 10c–1a information to
an RNSA are the same. Therefore,
reporting agents and providing covered persons, as
discussed above, because they both must provide
Rule 10c–1a information to an RNSA in complying
with final Rule 10c–1a. Accordingly, and consistent
with the PRA burden estimates included in the
Proposing Release, the PRA burden estimates for
reporting agents are not being adjusted
incrementally from the estimates for providing
covered persons. See Proposing Release, 86 FR
69825 n.156.
1178 See final Rule 10c–1a(b)(2).
1179 See final Rules 10c–1a(a)(1) and (b)(1).

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consistent with the Commission’s
estimate included above, in Part IX.B.1,
the Commission estimates that each
reporting agent will assume an initial
PRA burden of 3,000 hours in
developing and reconfiguring current
systems to capture the required data
elements. Accordingly, the industrywide initial PRA burden is estimated to
be 318,000 hours.1180
Once a reporting agent has established
the appropriate systems and processes
required for the collection and provision
of the applicable Rule 10c–1a
information, the reporting agent will
assume ongoing annual PRA burdens
associated with providing such
information to an RNSA, in addition to
an updated list of persons on whose
behalf they are providing information,
monitoring systems, implementing
changes, and troubleshooting errors. As
discussed above, in this part, because
reporting agents provide to an RNSA the
same information that providing
covered persons provide, the
Commission estimates that each
reporting agent will assume an ongoing
annual PRA burden of 1,350 hours
related to this requirement.
Accordingly, the total industry-wide
ongoing annual PRA burden is
estimated to be 143,100 hours.1181
2. Entering Into Written Agreements
With Non-Providing Covered Persons
To fulfill a covered person’s reporting
obligation under final Rule 10c–1a(a),
any reporting agent must enter into a
written agreement with the covered
person on whose behalf they are
providing Rule 10c–1a information to an
RNSA.1182 In meeting this requirement,
reporting agents will assume initial PRA
burdens related to drafting, negotiating,
and executing such an agreement.
Compliance with this requirement,
however, should not create any ongoing
annual burdens once the agreement is
executed. This is because the final rule
does not impose any requirement for
reporting agents to modify the written
agreement or take additional action after
the agreement is executed.

These agreements are estimated to be
standardized across the industry
because the data elements are consistent
for all persons.1183 The only terms (of an
agreement between a non-providing
covered person and a reporting agent)
that may require negotiation are the
price and the format in which the
information would be provided. This
process is estimated to be highly
automated. Reporting agents are
estimated to require the same amount of
time to comply with this requirement as
non-providing covered persons will
require. Accordingly, the Commission
estimates that each reporting agent will
spend 30 hours on this task.1184 As a
result, the total industry-wide initial
PRA burden related to this requirement
is estimated to be 3,180 hours.1185
3. Entering Into Written Agreements
With an RNSA
Any reporting agent that assumes the
reporting obligation on behalf of a
covered person pursuant to final Rule
10c–1a(a)(2) must also enter into a
written agreement with an RNSA that
permits the reporting agent to provide
Rule 10c–1a information to an RNSA on
behalf of the covered person.1186
Because the Rule 10c–1a information is
standardized for all reporting agents,
there are no terms of these agreements
that will need to be negotiated. Instead,
an RNSA may create a form agreement
for all reporting agents. Because these
agreements are estimated to be
standardized, the Commission estimates
that reporting agents will assume a onehour initial PRA burden to account for
any administrative tasks related to
processing and executing these
agreements.1187 Reporting agents that
enter into written agreements with an
RNSA should not incur any ongoing
annual burden to comply with this
requirement once the agreement is
executed, as the Rule 10c–1a
information is standardized.
Accordingly, the Commission estimates
that the industry-wide initial PRA
burden for this requirement is 106
hours.1188
1183 See

hours × 106 reporting agents = 318,000
hours. The estimated initial burden per reporting
agent is reduced from that included in the
Proposing Release in light of the final rule’s
inclusion of an end-of-day reporting requirement as
opposed to an intraday reporting requirement, as
discussed above, in Part IX.B.1.
1181 1,350 hours × 106 reporting agents = 143,100
hours. This methodology is consistent with that
used in the Proposing Release with respect to
reporting agents. See Proposing Release, 86 FR
69825.
1182 See final Rule 10c–1a(a)(2)(i).

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supra note 1169 and accompanying text.
supra note 1170 and accompanying text.
1185 30 hours × 106 reporting agents = 3,180
hours. This methodology is consistent with that
used in the Proposing Release with respect to
reporting agents. See Proposing Release, 86 FR
69825.
1186 See final Rule 10c–1a(b)(3).
1187 For example, a reporting agent may need to
enter the written agreement into a contract
management system or scan an executed paper
agreement into an electronic format.
1188 1 hour × 106 reporting agents = 106 hours.
This methodology is consistent with that used in
1184 See

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75737

4. Record Preservation Requirement
Any reporting agent that assumes the
reporting obligation on behalf of a
covered person pursuant to final Rule
10c–1a(a)(2) must also preserve for a
period of not less than three years, the
first two years in an easily accessible
place, the Rule 10c–1a information it
obtained from the covered person
pursuant to paragraph (a)(2) of the final
rule, including the time of receipt, and
the corresponding Rule 10c–1a
information provided by the reporting
agent to an RNSA, including the time of
transmission to an RNSA, and the
written agreements that the reporting
agent entered into with the covered
person and with an RNSA.1189 The
initial PRA burden associated with
preserving the collected Rule 10c–1a
information is related to the reporting
agent’s burden of developing and
reconfiguring its current systems to
capture the required data elements.
Therefore, an initial burden associated
with the preservation of information
under final Rule 10c–1a(b)(5) is not
separately estimated.
Compliance with this record
preservation requirement is estimated to
be highly automated. The Commission,
therefore, estimates that reporting agents
will spend one hour per week on
upkeep and testing of records to ensure
accuracy in complying with this
requirement. Reporting agents each will
assume an ongoing annual PRA burden
of 52 hours per year.1190 Accordingly,
the Commission estimates that the
industry-wide ongoing annual PRA
burden for this requirement is 5,512
hours.1191
the Proposing Release with respect to reporting
agents. See Proposing Release, 86 FR 69825.
1189 See final Rule 10c–1a(b)(5).
1190 This estimate is consistent with the ongoing
annual burden estimate for national securities
exchanges and RNSAs regarding the data collection
and reporting for Rule 17a–1, which requires that
every national securities exchange, national
securities association, registered clearing agency,
and the MSRB keep on file for a period of not less
than five years, the first two years in an easily
accessible place, at least one copy of all documents,
including all correspondence, memoranda, papers,
books, notices, accounts, and other such records
made or received by it in the course of its business
as such and in the conduct of its self-regulatory
activity. See Paperwork Reduction Act Extension
Notice for Exchange Act Rule 17a–1, 84 FR 57920
(Oct. 29, 2019), 84 FR 57921.
1191 52 hours × 106 reporting agents = 5,512
hours. This methodology is consistent with that
used in the Proposing Release with respect to
reporting agents. See Proposing Release, 86 FR
69825–26.

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
PRA TABLE 1—SUMMARY OF ESTIMATED BURDENS FOR COVERED PERSONS AND REPORTING AGENTS
Total initial
industry
burden
(hours)

Total annual
industry
burden
(hours)

Rule 10c–1a requirement

Type of PRA burden

Providing Covered Persons ...

Systems Development and
Monitoring.
Systems Development and
Monitoring.
Entering into Agreement with
Reporting Agent.
Systems Development and
Monitoring.
Entering into Agreement with
Non-providing Covered
Person.
Entering into Agreement with
RNSA.
Record Preservation Requirement.

Third-Party Disclosure ..........

255

765,000

344,250

Third-Party Disclosure ..........

248

372,000

167,400

Third-Party Disclosure ..........

248

7,440

0

Third-Party Disclosure ..........

106

318,000

143,100

Third-Party Disclosure ..........

106

3,180

0

Third-Party Disclosure ..........

106

106

0

Recordkeeping ......................

106

0

5,512

Non-providing Covered Persons.
Non-providing Covered Persons.
Reporting Agents ...................
Reporting Agents ...................
Reporting Agents ...................
Reporting Agents ...................

E. Collection of Information Related to
RNSAs
RNSAs will assume new PRA burdens
in complying with final Rule 10c–1a(f)
through (h). The PRA burdens
associated with an RNSA’s compliance
with paragraphs (f) through (h) are
discussed below. All estimates included
in this Part X are consistent with the
Commission’s estimates included in the
Proposing Release for an RNSA.1192
1. Burden Estimates Related to RNSA
Rule Implementation
Under final Rule 10c–1a(f), an RNSA
is required to implement rules regarding
the format and manner of its collection
of Rule 10c–1a information and make
publicly available such information in
accordance with rules promulgated
pursuant to section 19(b) and Rule 19b–
4 of the Exchange Act. The PRA burden
associated with filing any proposed rule
changes by an RNSA is already included
under the collection of information
requirements contained in Rule 19b–4
under the Exchange Act.1193 Therefore,
a separate PRA burden estimate is not
included for the purposes of the PRA
included for this rulemaking.

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Number of
entities
impacted

Type of respondent

2. Burden Estimates Related to the
Publication of Data
As discussed above, in Part VII.J, an
RNSA will be required, following the
receipt of information pursuant to
paragraph (c) or (d) of the final rule, to
assign a unique identifier to the covered
securities loan and make certain
information publicly available (on its
website or similar means of electronic
1192 See

Proposing Release, 86 FR 69827–29.
Proposed Rule Changes of SelfRegulatory Organizations, Release No. 34–50486
(Oct. 5, 2004), 69 FR 60287 (Oct. 8, 2004), 69 FR
60293.
1193 See

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distribution, without use restrictions,
for a period of at least five years) 1194
within the time frames specified in
paragraph (g) of the final rule. In
complying with these requirements, an
RNSA will need to create, implement,
and maintain the infrastructure to
enable providing covered persons and
reporting agents to provide an RNSA
with the Rule 10c–1a information. This
includes establishing technical
requirements and specifications for such
infrastructure, creating a system that can
generate unique identifiers, meeting
with industry participants to gather
feedback on the proposed infrastructure,
drafting written policies and procedures
to protect the confidentiality of certain
information, and entering into written
agreements with providing covered
persons and reporting agents. In
addition, the infrastructure employed
will need to comply with paragraphs
(h)(1) and (h)(2) of the final rule, which
require an RNSA to retain the collected
Rule 10c–1a information in a
convenient and usable standard
electronic data format that is machine
readable and text searchable without
any manual intervention, for a period of
five years, and to make the information
collected pursuant to paragraphs (b)(4)
and (c) through (e) of the final rule
available to the Commission, or other
persons as the Commission may
designate by order upon a demonstrated
regulatory need, respectively.
The initial burden assumed by an
RNSA in creating and implementing the
infrastructure for providing covered
persons and reporting agents to provide
the applicable Rule 10c–1a information
to an RNSA, and for an RNSA to make
such information publicly available, is
1194 See

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similar to the initial burden assumed by
national securities exchanges and
RNSAs in complying with the
requirement to establish the appropriate
systems and processes for the collection
and transmission of the required
information under the CAT. However,
the systems that are implemented to
comply with Rule 10c–1a should be
significantly less complex than those
that are implemented to comply with
the CAT. This is because the Rule 10c–
1a systems will need to capture less
information overall than what the CAT
requires.1195 Further, as discussed
above, in Part IX.A.3, there is only one
RNSA that will need to create and
implement the infrastructure for
providing covered persons and
reporting agents to provide Rule 10c–1a
information, in contrast to the multiple
national securities exchanges that create
systems to comply with the CAT. In
addition, an RNSA will have internal
staff that can create and implement the
infrastructure for providing covered
persons and reporting agents to provide
Rule 10c–1a information, unlike certain
tasks required under the CAT that may
require outsourcing. Accordingly, the
PRA burden estimates for this collection
of information are substantially reduced
as compared to those for the CAT, as
discussed below, in this part.
The Commission estimates that it
would take an RNSA approximately
10,924 hours of internal legal,
compliance, information technology,
and business operations time to develop
the infrastructure to enable providing
covered persons and reporting agents to
provide the Rule 10c–1a information to
an RNSA, and for an RNSA to assign a
unique identifier to the covered
1195 See

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations
securities loan and make the specified
information publicly available.1196 The
RNSA is not estimated to assume
external costs for the implementation of
the infrastructure to enable providing
covered persons and reporting agents to
provide the Rule 10c–1a information,
assign a unique identifier to the covered
securities loan, and make the final rule’s
specified information publicly available.
This is because the sole RNSA currently
existing, FINRA, has experience in
implementing systems to collect
information from its member brokerdealers.1197 Therefore, the Commission
estimates that the average one-time
initial PRA burden related to developing
the infrastructure to enable providing
covered persons and reporting agents to
provide the Rule 10c–1a information,
assign a unique identifier to the covered
securities loan, and make the final rule’s

specified information publicly available
is 10,924 hours.1198
Once an RNSA has developed the
infrastructure to enable providing
covered persons and reporting agents to
provide the Rule 10c–1a information,
assign a unique identifier to the covered
securities loan, and make the final rule’s
specified information publicly available,
the Commission estimates that an RNSA
will assume ongoing annual PRA
burdens of 7,739.5 hours related to
ensuring that the infrastructure is up-todate and remains in compliance with
the final rule, for an estimated annual
ongoing burden of 7,739.5 hours.1199
3. Burden Estimates Related to Data
Retention and Availability
Under final Rule 10c–1a(h)(1), an
RNSA must retain the collected Rule
10c–1a information in a convenient and

75739

usable standard electronic data format
that is machine readable and text
searchable without any manual
intervention for a period of five years.
The initial burden associated with
retaining the collected Rule 10c–1a
information is assumed in an RNSA’s
burdens related to implementing and
maintaining the infrastructure for
providing covered persons and
reporting agents to provide Rule 10c–1a
information to an RNSA, as discussed
above, in Part X.2. Therefore, the
Commission is not separately assessing
an initial burden associated with the
retention of collected Rule 10c–1a
information. The Commission, however,
estimates that an RNSA will assume an
ongoing annual PRA burden of 52 hours
to retain the collected information,1200
for an estimated annual industry-wide
burden of 52 hours.

PRA TABLE 2—SUMMARY OF ESTIMATED BURDENS FOR RNSA
Type of PRA burden

Publication of Data ..........................................
Data Retention and Availability .......................

Reporting and Third-Party Disclosure ............
Recordkeeping ...............................................

Total initial
industry
burden hours
1
1

10,924
0

Total annual
industry
burden hours
7,739.5
52

The Commission may receive
confidential information as a result of
this collection of information, such as
the identity of covered persons. The
final rule does not permit an RNSA to
make such information publicly
available.1201 Aside from this
information, the collection of
information is broadly expected to be
publicly available information. To the

H. Retention Period for Record
Preservation Requirement
Pursuant to final Rule 10c–1a(h)(1),
an RNSA is required to retain the
collected Rule 10c–1a information in a
convenient and usable standard
electronic data format that is machine
readable and text searchable without
any manual intervention for a period of

five years. Pursuant to final Rule 10c–
1a(b)(5), a reporting agent that assumes
the reporting obligation on behalf of a
covered person pursuant to paragraph
(a)(2) of the final rule is required to
preserve the Rule 10c–1a information
obtained by the reporting agent from the
covered person pursuant to final Rule
10c–1a(a)(2), including the time of
receipt, and the corresponding Rule
10c–1a information provided by the
reporting agent to an RNSA, including
the time of transmission to an RNSA, as
well as the written agreements under
paragraphs (a)(2) and (b)(3) of the final
rule, for a period of not less than three
years, the first two years in an easily
accessible place.

1196 This estimate is based on the Commission’s
initial burden estimate for national securities
exchanges and RNSAs regarding the data collection
and reporting for the consolidated audit trail which
was approximately 43,696.80 burden hours in total.
See CAT Approval Order, 81 FR 84921. Given the
size of the overall equity market in comparison to
the size of the securities lending market, the
Commission believes equating the PRA burden
hours (to develop the infrastructure for the
provision of Rule 10c–1a information and for an
RNSA to assign a unique identifier to the covered
securities loan and make the specified information
publicly available) with the CAT burden hours
would overestimate the burden hours. The initial
burden in complying with final Rule 10c–1a’s
requirements related to an RNSA’s publication of
data should be calculated based on the size of the
securities lending market in comparison to the size
of the equities market. Consistent with the

Commission’s estimate in the Proposing Release,
the Commission estimates that the average daily
dollar value of securities lending transactions is
approximately $120 billion dollars compared to the
average daily equity trading volume of $475 billion.
See Proposing Release, 86 FR 69828. Accordingly,
the size of the securities lending market is
approximately 25% of the U.S. equity market.
Therefore, it is estimated that the initial PRA
burden to develop and implement the needed
systems changes to capture and publish the Rule
10c–1a information is 25% of the burden hours for
the CAT, which is 10,924 burden hours.
1197 See, e.g., supra Part VII.H.
1198 1 RNSA × 10,924 hours = 10,924 hours.
1199 The PRA burdens assumed in complying
with this requirement are similar to the burdens
assumed by national securities exchanges and
RNSAs in complying with the data collection and
reporting requirements for the CAT. This was

estimated to be approximately 30,958.20 total
hours. See CAT Approval Order, 81 FR 84922.
Consistent with the Commission’s initial PRA
burden estimates related to an RNSA’s publication
of data in accordance with the proposed rule, as
such burden estimate relates to the Commission’s
estimates in the CAT Approval Order, the
Commission estimates for purposes of compliance
with the final rule that the annual ongoing burden
related to the publication of the specified data is
similarly 25% of the hours required for compliance
with CAT. This is estimated to be 7,739.5 hours.
1200 See supra note 1190. The resulting burden
hours that are assumed in addition to those that
already exist for Rule 17a–1, for purposes of this
PRA estimate, are appropriate because an RNSA
may be required to retain records related to Rule
10c–1a information provided by covered persons or
reporting agents that are not RNSA members.
1201 See final Rule 10c–1a(g)(4).

extent the Commission receives
confidential information pursuant to
this collection of information, through
its examination and oversight program,
through an investigation, or by some
other means, such information will be
kept confidential, subject to the
provisions of applicable law.

F. Collection of Information Is
Mandatory
Each collection of information
discussed above is a mandatory
collection of information.
G. Confidentiality of Responses to
Collection of Information

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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations

XI. Regulatory Flexibility Act
Certification
The Regulatory Flexibility Act
(‘‘RFA’’) 1202 requires Federal agencies,
in promulgating rules, to consider the
impact of those rules on ‘‘small
entities,’’ 1203 a term that includes
‘‘small businesses.’’ 1204 Section
603(a) 1205 of the Administrative
Procedure Act,1206 as amended by
section 604(a) of the RFA, requires the
Commission to undertake a final
regulatory flexibility analysis of rules it
is adopting, unless the Commission
certifies that the rules would not have
a significant impact on a substantial
number of small entities.1207
Small entities include broker-dealers
with total capital (net worth plus
subordinated liabilities) of less than
$500,000 on the date in the prior fiscal
year as of which its audited financial
statements were prepared pursuant to
17 CFR 240.17a–5(d) (‘‘Rule 17a–5(d)’’),
or, if not required to file such
statements, a broker-dealer who had
total capital (net worth plus
subordinated liabilities) of less than
$500,000 on the last day of the
preceding fiscal year (or in the time it
has been in business, if shorter), and is
not affiliated with any person (other
than a natural person) who is not a
small business or small
organization.1208 A small business or
small organization, for purposes of
‘‘issuers’’ or ‘‘person’’ other than an
investment company, is defined as a
person who, on the last day of its most
recent fiscal year, had total assets of $5
million or less.1209 In the Proposing
Release, the Commission certified,
pursuant to section 605(b) of the RFA,
that the proposed rule would not have
a significant economic impact on a
substantial number of small entities.1210
The Commission requested but did not
receive any comments on the
1202 5

U.S.C. 601 et seq.
U.S.C. 605(b).
1204 Although section 601(b) of the RFA defines
the term ‘‘small business,’’ the statute permits
agencies to formulate their own definitions. The
Commission has adopted definitions for the term
‘‘small business’’ for the purposes of Commission
rulemaking in accordance with the RFA. Those
definitions, as relevant to this rulemaking, are set
forth in 17 CFR 240.0–10 (‘‘Rule 0–10’’). Rule 0–10
also provides that the Commission may, if
warranted by the circumstances, use a different
definition for particular rulemakings. See 17 CFR
240.0–10.
1205 5 U.S.C. 603(a).
1206 5 U.S.C. 551 et seq.
1207 5 U.S.C. 605(b).
1208 See 17 CFR 240.0–10(c).
1209 17 CFR 242.0–10(a).
1210 Proposing Release, 86 FR 69851.

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certification as it related to the entities
impacted by the proposed rule.
Based on the Commission’s analysis
of the existing information relating to
persons who are subject to the final rule,
it is unlikely that any broker-dealer,
clearing agency, investment company,
or bank categorized as a ‘‘small
business’’ or ‘‘small organization’’ under
Rule 0–10 would serve as a covered
person, reporting agent, or RNSA, as
they would almost certainly have
insufficient capital to participate in
lending activities involving a covered
securities loan or would register with
the Commission as a national securities
association. Accordingly, the
Commission believes it is unlikely that,
in the future, a substantial number of
small entities may become impacted by
the final rule. This is because brokerdealers who have a reporting obligation
or elect to serve as a reporting agent are
likely to have at least $500,000 in total
capital; as described above, investment
companies, together with other
investment companies in the same
group of related investment companies,
who have a reporting obligation are
likely to have net assets of over $50
million as of the end of its most recent
fiscal year; banks who have a reporting
obligation are likely to have total assets
of over $5 million; 1211 clearing agencies
who elect to serve as reporting agents
are likely to have compared, cleared,
and settled at least $500 million in
securities transactions during the
preceding fiscal year and have had a
least $200 million of funds and
securities in its custody or control at all
times during the preceding fiscal year
(or at any time that it has been in
business, if shorter); 1212 or such persons
are likely to be affiliated with a person
who is not a small business or small
organization as defined under Rule 0–
10.
For the foregoing reason, the
Commission certifies, pursuant to
section 605(b) of Title 5 of the U.S.
Code, that final Rule 10c–1a will not
have a significant economic impact on
a substantial number of small entities.
XII. Other Matters
If any of the provisions of the final
rule, or application thereof to any
person or circumstances, is held to be
invalid, such invalidity shall not affect
other provisions or application of such
provisions to other persons or
circumstances that can be given effect
without the invalid provision or
application.
1211 17

CFR 242.0–10(a).
17 CFR 240.0–10(d).

1212 See

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Pursuant to the Congressional Review
Act,1213 the Office of Information and
Regulatory Affairs has designated these
rules as a ‘‘major rule,’’ as defined by 5
U.S.C. 804(2).
Statutory Authority
The Commission is adopting final
Rule 10c–1a pursuant to Sections 3,
10(b), 10(c), 15(c), 15(h), 15A, 17(a),
23(a) of the Securities Exchange Act of
1934, 15 U.S.C. 78c, 78j(b), 78j(c), 78k–
1, 78o(c), 78o(g), 78o–3, 78q(a), and
78w(a), and Public Law 111–203,
984(b), 124 Stat. 1376 (2010).
List of Subjects in 17 CFR Part 240
Administrative practice and
procedure, Reporting and recordkeeping
requirements, Securities.
Text of Rule Amendments
For the reasons set out in the
preamble, the Commission is amending
title 17, chapter II of the Code of Federal
Regulations as follows:
PART 240—GENERAL RULES AND
REGULATIONS, SECURITIES
EXCHANGE ACT OF 1934
1. The general authority citation for
part 240 continues to read as follows:

■

Authority: 15 U.S.C. 77c, 77d, 77g, 77j,
77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn,
77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f,
78g, 78i, 78j, 78j–1, 78j–4, 78k, 78k–1, 78l,
78m, 78n, 78n–1, 78o, 78o–4, 78o–10, 78p,
78q, 78q–1, 78s, 78u–5, 78w, 78x, 78dd, 78ll,
78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b–
3, 80b–4, 80b–11, and 7201 et seq., and 8302;
7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18
U.S.C. 1350; Pub. L. 111–203, Sec. 939A, 124
Stat. 1376 (2010); and Pub. L. 112–106, Sec.
503 and 602, 126 Stat. 326 (2012), unless
otherwise noted.

*

*

*

*

*

Section 240.10c–1a also issued under 15
U.S.C. 78j(c), and Pub, L. 111–203, 984(b),
124 Stat. 1376 (2010).

*

*
*
*
*
2. Add § 240.10c–1a immediately
following § 240.10b–21 to read as
follows:

■

§ 240.10c–1a Securities lending
transparency.

(a) Reporting requirements for covered
persons. Any covered person who
agrees to a covered securities loan on
behalf of itself or another person shall:
(1) Provide to a registered national
securities association (‘‘RNSA’’) the
information in paragraphs (c) through
(e) of this section (‘‘Rule 10c–1a
information’’), in the format and manner
required by the applicable rule(s) of
such RNSA, and within the time periods
1213 5

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specified in paragraphs (c) through (e) of
this section.
(2) Provided, however, a covered
person may rely on a reporting agent to
fulfill its reporting obligations under
paragraph (a)(1) of this section if such
covered person:
(i) Enters into a written agreement
with a reporting agent that agrees to
provide the Rule 10c–1a information to
an RNSA on behalf of such covered
person in accordance with the
requirements in paragraph (b) of this
section; and,
(ii) Provides such reporting agent with
timely access to the Rule 10c–1a
information.
(b) Reporting agent requirements. Any
reporting agent that assumes the
reporting obligation on behalf of a
covered person pursuant to paragraph
(a)(2) of this section shall:
(1) Provide such Rule 10c–1a
information to an RNSA, in the format
and manner required by the applicable
rule(s) of such RNSA, and within the
time periods specified in paragraphs (c)
through (e) of this section;
(2) Establish, maintain, and enforce
written policies and procedures that are
reasonably designed to provide Rule
10c–1a information to an RNSA on
behalf of a covered person in the format
and manner required by the applicable
rule(s) of an RNSA, and within the time
periods specified in paragraphs (c)
through (e) of this section;
(3) Enter into a written agreement
with an RNSA that permits the reporting
agent to provide Rule 10c–1a
information to an RNSA on behalf of a
covered person;
(4) Provide an RNSA with a list
naming each covered person on whose
behalf the reporting agent is providing
Rule 10c–1a information to an RNSA
and provide an RNSA with any updates
to the list of such persons by the end of
the day such list changes; and
(5) Preserve for a period of not less
than three years, the first two years in
an easily accessible place:
(i) The Rule 10c–1a information
obtained by the reporting agent from the
covered person pursuant to paragraph
(a)(2) of this section, including the time
of receipt, and the corresponding Rule
10c–1a information provided by the
reporting agent to an RNSA, including
the time of transmission to an RNSA;
and
(ii) The written agreements under
paragraphs (a)(2) and (b)(3) of this
section.
(c) Data elements. A covered person
shall provide the following information,
if applicable, to an RNSA, by the end of
the day on which a covered securities
loan is effected:

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(1) The legal name of the security
issuer, and the Legal Entity Identifier
(‘‘LEI’’) of the issuer, if the issuer has a
non-lapsed LEI;
(2) The ticker symbol, International
Securities Identification Number
(‘‘ISIN’’), Committee on Uniform
Securities Identification Procedures
(‘‘CUSIP’’), or Financial Instrument
Global Identifier (‘‘FIGI’’) of the
security, or other security identifier;
(3) The date the covered securities
loan was effected;
(4) The time the covered securities
loan was effected;
(5) The name of the platform or venue
where the covered securities loan was
effected;
(6) The amount, such as size, volume,
or both, of the reportable securities
loaned;
(7) The type of collateral used to
secure the covered securities loan;
(8) For a covered securities loan
collateralized by cash, the rebate rate or
any other fee or charges;
(9) For a covered securities loan not
collateralized by cash, the securities
lending fee or rate, or any other fee or
charges;
(10) The percentage of collateral to
value of reportable securities loaned
required to secure such covered
securities loan;
(11) The termination date of the
covered securities loan; and
(12) Whether the borrower is a broker
or dealer, a customer (if the person
lending securities is a broker or dealer),
a clearing agency, a bank, a custodian,
or other person.
(d) Loan modification data elements.
A covered person shall provide the
following information to an RNSA by
the end of the day on which a covered
securities loan is modified:
(1) If the modification occurs after the
data elements under paragraph (c) of
this section for such covered securities
loan are provided to an RNSA, and
results in a change to information
previously required to be provided to an
RNSA under paragraph (c) of this
section:
(i) The date and time of the
modification;
(ii) The specific modification and the
specific data element in paragraph (c) of
this section being modified; and
(iii) The unique identifier assigned to
the original covered securities loan
under paragraph (g)(1) or (g)(3) of this
section;
(2) If the modification is to a covered
securities loan for which reporting
under paragraph (a) was not required on
the date the loan was agreed to or last
modified and results in a change to any
of the data elements in paragraphs (c)(1)
through (12) of this section:

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(i) The data elements in paragraphs
(c)(1) through (12) of this section as of
the date of modification and the date
and time of the modification.
(ii) [Reserved]
(e) Confidential data elements. A
covered person shall provide the
following information to an RNSA, if
applicable, by the end of the day on
which a covered securities loan is
effected:
(1) If known, the legal name of each
party to the covered securities loan,
other than the customer from whom a
broker or dealer borrows fully paid or
excess margin securities pursuant to
§ 240.15c3–3(b)(3) (‘‘Rule 15c3–3(b)(3)’’)
of the Exchange Act, Central
Registration Depository (‘‘CRD’’) or
Investment Adviser Registration
Depository (‘‘IARD’’) Number, market
participant identification (‘‘MPID’’), and
the LEI of each party to the covered
securities loan, and whether such
person is the lender, the borrower, or an
intermediary between the lender and
the borrower;
(2) If the person lending securities is
a broker or dealer and the borrower is
its customer, whether the security is
loaned from a broker’s or dealer’s
securities inventory to a customer of
such broker or dealer; and
(3) If known, whether the covered
securities loan is being used to close out
a fail to deliver pursuant to § 242.204 of
this chapter (‘‘Rule 204 of Regulation
SHO’’) or to close out a fail to deliver
outside of §§ 242.200 through 242.204 of
this chapter (‘‘Regulation SHO’’).
(f) RNSA rules. An RNSA shall
implement rules regarding the format
and manner of its collection of
information described in paragraphs (c)
through (e) of this section and make
publicly available such information in
accordance with rules promulgated
pursuant to 15 U.S.C. 78s(b) (‘‘section
19(b)’’) and § 240.19b–4 (‘‘Rule 19b–4’’)
of the Exchange Act.
(g) RNSA publication of data. An
RNSA shall:
(1) Following receipt of information
pursuant to paragraph (c) of this section,
as soon as practicable, and not later than
the morning of the business day after
the covered securities loan is effected,
assign a unique identifier to the covered
securities loan and make publicly
available the following information:
(i) For each covered securities loan
effected on the previous business day:
(A) The unique identifier assigned by
an RNSA;
(B) The information it receives under
paragraphs (c)(1) through (5) and (7)
through (12) of this section; and
(C) The security identifier(s) under
paragraphs (c)(1) or (2) of this section

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that an RNSA determines is appropriate
to identify the relevant reportable
security.
(2) Following receipt of information
pursuant to paragraph (c) of this section,
on the twentieth business day after the
covered securities loan is effected, make
publicly available the information
specified in paragraph (c)(6) of this
section along with the loan and security
identifying information specified in
paragraphs (g)(1)(i)(A) and (C) of this
section.
(3) Following receipt of information
pursuant to paragraph (d) of this
section, assign a unique identifier to the
covered securities loan if one was not
assigned pursuant to paragraph
(g)(1)(i)(A) of this section; and:
(i) As soon as practicable, and not
later than the morning of the business
day after the covered securities loan is
modified, make publicly available
information pertaining to any
modification to the data specified in
paragraphs (c)(1) through (5) and (7)
through (12) of this section; provided
however, for a covered securities loan
for which paragraph (c) information is
reported to an RNSA pursuant to
paragraph (d)(2) of this section, make
publicly available the data specified in
paragraphs (c)(1) through (5) and (7)
through (12); and
(ii) On the twentieth business day
after the covered securities loan is
modified, make publicly available the
data specified in paragraph (c)(6) of this
section along with the loan and security
identifying information specified in
paragraphs (g)(1)(i)(A) or (g)(3), as
applicable, and (g)(1)(i)(C) of this
section.
(4) Following receipt of information
pursuant to paragraph (e) of this section,
keep such information confidential, in
accordance with the provisions of
paragraph (h) of this section and
applicable law.
(5) Following the receipt of
information specified in paragraphs (c)
and (d) of this section, as soon as
practicable, and not later than the
morning of the business day after
covered securities loans are effected or
modified, make publicly available, on a
daily basis, information pertaining to
the aggregate transaction activity and
distribution of loan rates for each
reportable security and the security

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identifier(s) under paragraphs (c)(1) or
(2) of this section for which an RNSA
determines is appropriate to identify.
(h) Data retention and availability. An
RNSA shall:
(1) Retain the information collected
pursuant to paragraphs (c) through (e) of
this section in a convenient and usable
standard electronic data format that is
machine readable and text searchable
without any manual intervention for a
period of five years;
(2) Make the information collected
pursuant to paragraphs (b)(4) and (c)
through (e) of this section available to
the Commission; or other persons as the
Commission may designate by order
upon a demonstrated regulatory need;
(3) Make the information collected
under paragraphs (c) and (d) of this
section available to the public in the
same manner such information is
maintained pursuant to paragraph (h)(1)
of this section on an RNSA’s website or
similar means of electronic distribution,
without use restrictions, for a period of
at least five years; and
(4) Establish, maintain, and enforce
reasonably designed written policies
and procedures to maintain the security
and confidentiality of confidential
information required by paragraph (e) of
this section.
(i) RNSA fees. An RNSA may
establish and collect reasonable fees,
pursuant to rules that are promulgated
pursuant to section 19(b) and Rule 19b–
4 of the Exchange Act.
(j) Definitions. For purposes of this
section:
(1) The term covered person means:
(i) Any person that agrees to a covered
securities loan on behalf of a lender
(‘‘intermediary’’) other than a clearing
agency when providing only the
functions of a central counterparty
pursuant to § 240.17Ad–22(a)(2) (‘‘Rule
17Ad–22(a)(2)’’) of the Exchange Act or
a central securities depository pursuant
to § 240.17Ad–22(a)(3) (‘‘Rule 17Ad–
22(a)(3)’’) of the Exchange Act; or
(ii) Any person that agrees to a
covered securities loan as a lender when
an intermediary is not used unless
paragraph (j)(1)(iii) of this section
applies; or
(iii) A broker or dealer when
borrowing fully paid or excess margin
securities pursuant to Rule 15c3–3(b)(3)
of the Exchange Act.

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(2) The term covered securities loan
means:
(i) A transaction in which any person
on behalf of itself or one or more other
persons, lends a reportable security to
another person.
(ii) Notwithstanding paragraph (j)(2)(i)
of this section, a position at a clearing
agency that results from central
counterparty services pursuant to Rule
17Ad–22(a)(2) of the Exchange Act or
central securities depository services
pursuant to Rule 17Ad–22(a)(3) of the
Exchange Act will not be a covered
securities loan for purposes of this rule.
(iii) Notwithstanding paragraph
(j)(2)(i) of this section, the use of margin
securities, as defined in § 240.15c3–
3(a)(4) (‘‘Rule 15c3–3(a)(4)’’) of the
Exchange Act, by a broker or dealer will
not be a covered securities loan for
purposes of this rule.
(A) Provided, however, if a broker or
dealer lends such margin securities to
another person, the loan to the other
person is a covered securities loan for
purposes of this rule.
(B) [Reserved]
(3) The term reportable security
means any security or class of an
issuer’s securities for which information
is reported or required to be reported to
the consolidated audit trail as required
by § 242.613 (‘‘Rule 613’’) of the
Exchange Act and the CAT NMS Plan
(‘‘CAT’’), the Financial Industry
Regulatory Authority’s Trade Reporting
and Compliance Engine (‘‘TRACE’’), or
the Municipal Securities Rulemaking
Board’s Real-Time Transaction
Reporting System (‘‘RTRS’’), or any
reporting system that replaces one of
these systems.
(4) The term reporting agent means a
broker, dealer, or registered clearing
agency that enters into a written
agreement with a covered person under
paragraph (a)(2) of this section.
(5) The term RNSA means an
association of brokers and dealers that is
registered as a national securities
association pursuant to 15 U.S.C. 78o–
3 (‘‘section 15A’’) of the Exchange Act.
By the Commission.
Dated: October 13, 2023.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–23052 Filed 11–2–23; 8:45 am]
BILLING CODE 8011–01–P

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