75644 Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 

1See Reporting of Securities Loans, Release No. 

34–93613 (Nov. 18, 2021), 86 FR 69802 (Dec. 8, 

2021) (‘‘Proposing Release’’), 86 FR 69804–21. 

2See, 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). 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 240 

[Release No. 34–98737; File No. S7–18–21] 

RIN 3235–AN01 

Reporting of Securities Loans 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: 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 

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. 

Table of Contents 

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 

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 


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Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 75645 

3See Proposing Release, 86 FR 69803. 

4 In 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’’). 

5OFR 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. 

6See 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. 

7See 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. 

8See Proposing Release, 86 FR 69803 n.11. 

9See Proposing Release, 86 FR 69804. 

10See Proposing Release, 86 FR 69804. 

11See Proposing Release, 86 FR 69804. 

12See Proposing Release, 86 FR 69804. 

13See Proposing Release, 86 FR 69805. 

14See Proposing Release, 86 FR 69805. 

15See Proposing Release, 86 FR 69805. 

16See Proposing Release, 86 FR 69805. 

17See Proposing Release, 86 FR 69805. 

18See Proposing Release, 86 FR 69805. 

19As 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. 

20See infra Part VII.A. 

21See Proposing Release, 86 FR 69805. 

22See Proposing Release, 86 FR 69805. 

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 

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


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75646 Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 

23Section 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). 

24Section 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). 

25See Proposing Release, 86 FR 69851–53. 

26Proposing Release, 86 FR 69804. 

27Proposing Release, 86 FR 69804. 

28See Proposing Release, 86 FR 69804. 

29See 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. 

30See, e.g., proposed Rules 10c–1(b) and (d). 

31See Proposing Release, 86 FR 69807 n.60. 

32See proposed Rule 10c–1(a)(1)(i)(A). 

33See proposed Rule 10c–1(a)(1)(i)(B). 

34See proposed Rule 10c–1(a)(1)(ii)(A). 

35See proposed Rules 10c–1(a)(2)(i) and (2)(iv). 

36See proposed Rule 10c–1(a)(2)(iii). 

37See proposed Rule 10c–1(e). 

38See proposed Rule 10c–1(b). 

39See proposed Rule 10c–1(c). 

40See proposed Rule 10c–1(c). 

41See proposed Rule 10c–1(e). 

42See proposed Rule 10c–1(e)(3). 

43See Proposing Release, 86 FR 69816. 

44See proposed Rules 10c–1(d) and (e)(3). 

45See proposed Rule 10c–1(g)(3). 

III. Statutory Mandate 

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 brokerdealers 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 

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 


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46Comment letters to the proposed rule are 

available at https://www.sec.gov/comments/s7-18- 

21/s71821.htm. 

47See, 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 

increased transparency in the securities lending 

market); Letter from Aaron Swaney (Jan. 4, 2022) 

(‘‘Requiring entities with significant involvement in 

the markets to report their activities . . . is quite 

reasonable and very necessary.’’); Letter from Peter 

Antosh, Lawyer (Jan. 4, 2022) (‘‘. . . the 

information received and shared via this proposed 

rule would also . . . increase the public’s access to 

reliable pertinent market information, improving 

overall market efficiency’’); Letter from Tim DG 

(Aug. 16, 2022) (‘‘This rule is essential to give retail 

and more importantly, the regulators more insight 

to keep fraudulent behaviors at bay.’’); Letter from 

Adam Slee (Aug. 16, 2022) (‘‘We need greater 

transparency in the market to help ordinary people 

be able to better understand what is going on[;] this 

is a good step in the right direction.’’); Letter from 

Tim R. (Aug. 16, 2022) (‘‘This proposal will help 

true price discovery.’’); Letter from Don M. Cromer 

(Oct. 31, 2022) (‘‘I believe strongly in the 

transparency of our markets, and I feel that this rule 

is a strong step in the right direction, and I hope 

to see many more like it.’’). 

48See, e.g., Letter from Kevin To, Data Boiler 

Technologies, LLC (Jan. 7, 2022) (‘‘Data Boiler 

Technologies Letter’’), at 4; Letter from Stephen 

John Berger, Managing Director, Global Head of 

Government & Regulatory Policy, Citadel (Apr. 4, 

2022) (‘‘Citadel Letter’’). 

49See infra Part VII.A (discussing the definition 

of the term ‘‘covered person’’). 

50See 17 CFR 240.10c–1a(j)(3) (‘‘final Rule 10c– 

1a(j)(3)’’). 

51See 17 CFR 240.10c–1a(j)(5) (‘‘final Rule 10c– 

1a(j)(5)’’). 

52See 17 CFR 240.10c–1a(f) (‘‘final Rule 10c– 

1a(f)’’). 

53See 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)’’). 

54The change in designation from proposed Rule 

10c–1 to final Rule 10c–1a conforms with Federal 

Register requirements for rule designations. 

55See Proposing Release, 86 FR 69803 n.9. 

56See 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). 

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. 

58See final Rule 10c–1a(j)(1)(i). 

59See final Rule 10c–1a(j)(1)(ii). 

60See final Rule 10c–1a(j)(1)(iii). 

61See final Rule 10c–1a(j)(1)(i). 

62See 17 CFR 240.10c–1a(a)(2) (‘‘final Rule 10c– 

1a(a)(2)’’). 

63See 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)’’). 

perspectives,46 which are discussed in 

detail below. Many commenters 

supported enhanced transparency of 

information about securities loans.47

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. 

V. Overview of Final Rule 

The final rule requires covered 

persons 49 to provide securities loan 

information concerning reportable 

securities 50 to an RNSA,51 in the format 

and manner required by an RNSA,52 and 

within specified time periods 53 (‘‘Rule 

10c–1a information’’).54 The term 

‘‘covered person’’ is defined to mean: (1) 

any person that agrees to a covered 

securities loan on behalf of a lender 

(‘‘intermediary’’); (2) any person that 

agrees to a covered securities loan as a 

lender when an intermediary is not used 

unless 17 CFR 240.10c–1a(j)(1)(iii) 

(‘‘final Rule 10c–1a(j)(1)(iii)’’) applies to 

a broker or dealer borrowing fully paid 

or excess margin securities; 55 or (3) a 

broker or dealer when borrowing fully 

paid or excess margin securities.56 In 

addition, 17 CFR 240.10c–1a(a) (‘‘final 

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 

has the obligation to provide Rule 10c– 

1a information to an RNSA.58 If an 

intermediary is not used, the lender is 

required to provide Rule 10c–1a 

information to an RNSA.59 If a covered 

securities loan consists of a broker or 

dealer borrowing fully paid or excess 

margin securities, only the broker or 

dealer is required to provide the Rule 

10c–1a information to an RNSA, not the 

lender.60

However, in a change from the 

proposed rule, as discussed below, in 

Part VII.A, the final rule excludes from 

the definition of the term ‘‘covered 

person’’ a clearing agency when 

providing only the functions of a central 

counterparty as defined pursuant to 17 

CFR 240.17Ad–22(a)(3) (‘‘Rule 17Ad– 

22(a)(2)’’) of the Exchange Act or a 

central securities depository as defined 

pursuant to 17 CFR 240.17Ad–22(a)(3) 

(‘‘Rule 17Ad–22(a)(3)’’) of the Exchange 

Act.61 Thus, a clearing agency is not 

required to report Rule 10c–1a 

information to an RNSA for a covered 

securities loan when acting in the 

capacity or engaged in activities as a 

central counterparty or a central 

securities depository in connection with 

a covered securities loan. 

The final rule permits a covered 

person to rely on a reporting agent that 

is a broker, dealer, or registered clearing 

agency to provide Rule 10c–1a 

information to an RNSA to fulfill such 

covered person’s reporting obligation.62

To do so, the covered person must enter 

into a written agreement with a 

reporting agent, that agrees to provide 

Rule 10c–1a information to an RNSA, 

and provide such reporting agent with 

timely access to such information.63 If 

the reporting agent receives the Rule 

10c–1a information from the covered 

person on a timely basis, the reporting 

agent assumes responsibility for 


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64See 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)’’). 

65See 17 CFR 240.10c–1a(j)(2)(iii) (‘‘final Rule 

10c–1a(j)(2)(iii)’’). 

66See final Rule 10c–1a(j)(2)(ii). 

67See final Rule 10c–1a(c). 

68See 17 CFR 240.10c–1a(d) (‘‘final Rule 10c– 

1a(d)’’). 

69See final Rule 10c–1a(e). 

70See 17 CFR 240.10c–1a(g)(4) (‘‘final Rule 10c– 

1a(g)(4)’’). 

71See 17 CFR 240.10c–1a(h)(2) (‘‘final Rule 10c– 

1a(h)(2)’’). 

72Similar 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). 

73See 17 CFR 240.10c–1a(g)(1) (‘‘final Rule 10c– 

1a(g)(1)’’). 

74See 17 CFR 240.10c–1a(g)(1)(i)(A) (‘‘final Rule 

10c–1a(g)(1)(i)(A)’’). 

75See 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)’’). 

76See 17 CFR 240.10c–1a(g)(1)(i)(B) (‘‘final Rule 

10c–1a(g)(1)(i)(B)’’). 

77See infra Part IX.C.1 (Benefits of Increased 

Transparency in the Securities Lending Market). 

78See final Rule 10c–1a(g)(5). 

79See 17 CFR 240.10c–1a(g)(2) (‘‘final Rule 10c– 

1a(g)(2)’’). 

80See 17 CFR 240.10c–1a(g)(3)(i) (‘‘final Rule 

10c–1a(g)(3)(i)’’). 

81See 17 CFR 240.10c–1a(g)(3)(ii) (‘‘final Rule 

10c–1a(g)(3)(ii)’’). 

82See final Rule 10c–1a(f). 

83See 17 CFR 240.10c–1a(h) (‘‘final Rule 10c– 

1a(h)’’). 

84See 17 CFR 240.10c–1a(h)(3) (‘‘final Rule 10c– 

1a(h)(3)’’). 

85See 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’’). 

86As 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)). 

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 

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 

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 


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87See 17 CFR 240.10c–1a(j)(1) (‘‘final Rule 10c– 

1a(j)(1)’’). 

88See final Rules 10c–1a(a) and 17 CFR 240.10c– 

1a(b) (‘‘final Rule 10c–1a(b)’’). 

89See 17 CFR 240.10c–1a(j)(4) (‘‘final Rule 10c– 

1a(j)(4)’’). 

90See final Rule 10c–1a(a)(2). 

91See final Rule 10c–1a(j)(3). 

92See 17 CFR 240.10c–1a(j)(2) (‘‘final Rule 10c– 

1a(j)(2)’’). 

93See proposed Rule 10c–1(e). 

94See 17 CFR 240.10c–1a(d)(1)(ii) (‘‘final Rule 

10c–1a(d)(1)(ii)’’). 

95See 17 CFR 240.10c–1a(d)(2) (‘‘final Rule 10c– 

1a(d)(2)’’). 

96See final Rules 10c–1a(c) and 10c–1a(e). 

97See final Rule 10c–1a(d). 

98See final Rule 10c–1a(d)(2). 

99See final Rule 10c–1a(j)(5). 

100See 17 CFR 240.10c–1a(g) (‘‘final Rule 10c– 

1a(g)’’). 

101See final Rule 10c–1a(g)(2). 

102See final Rule 10c–1a(g)(5). 

103See proposed Rule 10c–1(h). 

information that is currently available to 

regulators to help assess market events. 

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 

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 

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. 


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104See proposed Rule 10c–1(a). See also 

Proposing Release, 86 FR 69807. 

105See Proposing Release, 86 FR 69807 (citing 15 

U.S.C. 78c(a)(9)). 

106See 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’’). 

107See proposed Rule 10c–1(a)(1). 

108See proposed Rule 10c–1(a)(1)(i)(A). 

109See Proposing Release, 86 FR 69809. 

110See Proposing Release, 86 FR 69805. 

111See Proposing Release, 86 FR 69807. 

112See Proposing Release, 86 FR 69807. 

113See Proposing Release, 86 FR 69808. 

114See Proposing Release, 86 FR 69808. 

115See 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). 

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. 

116See 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. 

117One 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’’). 

VII. Discussion of the Final Rule 

A. Scope of Persons With Reporting 

Obligations—10c–1a(j)(1) 

Proposed Rule 

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 

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 

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, 


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118See ICI Letter 1, at 5. 119See ICI Letter 1, at 5. 120See 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). 

121See Letter from Mary Jane Schuessler, 

Canadian Securities Lending Association (Jan. 12, 

2022) (‘‘CASLA Letter’’), at 3. 122See 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). 

123See infra Part VII.M. 124See 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). 

125See 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’’). 

126See 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. 

127The 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. 

128See, 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 

Continued 

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 

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 

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 


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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)’’). 

129See ICI Letter 1, at 5. 

130See 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’’). 

131See 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. 

132See Proposing Release, 86 FR 69808. 

133See 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. 

134See RMA Letter, at 3. 

135See RMA Letter, at 13 n.19. 

136See 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.). 

137See 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). 

138See RMA Letter, at 14. 

139See Proposing Release, 86 FR 69807. 

140See OFR Pilot Survey, at 7–8. 

141See Proposing Release, 86 FR 69807 n.68. 

142See 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). 

143See 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). 

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 

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 

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 


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144See 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’’). 

145For 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’’). 

146See final Rules 10c–1a(j)(1)(i) and (ii). 

147See final Rule 10c–1a(j)(1)(iii). 

148See 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 

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). 

149See final Rule 10c–1a(j)(1)(ii). 

150See proposed Rule 10c–1(a)(1)(ii)(A). 

151See proposed Rule 10c–1(a)(1)(ii)(B). 

152See proposed Rule 10c–1(a)(1)(ii)(C). 

153See proposed Rule 10c–1(a)(1)(ii)(C). 

154See proposed Rule 10c–1(a)(1)(ii)(C). 

155See Proposing Release, 86 FR 69810. 

156See Proposing Release, 86 FR 69809. 

157See, 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). 

158See DTCC Letter, at 4. 

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 

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) 

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 


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159See final Rule 10c–1a(a)(2). 

160See Proposing Release, 86 FR 69822 n.129. 

161See Proposing Release, 86 FR 69810. 

162See final Rules 10c–1a(c), (d), and (e). 

163For 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). 

164See 17 CFR 240.10c–1a(a)(1) (‘‘final Rule 10c– 

1a(a)(1)’’). 

165See 17 CFR 240.10c–1a(b) (‘‘final Rule 10c– 

1a(b)’’). 

166See proposed Rule 10c–1(a)(1)(ii)(A). 

167See Proposing Release, 86 FR 69810–11. 

168See Proposing Release, 86 FR 69811. 

169See, 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. 

170See ICI Letter 1, at 8. 

171See Nasdaq Letter, at 2. 

172See 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’’). 

173See, 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’’). 

174See DTCC Letter, at 4. 

175See James J. Angel Letter, at 6 (stating that 

lending platforms operated by clearing agencies 

‘‘could provide low-cost reporting solutions to 

market participants’’). 

176See final Rule 10c–1a(j)(4). 

177See 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.’’) 

178See, e.g., 15 U.S.C. 240.78q(b) (section 17(b) of 

the Exchange Act). 

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 

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 

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


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179See 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. 

180See HMA Letter, at 8. 

181See Sharegain Letter, at 2. 

182See S3 Partners Letter, at 12; Sharegain Letter, 

at 2; IIB Letter, at 10. 

183See S3 Partners Letter, at 12. 

184See 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.’’). 

185See 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 selfregulatory 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.’’). 

186See FIF Letter, at 7–8; S3 Partners Letter, at 

12. 

187See 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.’’). 

188See, 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). 

189See 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). 

190See 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. 

191See ICI Letter 1, at 12 (stating that ‘‘beneficial 

owners will not have the infrastructure to report’’). 

192See final Rule 10c–1a(a)(1). 

193See 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) 

194See S3 Partners Letter, at 12; IHS Markit 

Letter, at 4; Advanced Securities Consulting Letter, 

at 1–3. 

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 

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 

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 


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195See Pirum Letter, at 5. 

196See BlackRock Letter, at 3, 9. 

197See, e.g., 15 U.S.C. 240.78q(b) (section 17(b) of 

the Exchange Act). 

198See James J. Angel Letter, at 6. 

199See final Rule 10c–1a(j)(1). 

200See final Rule 10c–1a(j)(4). 

201See final Rule 10c–1a(a)(1). 

202See final Rule 10c–1a(j)(4). 

203See proposed Rule 10c–1(a)(1)(ii)(A). 

204See 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.’’). 

205The 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. 

206See Proposing Release, 86 FR 69809. 

207See Proposing Release, 86 FR 69810. 

208See Proposing Release, 86 FR 69810. 

209See Proposing Release, 86 FR 69810. 210See Proposing Release, 86 FR 69810–11. 211See Proposing Release, 86 FR 69811. 212One 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). 

213See final Rules 10c–1a(b) through (b)(5). 

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

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 

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 


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214See 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. 

215See 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. 

216See final Rule 10c–1a(b)(1). See also final Rule 

10c–1a(a)(2). 

217See 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. 

218Specifically, 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). 

219See final Rule 10c–1a(b)(2). 

220See proposed Rule 10c–1(a)(2)(i). 

221See final Rule 10c–1a(b)(3) (replacing term 

‘‘another person’’ from paragraph (a)(2)(ii) of the 

proposed rule with the term ‘‘covered person’’). 

222See final Rule 10c–1a(b)(4). 

223See proposed Rule 10c–1(a)(2)(iv). 

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 

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 

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 


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224See Proposing Release, 86 FR 69811. 

225See Proposing Release, 86 FR 69811. 

226See James J. Angel Letter, at 7. 

227See final Rule 10c–1a(b)(5); 17 CFR 240.10c– 

1a(b)(5)(i) (‘‘final Rule 10c–1a(b)(5)(i)’’); 17 CFR 

240.10c–1a(b)(5)(ii) (‘‘final Rule 10c–1a(b)(5)(ii)’’). 228While the term ‘‘Rule 10c–1a information’’ has 

stayed the same in the final rule, as also explained 

below, in Part VII.F, the scope of the information 

required by the final rule has been modified with 

the deletion of the proposed requirement to provide 

information regarding the total amount of 

‘‘securities on loan’’ and ‘‘available to lend’’ data, 

as was originally proposed. 

229See Proposing Release, 86 FR 69808. 

230See proposed Rule 10c–1(a)(1). See also 

Proposing Release, 86 FR 69808. See, e.g., 17 CFR 

230.902 (defining ‘‘Debt securities’’ as ‘‘any security 

other than an equity security’’ and an ‘‘equity 

security’’ as defined in 17 CFR 230.405). 

231See 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). 

232See supra note 47. 

233See Nasdaq Letter, at 2; Morningstar Letter, at 

4. 

234See AFREF Letter 1, at 3. 

235 ICI Letter 1, at 7. 

236Final Rule 10c–1a(j)(2). 

237Final Rule 10c–1a(j)(3). 

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 

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

D. Scope of Securities Required To Be 

Reported—Rule 10c–1a(j)(3) 

Proposed Rule 

In the Proposing Release, the 

Commission stated its preliminary belief 

that proposed Rule 10c–1 should apply 

to all securities ‘‘to ensure that a 

complete picture of transactions 

involving the loan of securities is 

provided to the RNSA.’’ 229 Accordingly, 

the proposed rule would have required 

the reporting of loans of any security 

(e.g., both equity and debt).230

Specifically, the Commission stated 

that, ‘‘if the Commission were to limit 

the scope of the proposed Rule (e.g., to 

only equity securities) then a significant 

number of securities lending 

transactions would be excluded and the 

market efficiencies and reduction of 

information asymmetry that the 

Commission anticipates will result from 

proposed Rule 10c–1 would not accrue 

to non-equity securities.’’ 231

Final Rule 

In response to proposed Rule 10c–1, 

some commenters expressed general 

support for increased transparency and 

price discovery in the securities lending 

market by increasing the amount and 

availability of data in the market.232

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 

was introduced.’’ 234

One commenter recommended that 

the Commission make explicit ‘‘the 

types of securities loans to which Rule 

10c–1 applies so that market 

participants have clarity as to which 

types of securities loans must be 

reported.’’ 235 The final rule makes 

explicit the types of transactions to 

which the final rule applies and the 

securities that are within the scope of 

the final rule through two newly 

defined terms: ‘‘covered securities loan’’ 

and ‘‘reportable security.’’ The 

definition of the term ‘‘covered 

securities loan’’ in paragraph (j)(2) of the 

final rule makes explicit the types of 

loans to which the final rule applies, as 

discussed below, in Part VII.E. The 

definition of the term ‘‘covered 

securities loan’’ refers to a transaction in 

which any person on behalf of itself or 

one or more other persons, lends a 

‘‘reportable security’’ to another 

person.236 The final rule defines the 

term ‘‘reportable security’’ 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 

§ 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 Reporting System 

(‘‘RTRS’’), or any reporting system that 

replaces one of these systems.’’ 237 The 

definition of the term ‘‘reportable 

security’’ aligns the securities for which 

loans must be reported with securities 

for which transactions are currently 

being reported to existing reporting 

regimes, specifically, the CAT, TRACE, 

and RTRS. At this time, data on 


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238See, 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).’’). 

239See, e.g., https://www.finra.org/filingreporting/trace/trace-foreign-sovereign-debt. 

240See, e.g., https://www.catnmsplan.com/faq 

(see FAQ B11 describing the types of products in 

scope for reporting to the CAT). 

241Under 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. 

242Brokers, 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/2018/34- 

83038-ex5.pdf. 

243See, 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. 

244See, 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. 

245See, e.g., RMA Letter, at 15. 

246See, 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.’’). 

247See infra Part IX.C.1 (discussing the benefits 

of increased transparency in less liquid lending 

markets). 248See, 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. 249See ICI Letter 1, at 7. 

250See 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’’). 

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 

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 

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 


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251BlackRock Letter, at 9. 252See Andrew Ang et al., Asset Pricing in the 

Dark: The Cross-Section of OTC Stocks, 26 Rev. Fin. 

Stud. 2985–3028 (2013). 253See infra note 688 and accompanying text. 254See 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. 

255See RMA Letter, at 16. 256RMA Letter, at 16. 257See RMA Letter, at 16. 258See infra Part IX.C.1 (discussing how the final 

rule will affect markets with low lending volume 

such as corporate bonds). 259RMA Letter, at 16. 

260See, 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. 

261See, 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). 

262RMA Letter, at 16. 

263Final Rule 10c–1a(g)(4). 

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 

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 

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 


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264Final Rule 10c–1a(h)(4). 265See proposed Rule 10c–1(a). 266See Proposing Release, 86 FR 69808 (Question 

8). 

267See Proposing Release, 86 FR 69807. See also 

Public Law 111–203, sec. 984(b), 124 Stat. 1376 

(2010). 

268See, 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. 

269See Citadel Letter, at 12. 

270See, e.g., CASLA Letter, at 2 (recommending 

‘‘a definition of ‘securities loan’ . . . based on the 

purpose of a loan’’). 

271See, e.g., BlackRock Letter, at 6–7. 

272See, 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. 

273See final Rule 10c–1a(j)(2). 

274See final Rule 10c–1a(j)(2)(ii). 

275See final Rule 10c–1a(j)(2)(iii). 

276See 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). 

277See, e.g., SIFMA Letter 1, at 15; RMA Letter, 

at 15; CASLA Letter, at 2; IIB Letter, at 10. 

278See 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’’). 

279To 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. 

280See FINRA Regulatory Notice 21–19 (June 4, 

2021), available at https://www.finra.org/rulesguidance/notices/21-19. 

281See, 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. 

282See, 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. 

283See, 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. 

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 

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 

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 


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284See, e.g., SIFMA Letter 1, at 3; SIFMA AMG 

Letter, at 9. 

285See SIFMA Letter 1, at 3. 

286SIFMA AMG Letter, at 2. 

287See SIFMA Letter 1, at 3. 

288See 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 

loan be settled, which may take days or longer after 

the material terms of a securities loan have been 

agreed to). 

289See, e.g., SIFMA Letter 1, at 16; SIFMA AMG 

Letter, at 9; RMA Letter, at 15. 

290See SIFMA Letter 1, at 3. 

291See SIFMA AMG Letter, at 2. 

292See Proposing Release, 86 FR 69804. 

293See Proposing Release, 86 FR 69812. 

294See, 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’’). 

295See SIFMA AMG Letter, at 2; SIFMA Letter 1, 

at 3. 

296But see supra note 148 (discussing 

requirements for the provision of collateral by 

borrowers in the instance of fully paid and excess 

margin securities). 297See, 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’’). 298See 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). 

299See 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’’). 

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

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 


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300See 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). 

301Rule 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.’’ 

302See Proposing Release, 86 FR 69803 n.2. 

303See Proposing Release, 86 FR 69843 n.246. 

304See, 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’’). 

305See ABA Letter, at 3–4 (stating that ‘‘[t]he SEC 

should define covered securities lending 

transactions . . . and distinguish it from repurchase 

and other agreements’’). 

306See Better Markets Letter, at 10. See also James 

J. Angel Letter, at 6–7. 

307See 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’’). 

308See 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, 

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’’). 

309See, 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. 

310See DTCC Letter, at 3; See also OCC Letter, at 

10. 

311See DTCC Letter, at 4. 

312See Proposing Release, 86 FR 69808 (Question 

8). 

313See OCC Letter, at 12. 

314See OCC Letter, at 12. 

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 

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

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 


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315See 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’’). 

316Under 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. 

317See 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. 

318See final Rule 10c–1a(j)(2)(ii). 

319See BlackRock Letter, at 7. See also, SIFMA 

AMG Letter, at 10 (stating that ‘‘for bulk loans, 

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’’). 320BlackRock Letter, at 7. 

321See 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.’’). 

323The 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’’). 

324See Morningstar Letter, at 4. 

325Traditionally, 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. 

326See 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, 

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

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 

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 


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R. Glenn Hubbard, Co-Chair, Committee on Capital 

Markets Regulation (Jan. 6, 2022) (‘‘CCMR Letter’’), 

at 2. 327See CCMR Letter, at 2; AIMA Letter 1, at 2. 328See 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’’). 329See SBAI Letter, at 2. 330See also James J. Angel Letter, at 4 (asking 

‘‘when and how are loans from customer margin 

accounts to be reported?’’). 331See 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). 

332See Proposing Release, 86 FR 69807. 

333See SIFMA AMG Letter, at 9. 

334 12 CFR 220.10(a) (‘‘Regulation T’’). 

335See SIFMA AMG Letter, at 9 (quoting section 

220.10(a) of Regulation T). 

336 12 CFR 220.10(a). 

337For 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. 

338See Federated Hermes Letter, at 2. 

339See, e.g., 17 CFR 240.10c–1a(c)(6) (‘‘final Rule 

10c–1a(c)(6)’’). 

340See final Rule 10c–1a(g)(2). 

341See final Rule 10c–1a(c). 

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

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 

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 


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342See also Proposing Release, 86 FR 69804. 

343See 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. 

344Margin 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.’’ 

345See SIFMA AMG Letter, at 5. 

346See SIFMA Letter 1, at 9 n.39. 

347This 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. 

348See final Rule 10c–1a(j)(2)(iii);17 CFR 

240.10c–1a(j)(2)(iii)(A) (‘‘final Rule 10c– 

1a(j)(2)(iii)(A)’’). 

349See final Rule 10c–1a(j)(2)(iii). 350See final Rule 10c–1a(j)(2)(iii)(A). 351A 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). 

352See final Rule 10c–1a(j)(1)(iii). 

353See 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’’). 

354See 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.’’). 

355See final Rule 10c–1a(j)(2)(i). 

356See final Rule 10c–1a(j)(2)(i). 

357See final Rule 10c–1a(a). 

358See 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’’). 

359See final Rule 10c–1a(j)(2)(ii). 

360See final Rule 10c–1a(j)(2)(iii). 

361See final Rule 10c–1a(j)(3). 

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 

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 

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 


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362See infra Part IX.C.1. 

363While 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’’). 

364See proposed Rule 10c–1(f). 

365See 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. 

366See Proposing Release, 86 FR 69813–14, 

69851–52 (describing each of the proposed 

transaction data elements). 

367See Proposing Release, 86 FR 69813. 

368See Proposing Release, 86 FR 69814. 

369See 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. 

370See 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.’’ 

371See Proposing Release, 86 FR 69814. 

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 

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 

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 


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372See 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. 

373The 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. 

374See, 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). 

375Nasdaq Letter, at 3. 

376See 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.’’). 

377Letter from Hope M. Jarkowski, General 

Counsel, NYSE Group, Inc. (Jan. 6, 2022) (‘‘NYSE 

Letter 1’’), at 2. 

378NYSE Letter 1, at 1–2. 

379See 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). 

380See 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. 

381See 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. 

382See, e.g., BlackRock Letter, at 3–4; see also FIF 

Letter, at 9 (stating that reporting an LEI is 

duplicative and likely not useful). 

383See proposed Rule 10c–1(b)(9). 

384See 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’’). 

385See, 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’’). 

identify trends and any anomalous 

market patterns.372

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 

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 

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 


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386Letter 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). 387See, 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)’’). 

388See 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). 

389Although 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. 

390See SIFMA Letter 2, at 4. 391See SIFMA AMG Letter, at 6–7. 392See, 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). 

393See generally Letter from Jennifer Han, 

Executive Vice President, Chief Counsel & Head of 

Regulatory Affairs, Managed Funds Association 

(Apr. 1, 2022) (‘‘MFA Letter 2’’). 

394See SIFMA AMG Letter, at 7. 

395See CCMR Letter, at 5. 

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 

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 

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 


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396See 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. 

397See 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. 

398See final Rule 10c–1a(g). 

399Some 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 

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. 

400See 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. 

401The proposed time periods for reporting the 

specified information to an RNSA are discussed 

below, in Part VII.G. 

402With 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. 

403See 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 

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). 

404See 17 CFR 240.10c–1a(c)(1) (‘‘final Rule 10c– 

1a(c)(1)’’). 

405See proposed Rule 10c–1(b)(9). 

406See final Rule 10c–1a(c)(8). 

407See final Rule 10c–1a(c)(8). 

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

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

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 


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408See 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). 

409See 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). 

410See proposed Rule 10c–1(c). 

411Proposed Rule 10c–1(c). 

412See Proposing Release, 86 FR 69815. 

413See 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. 

414See 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)’’). 

415The 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. 

416See final Rules 10c–1a(d)(1)(i) and (d)(1)(iii). 

417See final Rules 10c–1a(d)(1)(i) and (d)(1)(iii). 

418See 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. 

419Comments received by the Commission that 

focus primarily on the proposed 15-minute timing 

Continued 

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 

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 

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 


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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. 

420See, 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). 

421See BlackRock Letter, at 2. 

422See BlackRock Letter, at 2. 

423See 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. 

424See infra Part IX.C.1 (discussing an RNSA’s 

discretion with respect to benchmark pricing). 

425See 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.’’). 

426Under 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). 

427See 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)’’). 

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. 

429See 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.’’). 

430AIMA Letter 1, at 5. 

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 

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 


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431See, 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’’). 

432See, e.g., BlackRock Letter, at 9; AIMA Letter 

1, at 5. 

433See, e.g., BlackRock Letter, at 9; AIMA Letter 

1, at 5; ICI Letter 1, at 13. 

434BlackRock Letter, at 9. 

435BlackRock Letter, at 9. 

436See 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 

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). 

437See 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). 

438See final Rule 10c–1a(d)(2). 

439See final Rule 10c–1a(d)(2). 

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

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) 

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 


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440See supra note 436 (discussing costs that 

result from the requirement to report information 

once a loan modification occurs after the loan 

qualifies for reporting). 

441BlackRock Letter, at 9. 

442See final Rule 10c–1a(g)(3)(i). 

443See final Rule 10c–1a(g)(3)(ii). 

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. 

446The 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. 

447See proposed Rule 10c–1(d). 

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. 

449See Charles Schwab Letter, at 2; see also FIF 

Letter, at 7. 

450See Charles Schwab Letter, at 2. 

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) 

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 

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 

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 


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451See, 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.’’). 

452See, 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). 

453See, e.g., FINRA Rule 4511 (regarding 

preservation of records), available at https://

www.finra.org/rules-guidance/key-topics/booksrecords. 

454See 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. 

455See, 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’’). 

456See Letter from Jimit Raithatha (Oct. 11, 2022). 

457See Proposing Release, 86 FR 69815. 

458See, 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. 

459See 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). 

460See S3 Partners Letter, at 12; IHS Markit 

Letter, at 4; Pirum Letter, at 5; BlackRock Letter, at 

9. 

461See 15 U.S.C. 78o. 

462See, 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 

Continued 

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 

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 

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 


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may designate by order upon a demonstrated 

regulatory need. 

463See OCC Letter, at 9. 

464See, 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. 

466See 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. 

467See, 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.’’). 

468See Citadel Letter, at 11. 

469See FINRA Letter, at 1–2. 

470Amendments to Regulation SHO, Release No. 

34–60388 (July 17, 2009); 74 FR 38266, 38271 (July 

31, 2009) (Adopting Release). 

471See 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. 

472See final Rules 10c–1a(e)(1) and (e)(3). 

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 

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

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, 


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473See final Rule 10c–1a(e) (referring to 

‘‘Confidential data elements’’ in paragraphs (e)(1) 

through (3)). 

474See final Rule 10c–1a(e) (referring to 

‘‘Confidential data elements’’ in paragraphs (e)(1) 

through (3)). 

475See proposed Rule 10c–1(e)(1)(iii). 

476See proposed Rules 10c–1(e)(1)(i) and (ii). 

477See Proposing Release, 86 FR 69817. 

478See Proposing Release, 86 FR 69817. 

479The 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). 

480See 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). 

481See, 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. 

482See, e.g., IIB Letter, at 8. See also RMA Letter, 

at 11. 

483See IIB Letter, at 8. 

484See, 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 

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’’). 485See State Street Letter, at 4; IHS Markit Letter, 

at 7, 9 (responding to Questions 25 and 49). 486See 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. 

487See 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’’). 

488See Proposing Release, 86 FR 69817 n.113. 

489See, 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. 

490See 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’’). 

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

Final Rule 

The Commission received numerous 

comments regarding the ‘‘available to 

lend’’ data element 479 of the proposed 

rule. Certain commenters expressed 

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 

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 


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491See proposed Rule 10c–1(e)(1)(iv). 

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

493See proposed Rule 10c–1(e)(3). 

494See proposed Rule 10c–1(e)(3). 

495See Proposing Release, 86 FR 69817. 

496See Proposing Release, 86 FR 69817. 

497The 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). 

498See 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. 

499See Letter from Americans for Financial 

Reform Education Fund, at 3 (Apr. 1, 2022) 

(‘‘AFREF Letter 2’’). 

500See FIF Letter, at 11; ICI Letter 1, at 11. 

501See FIF Letter, at 11. 

502See 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.’’). 

503See S3 Partners Letter, at 12. 504See FIF Letter, at 10; S3 Partners Letter, at 11– 

12; Linklaters Letter, at 5–6. 505See final Rule 10c–1a(c). 506See 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. 

507See final Rule 10c–1a(g)(5). 508See SIFMA Letter 1, at 18–19; SIFMA AMG 

Letter, at 10. 509See final Rule 10c–1a(g). 510See AFREF Letter 2, at 3. 511See final Rule 10c–1a(g)(2). 

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. 

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 

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 

‘‘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 


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512See 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.’’). 

513See Proposing Release, 86 FR 69817. 

514Some 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 15- 

minute reporting requirement saying the cost and 

effort are justified to prevent fraud and prevent 

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. 

515See 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. 

516See FIF Letter, at 3. 

517See, 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. 

518See, 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. 

519See MFA Letter 1, at 3. 

520See also RMA Letter, at 9. 

521See 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). 

522See 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 

Continued 

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 

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 15- 

minute requirement for reporting 

specified data elements to an RNSA. 

Final Rule 

While the proposed 15-minute 

reporting requirement received some 

support,514 most of the comments 

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 

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


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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’’). 

523See, 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). 

524See 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’’). 

525See IHS Markit Letter, at 5. 

526See 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’’). 

527See, 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). 

528See BlackRock Letter, at 2–4. 

529See Pirum Letter, at 2. 

530See RMA Letter, at 3. 

531See ABA Letter, at 4. 

532See, 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). 

533See 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). 

534Consistent 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). 

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 

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 15- 

minute 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

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 


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535See 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. 

536Under 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). 

537Final Rule 10c–1a(c). See also infra note 541 

and accompanying text. 

538See proposed Rule 10c–1(c). 

539See, 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 15- 

minute reporting requirement, will thereby allow 

sufficient time for necessary control processes to 

take place to ensure the accuracy of data 

submissions). 

540See, 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. 541See 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). 

542See final Rule 10c–1a(d). 

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 

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 15- 

minute 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 

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 


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543See, 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). 

544See proposed Rule 10c–1(c). 

545See proposed Rule 10c–1(g). 

546See final Rules 10c–1a(e)(1) through (e)(3). 

547See 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. 

548See proposed Rule 10c–1(a)(1). 

549See Proposing Release, 86 FR 69808. 

550See, 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’’). 

551See final Rule 10c–1a(j)(5). 

552See 15 U.S.C. 78o–3. 

553See proposed Rule 10c–1(f). 

554See Proposing Release, 86 FR 69819. 

555 15 U.S.C. 78s(b). 

556See Proposing Release, 86 FR 69809 (Question 

13). 

557See 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’’). 

558See HMA Letter, at 7. See also Nasdaq Letter, 

at 3–4. 

559See IHS Markit Letter, at 11. 

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 

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 

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 

(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 


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560See AFREF Letter 1, at 4. 

561See 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’’). 

562See Proposing Release, 86 FR 69819 n.116. 

563See S3 Partners Letter, at 5. 

564See BlackRock Letter, at 3. 

565See final Rule 10c–1a(a)(2). 

566See S3 Partners Letter, at 12–13. 

567See S3 Partners Letter, at 12–13. 

568See OCC Letter, at 12. 

569See 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. 

570See proposed Rule 10c–1(b)(1). 571See proposed Rule 10c–1(b)(2). 572See proposed Rule 10c–1(c). 573See proposed Rule 10c–1(g). 574See proposed Rule 10c–1(e)(3). 575See Proposing Release, 86 FR 69812 n.85. 576See proposed Rule 10c–1(b). 577See, 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). 

578See, e.g., HMA Letter, at 7. 

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 

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. 

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 


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579See, e.g., proposed Rule 10c–1(b). 

580See, e.g., supra note 399 and accompanying 

text. 

581See final Rule 10c–1a(g)(5). 

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)). 

583See final Rule 10c–1a(g)(2). 

584See final Rule 10c–1a(g)(3). 

585See final Rule 10c–1a(g)(1). 

586See final Rule 10c–1a(g)(3). 

587See final Rule 10c–1a(g)(3)(i). 

588See final Rule 10c–1a(g)(4). 

589See final Rule 10c–1a(g). 

590See final Rules 10c–1a(g)(3)(i) and (ii). 

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 

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 

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 


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591See, e.g., State Street Letter, at 6; ABA Letter, 

at 4. 

592See RMA Letter, at 1, 19. 

593Pirum Letter, at 4. 

594See FIF Letter, at 8–9. 

595See FIF Letter, at 9. 

596See Pirum Letter, at 4. 

597RMA Letter, at 19. 

598RMA Letter, at 19. 

599See RMA Letter, at 19. 

600See RMA Letter, at 19. 

601See IHS Markit Letter, at 8. 

602See RMA Letter, at 19. 

603See 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.’’). 

604See final Rule 10c–1a(g). 

605See proposed Rule 10c–1(g)(1). 

606See Proposing Release, 86 FR 69819. 

607See 17 CFR 240.17a–1. 

608See Letter from Andrew Robinson (Jan. 7, 

2022) (‘‘Robinson Letter’’), at 12. 

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 

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 

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 


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609See 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. 

610See Proposing Release, 86 FR 69819. 611See 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. 612See 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). 

613See proposed Rule 10c–1(g)(3). 

614See Proposing Release, 86 FR 69819. 

615See Proposing Release, 86 FR 69819–20. 616See Proposing Release, 86 FR 69820. 617See James J. Angel Letter, at 3; Morningstar 

Letter, at 4 (stating that an ‘‘RNSA’s free and 

unrestricted disclosures to the public increase 

transparency’’). 618See James J. Angel Letter, at 2. 619See ABA Letter, at 2–3. 620See Proposing Release, 86 FR 69820. 621See proposed Rule 10c–1(h). 622See 15 U.S.C. 78o(b) (section 15A(b) of the 

Exchange Act). 623See final Rule 10c–1a(i). 624See final Rule 10c–1a(h)(3). 

625The 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. 

626See Proposing Release, 86 FR 69820 (Question 

58). 

627See Robinson Letter, at 12. 

628See final Rule 10c–1a(h)(1). 

629See supra note 609. 

630See final Rule 10c–1a(h)(3). References to the 

relevant collected information in paragraphs (b) and 

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) 

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 

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 

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


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(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. 

631See proposed Rule 10c–1(h). 

632See 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.’’). 

633See 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’’). 

634See ABA Letter, at 3. 

635See State Street Letter, at 2. 

636See proposed Rule 10c–1(h). 

637Final Rule 10c–1a(i). 

638See 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). 

639See proposed Rule 10c–1(h)(4) (specifically 

including the information collected pursuant to 

paragraphs (d) and (e)(3) of the proposed rule). 

640See Proposing Release, 86 FR 69820. 

641See final Rule 10c–1a(h)(4). 

642See 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). 

643See 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. 

644See 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’’). 

645See 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). 

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. 

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 

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

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 


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646The 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.’’ 

647See 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. 

648See, 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). 

649See RMA Letter, at 18. 650One 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. 

651See, 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). 

652See, 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). 

653See, 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. 

654See ISLA Letter, at 2. 

655See, 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). 

656Because 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. 

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

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 

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 

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 

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657See, 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’’). 

659See, 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. 

660HSBC 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’’). 

661See 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. 

662See 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. 

663The 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). 

664See, 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). 

665See 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). 

666See HSBC Letter 2, at 1. 

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 

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, 

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 


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75690 Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 

667See Citadel Letter, at 12–14. 

668Hickman 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). 

670See Citadel Letter, at 13. 

671See Citadel Letter, at 14. 

672See 15 U.S.C. 240.78j(c) (section 10(c)(1) of the 

Exchange Act). 

673See, 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). 

674See, e.g., Trimbath Letter; Form Letters A and 

B. 

675See, 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). 

676See, 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). 

677See, 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. 

678See, 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 

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). 

679See, e.g., Trimbath Letter, at 1–2. 

680See, 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). 

681With 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. 

682See 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’’). 

683See IIB Letter, at 3. 

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 

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 

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 


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684See EBF Letter, at 2. 

685See 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’’). 

686See S3 Partners Letter, at 5. 

687See 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’’). 

688See, 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’’). 

689See CASLA Letter, at 2; RMA Letter, at 15–17. 

See also SBAI Letter, at 2; MFA Letter 3, at 6. 

690See CASLA Letter, at 2; RMA Letter, at 17; 

MFA Letter 3, at 7. 

691See 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. 

692See BlackRock Letter, at 7–8. 

693See S3 Partners Letter, at 12; Sharegain Letter, 

at 2; IIB Letter, at 10. 

694See James J. Angel Letter, at 10. 

695See 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’’). 

696See 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’’). 

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 

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

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 


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75692 Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 

697See 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’’). 

698See 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’’). 

699Numerous 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’’). 

700Section 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. 

701For 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. 

702See infra Part IX.C.1 for further discussion of 

the expected benefits of final Rule 10c–1a. 

703See 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. 

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 

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 

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 


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704See supra Part IX.D.2 discussing why existing 

data providers may retain certain advantages in the 

market for securities lending data and analytics. 

705See infra note 723 and corresponding text for 

a discussion of factors that could be important 

drivers of borrowing costs. 

706See infra Part IX.B.2 for further discussion of 

the current state of transparency in the securities 

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. 

707The 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. 

708The 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. 

709See infra Part IX.B.2 for further discussion of 

the potential for biases related to selection issues 

in commercial securities lending databases. 

710See S3 Partners Letter, at 5. 

711See Citadel Letter, at 8. 

712See 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’’). 

713See Citadel Letter, at 8. 

714See supra note 708 for a definition of 

‘‘Customer’’ loans. 

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. 

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 

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 

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 


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715See infra Part IX.B.2 for further discussion of 

the potential for biases related to selection issues 

in commercial securities lending databases. 

716See infra Part IX.B.2 for additional discussion 

of the characteristics of, and differences between, 

customer market survey data and give-to-get data. 

717Specifically, 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. 

718See infra Part IX.B.2 for further discussion of 

the biases and lack of comprehensiveness in 

commercial securities lending datasets. 

719See infra notes 768 through 770 and 

corresponding text for further discussion of 

limitations related to combining multiple securities 

lending datasets. 

720See infra Part IX.B.2 for an additional 

discussion of this data. 

721See RMA Letter, at 5–6. 

722See infra Part IX.B.2 for further discussion of 

market participants’ incentives to provide data to 

give-to-get data vendors. 

723See infra Part IX.B.2 for further discussion of 

the potential for biases related to selection issues 

in commercial securities lending databases. 

724See, 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. 

725See, 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, 

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 

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 

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 


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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’’). 

726Enhanced 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. 

727Settlement 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 

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. 

730Since 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. 

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. 

732Among 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). 

733See infra Part IX.B.3 for statistics on the range 

of borrowing costs. 

734Most broker dealers are regulated by FINRA 

and are subject to securities lending rules such as 

FINRA Rules 4314, 4320, and 4330. 

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 

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 

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 


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735See infra Part IX.B.4 for further discussion of 

the sourcing of shares by broker-dealers for 

securities loans. 

736See, 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). 

737Market 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. 

738Equity 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’’). 

739For 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. 

740See, e.g., Amendments to Regulation SHO, 

Release No. 34–58775 (Oct. 14, 2008), 73 FR 61690 

n.8 (Oct. 17, 2008). 

741See 17 CFR 242.204. 

742See, 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’’). 

743These 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. 

744See OFR Pilot Survey, at 7; supra note 136. 

745See, e.g., OFR Reference Guide, supra note 4. 

746This 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)’’). 

747See IHS Markit Letter, at 3. 

748See HMA Letter, at 3. 

749See 12 CFR 220.10(a). 

750See infra Part IX.B.6 for further discussion of 

the correlation between securities loan information 

and short interest. 

751See supra Part IX.A.2 for a description of these 

types of datasets. 

752For 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 

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 

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 

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 


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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. 

753See supra Part IX.A.2 for a description of the 

give-to-get model of data collection. 

754For example, some data providers retain the 

right to review and reject any use of the data at their 

own discretion. 

755See 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. 

756See Garango 2020, supra note 712. 

757See Citadel Letter, at 8. 

758For 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. 

759See Proposing Release, 86 FR 69832. 

760See 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. 

761See, 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)’’). 

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 

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-toget 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 


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762See 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. 

763See Heckman (1990), supra note 761. 

764One 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. 

765Note 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. 

766See infra Part IX.B.3 for further discussion of 

the factors that influence the prices of securities 

loans. 

767One 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 

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). 

768For 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. 

769Borrowing 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. 

770One 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. 

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 

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

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 


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771For 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. 

772See 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’’). 

773See, e.g., RMA Letter, at 16; IIB Letter, at 6. 

774Through 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, 

collateral 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. 775The 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). 

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 

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 

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 

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75700 Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 

777The 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. 

778See 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. 

780See supra note 732 for additional factors 

pointed out by commenters that could be important 

drivers of borrowing costs. 

781See 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. 

782We 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. 

783FIS 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. 

784The 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. 

785See RMA Letter, at 16. 

786FIS 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. 

787This 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. 

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 N 

Panel A: Distribution of Utilization Rates 

9–Oct–15 .......................................... 1.02 2.94 5.42 8.28 12.06 22.70 17.21 24.83 39.35 68.98 3,638 


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788See Citadel Letter, at 10. 789See Proposing Release, 86 FR 69833. 790See, 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 

that differences in investors’ access to information 

about municipal bond prices leads to a high level 

of price dispersion. 

791Specifically, 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. 

792See, e.g., HMA Letter at 2, Overdahl Letter at 

6, and ISLA Letter at 2. 

793The OFR Pilot Survey at Table 8 provides 

similar statistics and finds similar dispersion for 

U.S. Equities. 

794See, 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). 

795See RMA Letter, at 16. 

796See 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%. 

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

p10 p20 p30 p40 Median Mean p60 p70 p80 p90 N 

10–Nov–15 ....................................... 0.94 2.82 5.18 8.19 11.72 22.51 16.87 24.59 38.59 68.10 3,638 

31–Dec–15 ....................................... 0.75 2.35 4.52 7.31 11.17 22.25 16.49 25.02 40.42 67.64 3,639 

Panel B: Distribution of Average Lending Fees 

9–Oct–15 .......................................... 0.48 0.56 0.58 0.6 0.65 3.76 0.76 1.24 2.62 7.07 3,727 

10–Nov–15 ....................................... 0.47 0.56 0.59 0.61 0.66 3.77 0.77 1.32 2.76 7.36 3,725 

31–Dec–15 ....................................... 0.37 0.46 0.5 0.54 0.58 3.86 0.66 1.12 2.77 7.51 3,725 

Panel C: Distribution of Range of Lending Fees 

9–Oct–15 .......................................... 1.01 1.35 1.85 2.27 2.85 8.42 3.57 5.21 7.76 10.41 3,727 

10–Nov–15 ....................................... 0.93 1.31 1.81 2.36 2.98 8.39 3.78 5.51 7.73 11.16 3,725 

31–Dec–15 ....................................... 1.15 1.48 1.84 2.25 2.68 8.20 3.43 4.20 6.36 11.41 3,725 

* 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 

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 

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 


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75702 Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 

797See supra note 708 for further discussion of 

the distinction between Wholesale and Customer 

loans. 798The notion that broker-dealers will first source 

shares from internal inventory before accessing 

lending markets was mentioned in the Proposing 

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.’’). 

799See OFR Pilot Survey at Table 1. 

800These dates are Oct. 9, 2015, Nov. 10, 2015, 

and Dec. 31, 2015. 

801See, e.g., Kolasinski (2013), supra note 736. 

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

Source: OFR Pilot Survey of Agent Securities 

Lending Activity 

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 

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 

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 


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Figure 1 Fraction of shares on loan by borrower type (2015) 

Sate pemion fund.I 

Ba•bl Credit 

Unions 

.14~ 

1% 
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 75703 

802See IHS Markit Letter, at 13. 

803See supra Part IX.B.2 for further discussion of 

issues related to the current availability and 

comprehensiveness of securities lending data. 

804See Kolasinski (2013), supra note 736, cited in 

the Proposing Release with regard to search costs. 

See Proposing Release, 86 FR 69805, 69831, and 

69832. 

805See discussion on this point in supra Parts 

IX.B.2 and IX.B.3. 

806Some entities, such as some hedge funds, have 

multiple prime brokers. For such institutions it 

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. 807See supra Part IX.B.2 for further discussion of 

issues related to the current availability and 

comprehensiveness of securities lending data. 808See supra note 798 and corresponding text for 

further discussion of broker-dealers’ sources of 

shares for securities loans. 809Based 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. 

810Commercial 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. 

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 

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. 


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811See 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. 

812See 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 

commercial data vendors and find very high 

correlations between the values presented in the 

different datasets. 

813See supra Part IX.B.2 for further discussions 

of data providers’ incentives when providing data 

to data vendors under a give-to-get model. 

814See supra Part IX.B.2 for further discussion of 

the current limits to transparency in the securities 

lending market. 

815See S3 Partners Letter, at 5. 

816See infra Part IX.B.6 for further discussion of 

FINRA’s bimonthly short interest data. 

817See, 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 

Source: OFR Pilot Survey of Agent Securities 

Lending Activity 

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 

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. 

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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Figure 2: Sources of lendable shares (2015) 

Othen 

Gownm.-

tal entitles 

16% 

11:westmeat 

lmu 

32% 
Federal Register / Vol. 88, No. 212 / Friday, November 3, 2023 / Rules and Regulations 75705 

of the potential reasons for borrowing and lending 

securities apart from to facilitate a short trade. 

818See, 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). 

819See supra Part IX.B.2 for further discussion of 

the give-to-get model. 

820These 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. 

821This 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. 

822See supra Part IX.B.2 for further discussion of 

why the Commission believes that Customer market 

survey datasets are not comprehensive. 

823See supra note 738 and corresponding text. 

This lag will decrease to two days when equity 

settlement moves to T+1 on May 28, 2024. 

824See, 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. 

825Specifically, 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. 

826See FINRA, Short Interest—What It Is, What 

It Is Not (Jan. 25, 2023), available at http://

www.finra.org/investors/insights/short-interest. 

827See 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. 

828See 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.’’). 

830FINRA Rule 4560 excludes short sales in 

‘‘restricted equity securities,’’ as defined in Rule 

144, from the reporting requirement. 

831See FINRA Rule 4560(b)(1). See supra note 

301 for the definition of a short sale. 

832See 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. 

information about existing sources of 

short selling data to facilitate an 

analysis of the impact of the Rule on 

short selling transparency. 

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

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 

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 


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833See, 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). 

834See supra Part IX.B.6 for more information 

about FINRA’s bimonthly short interest data. 

835See 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 

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. 

836See 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. 

837See, 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. 

838Rule 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/34- 

50103.htm#VI. 

839See 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 

situations where firms are, in fact, ‘‘long’’ the 

securities being sold’’). 

840For 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. 

841Accuracy 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. 

842The 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. 

843See supra Part IX.B.2 for further discussion of 

selection issues in commercial securities lending 

databases based on voluntary data submissions. 

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. 

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 

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 

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 


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844See 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.’’ 

845Consequently, 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. 

846A 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. 

847See supra Part IX.B.4 for further information 

about the market for borrowing services. 

848See 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. 

849See 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. 

850See, 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. 

851See supra Part IX.B.1 for further discussion of 

financial institutions’ use of securities loans for 

collateral and balance sheet management. 

852See id. 

853See infra Part IX.D.2 for a discussion of the 

expected impact of the final rule on competition for 

securities lending data analytics services. 

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 

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 

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 

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 


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854One 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. 

855See 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. 

856See, 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. 

857See 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%. 

858See, 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). 

859See, 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. 

860See 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)’’). 

861See, 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.’’ 

862See James J. Angel Letter, at 2. 

863See, e.g., Overdahl Letter, at 6; Citadel Letter, 

at 8. At least one commenter stated that the 

evidence from TRACE was applicable. 

864See Overdahl Letter, at 5–7. 

865See Overdahl Letter, at 6. 

866See Overdahl Letter, at 7. 

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 

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 

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 


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867See, 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). 

868See 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. 

869According 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. 

870See 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 

investors.’’ 

871See Overdahl Letter, at 6. 

872See 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. 

873See Overdahl Letter, at 9, citing Cereda et al. 

(2022). 

874See 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. 

875See id. 

876See 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.’’ 

877See id. 

878See 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. 

879See, e.g., Overdahl Letter, at 3; Citadel Letter, 

at 5–7, 11; MFA Letter 3, at 3–4, 8. 

880See 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 

Continued 

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 

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 

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 


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effects of the final rule to be concentrated among 

hard-to-borrow stocks. 

881See 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. 

882See 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. 

883See, 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. 

884See, 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). 

885See, e.g., Vivian W. Fang, et al., Short Selling 

and Earnings Management: A Controlled 

Experiment, 71 J. Fin. 1251 (2016). 

886See Dixon, et al. (2021), supra note 746. 

887See supra Part IX.B.1 for a discussion of 

option market makers’ use of securities lending 

markets to engage in delta hedging. 

888See, 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). 

889See, 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. 

890See, 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. 

891Commenters 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). 

892See, 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. 

893The 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. 

894See supra Part IX.B.6 for further discussion of 

why the market for Customer loans is tightly linked 

to short selling positions. 

895See 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. 

896Note 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. 

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 

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 

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 


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897See 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. 898See final Rule 10c–1a(g)(5), requiring an RNSA 

to disseminate aggregated daily information. 899See supra Part VII.J for further discussion. 900Note 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. 

901See discussion of the FINRA bimonthly short 

interest data and SRO short selling volume and 

transaction data above in Part IX.B.6. 

902One 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. 

903See supra Part IX.B.2 for additional discussion 

of bias in existing securities lending data. 

904See 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. 

905See supra this part for further discussion of 

the expected economic effects of the final rule 

through its impact on short selling. 

906See 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. 

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 

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 

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 


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907See 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). 

908This 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. 

909See supra Part IX.B.1 for further discussion of 

the use of securities lending by financial 

institutions for collateral and balance sheet 

management. 

910Regulation 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. 

911See 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. 

912See supra Part IX.B.4 for further discussion of 

the market for lending services. 

913See infra Part IX.D.2 for further discussion of 

the expected effects of the final rule on competition 

between broker-dealers. 

914The 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. 

915See supra Part IX.B.5. 

916See infra Part IX.D.2 for further discussion of 

the expected effects of the final rule on competition 

for securities lending data analytics services. 

917While 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. 

918This 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. 

919See infra Part IX.D.1 for further discussion of 

the expected effects of the final rule on price 

efficiency. 

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 

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 

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 


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920Several 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. 

921For 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. 

922See, 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. 

923See, 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. 

924See, 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.’’ 

925See supra in this part for a discussion of these 

benefits. 

926See, e.g., the information provided by 

commenters in supra note 732. 

927See, e.g., Duong, et al. (2017), who find that 

information derived from securities lending data 

can be used to predict stock returns. 

928See 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. 

929See, e.g., Proposing Release, 86 FR 69834, 

69840. 

930See Kolasinski (2013) supra note 736 (writing 

on the link between the cost to borrow and 

availability of shares to lend). 

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 

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 

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, 

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


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931See, e g., IHS Markit Letter, at 13; RMA Letter, 

at 18. 

932See IHS Markit Letter, at 14. 

933See 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. 

934See final Rule 10c–1a(g)(5), requiring an RNSA 

to disseminate aggregated daily information. 

935See MFA Letter 3, at 4. 

936See supra Part IX.B.2. 

937See MFA Letter 3, at 5. 

938See supra Part VII.F.1 for additional 

discussion of the reporting of this data. 

939See 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. 

940See, 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 

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. 

941See supra Part IX.B.4 for a discussion of costs 

related to switching broker-dealers. 

942However, 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. 

943At least one commenter expressed concern 

that the proposed rule may result in increased costs 

when switching lending agents. See CSFME Letter 

1, at 5. 

944See Proposing Release, 86 FR 69837 n.221. 

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 

‘‘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 

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 


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945See supra in this part for discussions of the 

Commission’s expectation that the final rule will 

lower borrowing costs for some securities. 946See supra in this part for further discussion for 

this literature. 947See, 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.’’ 

948See infra Part IX.C.4 for further discussion of 

the expected effect of the final rule on securities 

lending revenues. 

949See 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. 

950See RMA Letter, at 16. 

951See RMA Letter, at 16. 

952See 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. 

953See final Rule 10c–1a(g)(5). 

954See 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. 

956See 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. 

957Currently, FINRA is the only RNSA. Although 

the final rule applies to ‘‘an RNSA,’’ this portion of 

our analysis describes benefits to and involving 

Continued 

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 

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 

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 


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FINRA so that we can discuss specific FINRA Rules 

and practices that will be affected. 958See final Rule 10c–1a(e). 959See id. 960See 17 CFR 240.10c–1a(e)(2) (‘‘final Rule 10c– 

1a(e)(2)’’). 

961See final Rule 10c–1a(e)(3). 

962See 17 CFR 240.15c3–3. 

963Examples 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. 

964More 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. 

965See 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/. 

966See 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. 967For 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. 

968See S3 Partners Letter, at 8. 

969See, e.g., Proposing Release, 86 FR 69803 n.11. 

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 

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’’ 

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 


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970As 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. 

971See final Rule 10c–1a(g)(1). 972As 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. 

973The 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. 

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. 

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 

Total annual 

industry cost 

Covered Persons and Reporting Agents ................................................................... 609 a $522,590,000 b $233,260,000 

RNSA ......................................................................................................................... 1 c 3,880,000 d 2,760,000 

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. 


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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 

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 

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. 

975Note 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. 

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 ................................................................................................................... b 255 c $272.01 d $122.40 

Non-Providing Covered Persons e ........................................................................................................... f 248 g 132.27 h 59.52 

Reporting Agents i .................................................................................................................................... j 106 k 113.07 l 51.34 

Total .................................................................................................................................................. 609 m 517.34 n 233.26 

aProviding covered persons would provide information directly to an RNSA. 

bThe 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. 

fThe 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. 

jThe 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. 

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 

Total initial 

industry cost 

Total annual 

industry cost 

Non-Providing Covered Persons a ........................ b 248 Reporting Agent ................................................... c $3,670,000 $0 

Reporting Agents d ................................................ d 106 Person who Provides 10c–1a Information ........... f 1,570,000 0 

............ RNSA .................................................................... g 8,800 0 

Total ............................................................... 354 ............................................................................... h 5,250,000 0 

aSee supra note Table 3 note e. bSee 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. dSee supra note Table 3 note i. eSee 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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976See, 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)’’). 

977See supra Part IX.B.4 for a description of the 

market for lending services. 

978This possibility is discussed further in infra 

Part IX.C.4. 

979See estimates in infra note 993. 

980One 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.’’ 

981See, e.g., Bloomberg L.P. Letter, at 4; HMA 

Letter, at 11. 

982RNSA 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. 

983The 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 

the estimates provided herein as best estimates 

based on the information currently available to the 

Commission. 

984See 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’’). 

985Specifically, 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. 

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 

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

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 


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986See 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. 

987See also infra Part IX.D.2 (discussing possible 

effects of overlap on competition). 

988See IHS Markit Letter, at 9. 

989We 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). 

990A 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. 

991See Proposing Release, 86 FR 69843. 

992See 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%. 

993Averaging 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. 

994Research shows that an exogenous shock to 

the lending supply affects loan prices, but that the 

downstream effects of these fee changes are modest 

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. 

995See 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. 996See, 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.’’). 

997See supra note 993 for a description of this 

estimate. 

998See Proposing Release, 86 FR 69837. 

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 

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 

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 

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 


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999See infra Part IX.D.2 for a discussion of the 

implications of the final rule for competition 

between broker-dealers. 

1000As 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. 

1001See, 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. 

1002See id. 

1003See supra Part IX.C.1 for a discussion of how 

a decrease in information asymmetries will benefit 

end borrowers and beneficial owners. 

1004See 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. 

1005See 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. 

1006See supra note 1000 for further discussion of 

a potential rough estimate of the extent to which 

securities lending prices are driven by asymmetric 

information. 

1007See, e.g., Overdahl Letter, at 4. 

1008See 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. 

1009Note, 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. 

1010See, e.g., IIB Letter, at 11; Charles Schwab 

Letter, at 2. 

1011See, 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 

Continued 

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 

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 

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 


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million.’’) (citing Jennifer Rose Hale, The Soaring 

Risks of Financial Services Cybercrime: By the 

Numbers, Diligent (Apr. 9, 2021). 

1012See 79 FR 72252. See also SEC, Spotlight on 

Regulation SCI, available at https://www.sec.gov/ 

spotlight/regulation-sci. 

1013See, e.g., RMA Letter, at 8; ISLA Letter, at 3. 

1014See, 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.’’). 

1015See supra Part IX.A.2. 

1016See CSFME Letter 1, at 5. 

1017One 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. 

1018See final Rule 10c–1a(ii)(A), requiring a 

reporting agent to be a broker or dealer. 

1019See supra note 776 for a definition and 

discussion of repo contracts. 

1020See supra note 777 for evidence of this from 

the OFR Pilot Survey. 1021The 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. 

1022See 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. 

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 

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 

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 


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1023See supra note 660, citing HSBC Letter 1. 

1024See supra note 660, citing HSBC Letter 2. 

1025See 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. 

1026See supra Part IX.C.1 for a discussion of the 

final rule’s expected benefits from reducing 

asymmetric information in the securities lending 

market. 1027See 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. 1028See supra Part IX.C.1 for a discussion of the 

final rule’s expected benefits from improved 

financial management for financial institutions. 

1029See 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. 

1030See Citadel Letter, at 8. 

1031See supra Part IX.C.1 for a discussion of why 

switching costs may be limited. 

1032See, e.g., RMA Letter, at 5. 

1033See supra note 993 and corresponding text 

for an estimate of compliance costs as a fraction of 

securities lending revenues. 

1034See 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.’’ 

1035The 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 

Continued 

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

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 

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


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to larger market participants engaged in securities 

lending transactions. 1036An 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. 

1037The 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. 

1038See 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. 

1039See, e.g., HSBC Letter 1, at 5. 

1040See supra Part VII.M for further discussion of 

the cross-border applicability of final Rule 10c–1a. 

1041See ICI Letter 2, at 12. See also supra Part 

IX.B.6 for a description of related comments. 

1042See also supra Part IX.C.3. 

1043See 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. 

1044See supra Part IX.C.1 for further discussion 

of the expected benefits of the final rule related to 

improved financial management for financial 

institutions. 

1045See supra Part IX.C.1. 

1046See supra Part IX.C.1 discussing instances 

where the cost of short selling could increase, 

consistent with the views of some commenters. 

1047See supra Part IX.B.6 for further discussion 

of the timeliness of current sources of short selling 

information. 

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 

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 

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 


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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. 

1049See 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. 

1050See 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. 

1051See supra note 738 and corresponding text. 

1052See supra Part IX.C.1 for further discussion 

of the potential negative consequences of revealing 

short sellers’ strategies. 

1053See final Rule 10c–1a(c). 

1054See supra Part IX.C.2 for further discussion 

of the regulatory benefits of the final rule. 

1055See supra Part IX.C.1 for further discussion 

of the expected benefits of the final rule from 

increasing transparency in the securities lending 

market. 

1056See, 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’’). 

1057See, e.g., IHS Markit Letter, at 13 (stating that 

‘‘most lenders will not be able to meet the 15- 

minute 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’’). 

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 

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 

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 


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1058The 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. 

1059See supra Part IX.C.1. 

1060See supra Part IX.C.1 for further discussion 

of the potential negative consequences of revealing 

short sellers’ information. 

1061This was suggested by some commenters. 

See, e.g., RMA Letter, at 4; SIFMA Letter 1, at 3– 

4, MFA Letter 3, at 4–5. 

1062See final Rule 10c–1a(g)(5). 

1063See supra Part IX.C.1 for further discussion 

of the potential negative consequences of revealing 

short sellers’ information. 

1064See 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. 

1065See 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’’). 

1066See supra Part IX.C.1 for a discussion of the 

expected effects of the final rule on reducing 

information asymmetry. 

1067See supra Part IX.C.1 for a discussion of the 

expected effects of the final rule on short sellers. 

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. 

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

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. 

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 


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1068See supra Part IX.C.1 for a discussion of this 

benefit. 

1069See supra Part IX.B.6 for further discussion 

of why the market for Customer loans is tightly 

linked to short selling positions. 

1070See 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. 

1071See supra Part IX.C.2 for a discussion of the 

expected regulatory benefits associated with final 

Rule 10c–1a. 

1072See supra Part IX.C.1 for further discussion 

of the expected effects of the final rule on increase 

transparency in the securities lending market. 

1073See supra Part IX.D.2 for further discussion 

of the final rule’s expected effects on competition 

between securities lending data analytics firms. 

1074See, e.g., AIMA Letter 1, at 2; SIFMA AMG 

Letter, at 8, 11; CASLA Letter, at 2; MFA Letter 3, 

at 6–7. 

1075See, e.g., Dixon, et al. (2021) supra note 746. 

1076See, 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.’’). 

1077See supra Part IX.C.4 for further discussion 

of the final rule’s expected effects on securities 

lending data vendors’ revenues. 

1078See final Rule 10c–1a(g)(5). 

1079See final Rule 10c–1a(j)(1) for a definition of 

‘‘covered person.’’ 

1080See 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. 

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. 

4. Require Reporting of Shares Available 

To Lend and Shares on Loan 

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 

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 

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 


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1081See, 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. 

1082See final Rule 10c–1a(j)(4) for a definition of 

‘‘reporting agent.’’ 

1083See, e.g., IHS Markit Letter, at 2, 10–11; S3 

Partners Letter, at 12. 

1084See IHS Markit Letter, at 2. 

1085This 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’’). 

1086Note 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. 

1087See id. 

1088See 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. 

1089See, 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). 

1090See SEC Division of Economic Research and 

Analysis (DERA), Short Sale Position and 

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. 

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 

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 

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 


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Transaction Reporting (May 5, 2014), available at 

https://www.sec.gov/files/short-sale-position-andtransaction-reporting%2C0.pdf, at 52–53. 

1091See 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). 

1092See supra Part IX.C.1 for further discussion 

of the potential negative consequences of revealing 

short sellers’ information. 

1093See, e.g., FINRA Rule 4314. 

1094See Proposing Release, 86 FR 69846. 

1095See, 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). 

1096See supra Part IX.C.1 for further discussion 

of the expected benefits from the final rule on 

increased transparency in the securities lending 

market. 

1097See supra Part IX.C.1 for a discussion of 

empirical evidence that the introduction of TRACE 

improved efficiencies in the corporate bond market. 

1098Persistence 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. 

1099See supra Parts IX.C.1 and IX.C.2. 

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 

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. 

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 

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 


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1100See, 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). 

1101See final Rule 10c–1a(f) and supra Part VIII 

for additional discussion of the implementation 

timeline. 

1102See, 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’’). 

1103See supra Part IX.C.1 for a discussion of the 

benefit of the final rule related to increased 

transparency in the securities lending market. 

1104See supra Part IV.C.2 for a discussion of the 

regulatory benefits of the final rule. 

1105For example, FINRA’s TRACE system. 

1106See 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/2021/34- 

92586.pdf, appeal filed, Nasdaq Stock Market LLC 

v. SEC, No. 21–1167 (D.C. Cir. Aug. 9, 2021). 

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. 

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, 

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 

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 


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1108A 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). 

1109The 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. 

1110See supra Part VII.I for further discussion. 

1111See 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. 

1112See 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. 

1113 44 U.S.C. 3501 through 3521. The burdens 

associated with the information collection 

requirements are referred to as ‘‘PRA burdens.’’ 

1114See 44 U.S.C. 3507(d); 5 CFR 1320.11. 

1115See, e.g., CSFME Letter 1, at 3; IHS Markit 

Letter, at 13. 

1116 IHS Markit Letter, at 13. 

1117See MFA Letter 3, at 8. 

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 

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. 

X. Paperwork Reduction Act 

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 


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1118See supra Part I; see also supra Part IX.B.2. 

1119The 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.’’ 

1120Proposing Release, 86 FR 69822. 

1121Proposing Release, 86 FR 69822–23. 

1122See CSFME Letter 1, at 3. 

1123See 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. 

1125See OFR Pilot Survey, at 7–8. 

1126 1,389 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. 

1128Proposing Release, 86 FR 69823. 

1129See 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 

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 

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, 

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 


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borrowing fully paid or excess margin securities 

pursuant to Rule 15c3–3(b)(3) of the Exchange Act 

= 503 covered persons. 

1131For the purposes of the PRA estimates 

included in this release, such covered person is 

referred to as a ‘‘providing covered person.’’ 

1132For 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. 

1135Proposing Release, 86 FR 69822. 

1136These 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. 

1137See 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, SecurityBased 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. 

1139See, e.g., Proposing Release, 86 FR 69829. 

1140See IHS Markit Letter, at 13. 1141As 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. 

1142As 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. 

1143Proposing Release, 86 FR 69827. 

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

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 

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 

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 


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1144While 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. 

1145See Proposing Release, 86 FR 69823. 

1146See 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. 

1147CSFME Letter 1, at 3. 

1148See, e.g., Proposing Release, 86 FR 69822. 

1149The 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 

require that order information be provided to an 

RNSA. Additionally, more trades that are reportable 

to the CAT are executed than securities lending 

transactions. 

1151CAT Approval Order, 81 FR 84887. 

1152See Proposing Release, 86 FR 69823. 

1153The 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. 

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. 

1158Such 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. 

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

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 

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, 


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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. 

1162Proposing Release, 86 FR 69827. 

1163 1,500 hours × 248 non-providing covered 

persons = 372,000 hours. 

1164See 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. 

1165See 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. 

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

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 

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. 

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 


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1168See 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. 

1169See final Rules 10c–1a(c) through (e). 

1170Each 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. 

1172See final Rule 10c–1a(b)(1). 

1173See final Rule 10c–1a(b)(2). 

1174See final Rule 10c–1a(b)(3). 

1175See final Rule 10c–1a(b)(4). 

1176See final Rules 10c–1a(b)(1) through (b)(5). 

1177The 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 

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. 

1178See final Rule 10c–1a(b)(2). 

1179See final Rules 10c–1a(a)(1) and (b)(1). 

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. 

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 

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 

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, 


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1180 3,000 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. 

1182See final Rule 10c–1a(a)(2)(i). 

1183See supra note 1169 and accompanying text. 

1184See 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. 

1186See final Rule 10c–1a(b)(3). 

1187For 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 

the Proposing Release with respect to reporting 

agents. See Proposing Release, 86 FR 69825. 

1189See final Rule 10c–1a(b)(5). 

1190This 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. 

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

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


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1192See Proposing Release, 86 FR 69827–29. 

1193See Proposed Rule Changes of SelfRegulatory Organizations, Release No. 34–50486 

(Oct. 5, 2004), 69 FR 60287 (Oct. 8, 2004), 69 FR 

60293. 1194See final Rule 10c–1a(h)(3). 1195See supra note 1150 and accompanying text. 

PRA TABLE 1—SUMMARY OF ESTIMATED BURDENS FOR COVERED PERSONS AND REPORTING AGENTS

Type of respondent Rule 10c–1a requirement Type of PRA burden 

Number of 

entities 

impacted 

Total initial 

industry 

burden 

(hours) 

Total annual 

industry 

burden 

(hours) 

Providing Covered Persons ... Systems Development and 

Monitoring.

Third-Party Disclosure .......... 255 765,000 344,250 

Non-providing Covered Persons.Systems Development and 

Monitoring.

Third-Party Disclosure .......... 248 372,000 167,400 

Non-providing Covered Persons.Entering into Agreement with 

Reporting Agent.

Third-Party Disclosure .......... 248 7,440 0 

Reporting Agents ................... Systems Development and 

Monitoring.

Third-Party Disclosure .......... 106 318,000 143,100 

Reporting Agents ................... Entering into Agreement with 

Non-providing Covered 

Person.

Third-Party Disclosure .......... 106 3,180 0 

Reporting Agents ................... Entering into Agreement with 

RNSA.

Third-Party Disclosure .......... 106 106 0 

Reporting Agents ................... Record Preservation Requirement.Recordkeeping ...................... 106 0 5,512 

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. 

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 

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 

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 


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1196This 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. 

1197See, e.g., supra Part VII.H. 

1198 1 RNSA × 10,924 hours = 10,924 hours. 

1199The 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. 

1200See 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. 

1201See final Rule 10c–1a(g)(4). 

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 

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 

Rule 10c–1a requirement Type of PRA burden 

Number of 

entities 

impacted 

Total initial 

industry 

burden hours 

Total annual 

industry 

burden hours 

Publication of Data .......................................... Reporting and Third-Party Disclosure ............ 1 10,924 7,739.5 

Data Retention and Availability ....................... Recordkeeping ............................................... 1 0 52 

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 

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 

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. 

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. 


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1202 5 U.S.C. 601 et seq. 

1203 5 U.S.C. 605(b). 

1204Although 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). 

1208See 17 CFR 240.0–10(c). 

1209 17 CFR 242.0–10(a). 

1210Proposing Release, 86 FR 69851. 

1211 17 CFR 242.0–10(a). 

1212See 17 CFR 240.0–10(d). 1213 5 U.S.C. 801 et seq. 

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 

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. 

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 


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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: 

(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: 

(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 

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. 

(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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