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[Federal Register Volume 90, Number 5 (Wednesday, January 8, 2025)]
[Notices]
[Pages 1563-1585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00179]

[[Page 1563]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102093; File No. SR-FINRA-2024-007]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change, as Modified by 
Partial Amendment No. 1, To Adopt the FINRA Rule 6500 Series 
(Securities Lending and Transparency Engine (SLATE\TM\))

January 2, 2025.

I. Introduction

    On May 1, 2024, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Exchange Act'' or ``SEA''),\1\ and 
Rule 19b-4 thereunder,\2\ a proposed rule change to adopt the new FINRA 
Rule 6500 Series (Securities Lending and Transparency Engine 
(SLATETM)) to (1) require reporting of securities loans; and 
(2) provide for the public dissemination of loan information. The 
proposed rule change was published for comment in the Federal Register 
on May 7, 2024.\3\ On June 10, 2024, the Commission extended until 
August 5, 2024, the time period within which to approve the proposed 
rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\4\ On August 5, 2024, the Commission instituted proceedings to 
determine whether to approve or disapprove the proposed rule change, 
and allow for additional analysis of, and input from commenters with 
respect to, the scope and implementation of the proposed rules.\5\ On 
October 28, 2024, the Commission designated January 2, 2025, as the 
date by which the Commission shall either approve or disapprove the 
proposed rule change.\6\ On November 14, 2024, FINRA filed a partial 
amendment to the original proposed rule change. On November 15, 2024, 
the Commission published notice of Partial Amendment No. 1.\7\ The 
Commission received comment letters in response to publications of the 
Notice, OIP, and Partial Amendment No. 1,\8\ as well as a response 
letter from FINRA.\9\ This order approves the proposed rule change, as 
modified by Partial Amendment No. 1 (collectively, ``Proposal'').\10\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 100046 (May 1, 
2024), 89 FR 38203 (May 7, 2024) (``Notice'').
    \4\ See Securities Exchange Act Release No. 100305 (June 10, 
2024), 89 FR 50644 (June 14, 2024).
    \5\ See Securities Exchange Act Release No. 100655 (August 5, 
2024), 89 FR 65441 (August 9, 2024) (``OIP'').
    \6\ See Securities Exchange Act Release No. 101450 (October 28, 
2024), 89 FR 87448 (November 1, 2024).
    \7\ See Securities Exchange Act Release No. 101645 (November 15, 
2024), 89 FR 92228 (November 21, 2024) (``Partial Amendment No. 
1''). All defined terms herein have the same meaning as they do in 
the Notice and in Partial Amendment No. 1, as applicable.
    \8\ Comments are available at: https://www.sec.gov/comments/sr-finra-2024-007/srfinra2024007.htm.
    \9\ See Letter from Racquel L. Russell, Senior Vice President, 
Director of Capital Markets Policy, Office of General Counsel, FINRA 
(November 14, 2024), available at https://www.sec.gov/comments/sr-finra-2024-007/srfinra2024007-540615-1548002.pdf (``FINRA Letter'').
    \10\ The term ``Proposal'' as used herein refers to the proposed 
rule change, as amended by Partial Amendment No. 1.
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II. Description of the Proposed Rule Change, as Modified by Partial 
Amendment No. 1

    As described in more detail in the Notice \11\ and in Partial 
Amendment No. 1,\12\ FINRA stated that it proposed, consistent with 
Exchange Act Rule 10c-1a (``Rule 10c-1a''),\13\ to adopt the new FINRA 
Rule 6500 Series (Securities Lending and Transparency Engine 
(SLATETM)) to establish reporting requirements for Covered 
Securities Loans and to provide for the dissemination of individual and 
aggregate Covered Securities Loan information and loan rate statistics. 
These proposed rules would define key terms for the reporting of 
Covered Securities Loans and specify the reporting requirements with 
respect to both Initial Covered Securities Loans and Loan 
Modifications. FINRA stated its intent to file, and has filed, 
separately a proposed rule change to establish Covered Securities Loan 
reporting fees and securities loan data products and associated 
fees.\14\
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    \11\ See Notice, 89 FR 38204-06.
    \12\ See Partial Amendment No. 1, 89 FR 92229.
    \13\ 17 CFR 240.10c-1a.
    \14\ Notice, 89 FR 38206. See infra Part III.I.
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    According to FINRA, the proposed Rule 6500 Series is designed to 
improve transparency and efficiency in the securities lending market, 
consistent with Section 15(A)(b)(6) of the Exchange Act, Rule 10c-1a, 
and Section 984 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act.\15\ FINRA stated that the proposed rule change would do 
so by facilitating the collection of specified securities loan 
information from Covered Persons and Reporting Agents, both of which 
may include non-FINRA members, and providing access to such information 
to market participants, the public, and regulators.\16\
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    \15\ Notice, 89 FR 38213.
    \16\ Notice, 89 FR 38213.
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A. Reporting Initial Covered Securities Loans

    Proposed Rule 6530(a) would govern the reporting requirements 
applicable to Covered Persons for reporting Initial Covered Securities 
Loans.\17\ Proposed Rule 6510 \18\ would define ``Initial Covered 
Securities Loan'' as a new Covered Securities Loan not previously 
reported to SLATE. The definitions of ``Covered Person'' and ``Covered 
Securities Loan'' for the purposes of this proposed rule change would 
be the same as set forth in Rule 10c-1a. Initial Covered Securities 
Loans would be required to be reported within the time periods outlined 
in proposed Rule 6530(a)(1) (When and How Initial Covered Securities 
Loans Are Reported). Specifically, as modified by Partial Amendment No. 
1, for Initial Covered Securities Loans effected on a business day at 
or after 12:00:00 a.m. Eastern Time (``ET'') through 7:00:00 p.m. ET 
the required information must be reported the same day by 11:59:59 p.m. 
ET.\19\ Additionally, as modified by Partial Amendment No. 1, for 
Initial Covered Securities Loans effected on a business day after 
7:00:00 p.m. ET, the required information must be reported no later 
than the next business day (T+1) by 11:59:59 p.m. ET; \20\ Initial 
Covered Securities Loans effected on a Saturday, a Sunday, a federal or 
religious holiday, or other day on which SLATE is not open at any time 
during that day (determined using ET) must be reported the next 
business day (T+1) by 11:59:59 p.m. ET.\21\
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    \17\ As described in more detail in the Notice, as well as 
below, in Part II.C, a Covered Person may engage a Reporting Agent 
to comply with the reporting obligations on its behalf.
    \18\ Partial Amendment No. 1 modified originally proposed Rule 
6510 by removing the subparagraph providing the definition of 
``Affiliate,'' re-lettering all subsequent subparagraphs under 
proposed Rule 6510, and updating cross-references in proposed Rule 
6510 to other SLATE provisions.
    \19\ See proposed Rule 6530(a)(1)(A). As originally proposed in 
the Notice, an Initial Covered Securities Loan effected on a 
business day at or after 12:00:00 a.m. ET through 7:45:00 p.m. ET 
would have been reported the same day before 8:00:00 p.m. ET.
    \20\ See proposed Rule 6530(a)(1)(B). As originally proposed in 
the Notice, an Initial Covered Securities Loan effected on a 
business day after 7:45:00 p.m. ET would have been reported no later 
than the next business day (T+1) before 8:00:00 p.m. ET.
    \21\ See proposed Rule 6530(a)(1)(C). As originally proposed in 
the Notice, an Initial Covered Securities Loan effected on a 
Saturday, a Sunday, a federal or religious holiday, or other day on 
which SLATE is not open at any time during that day (determined 
using ET) would have been reported the next business day (T+1) 
before 8:00:00 p.m. ET.

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[[Page 1564]]

    Proposed Rule 6530(a)(2) (Loan Information To Be Reported) would 
specify the items of information that must be reported to FINRA. 
Specifically, as modified by Partial Amendment No. 1,\22\ proposed Rule 
6530(a)(2)(A) through (L) would require that Initial Covered Securities 
Loan reports must contain the below non-confidential data elements:
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    \22\ As originally proposed in the Notice, each SLATE report 
would have contained the expected settlement date of the Covered 
Securities Loan. Partial Amendment No. 1 removed this proposed data 
element. In addition, as originally proposed in the Notice, each 
SLATE report would have contained the data element ``[a]ny other 
fees or charges'' separately from the data element concerning the 
rebate rate, as applicable to a Covered Securities Loan 
collateralized by cash or a Covered Securities Loan not 
collateralized by cash. FINRA stated that, when reporting a rebate 
rate or lending fee pursuant to (originally) proposed Rule 
6530(a)(2)(I) or (J), respectively, a Covered Person must report the 
rebate rate or lending fee as a percentage, and separately report 
the dollar cost of any other fees or charges. See Notice, 89 FR 
38206 n.30. The data element ``[a]ny other fees or charges'' has 
been removed by Partial Amendment No. 1. In light of the removal of 
these data elements, Partial Amendment No. 1 re-lettered the 
paragraphs under proposed Rule 6530(a)(2). Changes from Partial 
Amendment No. 1 regarding specific data elements are discussed below 
with respect to such data elements.
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    (A) The legal name of the security issuer and the Legal Entity 
Identifier (``LEI'') of the issuer (if the issuer has a non-lapsed 
LEI);
    (B) Security symbol, CUSIP, ISIN, or FIGI, or other security 
identifier; \23\
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    \23\ Partial Amendment No. 1 added the text ``or other security 
identifier'' to this list.
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    (C) The date the Covered Securities Loan was effected;
    (D) The time the Covered Securities Loan was effected;
    (E) The name of the platform or venue where the Covered Securities 
Loan was effected; \24\
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    \24\ Partial Amendment No. 1 added the text ``name of the'' 
before the word ``platform.'' FINRA stated that it will make 
available a list of platforms/venues and their associated 
identifiers for reporting purposes; if a loan occurs on a platform/
venue not yet included on the FINRA list, the Covered Person must 
enter the name of the platform/venue in the SLATE report. See 
Notice, 89 FR 38206 n.28.
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    (F) The amount of the Reportable Securities loaned; \25\
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    \25\ Proposed Rule 6530(a)(3) specifies that, for a Covered 
Securities Loan of a security reportable to CAT, a Covered Person 
must report the number of shares loaned. For a Covered Securities 
Loan of a security reportable to Trade Reporting and Compliance 
Engine (``TRACE'') or the Municipal Securities Rulemaking Board's 
Real-Time Transaction Reporting System (``RTRS''), a Covered Person 
must report the total par value of the securities loaned. Notice, 89 
FR 38206 n.29.
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    (G) The type of collateral used to secure the Covered Securities 
Loan;
    (H) For a Covered Securities Loan collateralized by cash, the 
rebate rate or any other fee or charges; \26\
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    \26\ Partial Amendment No. 1 modified this proposed data element 
by adding the text ``or any other fee or charges.''
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    (I) For a Covered Securities Loan not collateralized by cash, the 
securities lending fee or rate, or any other fee or charges; \27\
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    \27\ Partial Amendment No. 1 modified this proposed data element 
by adding the text ``or rate, or any other fee or charges.''
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    (J) The percentage of collateral to value of Reportable Securities 
loaned required to secure such Covered Securities Loan;
    (K) The termination date of the Covered Securities Loan; \28\
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    \28\ As originally proposed in the Notice, such information 
would have been provided in connection with a Covered Securities 
Loan with a specified term. Partial Amendment No. 1 modified this 
data element by removing the modifying text ``[f]or a Covered 
Securities Loan with a specified term.''
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    (L) 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.\29\
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    \29\ Proposed Rule 6510 would define the terms ``Broker,'' 
``Dealer,'' ``Clearing Agency,'' ``Bank,'' and ``Custodian'' by 
reference to their respective definitions under section 3(a) of the 
Exchange Act. See Notice, 89 FR 38207 nn.32-36.
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    As modified by Partial Amendment No. 1,\30\ proposed Rule 
6530(a)(2)(M) through (U) would also require that Initial Covered 
Securities Loan reports contain the below confidential data elements:
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    \30\ As originally proposed in the Notice, each SLATE report 
would have specified whether the Covered Person is the lender, 
borrower or intermediary; if the Covered Securities Loan is an 
allocation of an omnibus loan effected pursuant to an agency lending 
agreement, the unique internal identifier for the associated omnibus 
loan assigned by the Covered Person responsible for reporting the 
Covered Securities Loan to SLATE; and such modifiers and indicators 
as required by either the Rule 6500 Series or the SLATE Participant 
(defined in proposed Rule 6510(g)) specification. Partial Amendment 
No. 1 removed these proposed data elements. Changes from Partial 
Amendment No. 1 regarding specific data elements are discussed below 
with respect to such data elements.
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    (M) If known, the market participant identifier (``MPID'') of the 
Covered Person; \31\
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    \31\ Partial Amendment No. 1 added this data element to the list 
of loan information to be reported. FINRA stated that the conforming 
change to proposed Rule 6530(a)(2) to require a Covered Person to 
submit their MPID, if known, when reporting an Initial Covered 
Securities Loan, consistent with the requirement in proposed Rule 
6530(b)(2)(C) for Loan Modification reports, will identify in the 
audit trail the party on whose behalf a SLATE report is submitted. 
Partial Amendment No. 1, 89 FR 92231.
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    (N) 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 SEA Rule 
15c3-3(b)(3));
    (O) If known, the CRD Number or Investment Adviser Registration 
Depository (``IARD'') Number of each party to the Covered Securities 
Loan; \32\
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    \32\ Partial Amendment No. 1 removed the text ``if applicable'' 
at the end of this data element.
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    (P) If known, the MPID of each party to the Covered Securities 
Loan;
    (Q) If known, the LEI of each party to the Covered Securities Loan;
    (R) If known, whether each party to the Covered Securities Loan is 
the lender, the borrower, or an intermediary between the lender and the 
borrower;
    (S) If the person lending securities is a Broker or Dealer and the 
borrower is its customer, whether the security is loaned from the 
Broker's or Dealer's securities inventory to a \33\ customer of such 
Broker or Dealer;
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    \33\ Partial Amendment No. 1 replaced the word ``the'' with the 
word ``a'' before the text ``customer of such Broker or Dealer.''
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    (T) If known, whether the Covered Securities Loan is being used to 
close out a fail to deliver pursuant to Rule 204 of SEC Regulation SHO 
or to close out a fail to deliver outside of Regulation SHO; and \34\
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    \34\ Partial Amendment No. 1 added the word ``and'' between 
originally proposed paragraphs (a)(2)(T) and (a)(2)(U).
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    (U) Where a Covered Person's daily submission includes two or more 
reports related to the same Covered Securities Loan (e.g., an Initial 
Covered Securities Loan and a Loan Modification to terminate the 
Covered Securities Loan) and FINRA has not yet assigned a unique 
identifier to the Initial Covered Securities Loan, a unique identifier 
assigned to the Covered Securities Loan by the Covered Person 
responsible for reporting the loan to SLATE.\35\
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    \35\ As originally proposed in the Notice, this data element 
would have provided the following: ``The unique internal identifier 
assigned to the Covered Securities Loan by the Covered Person 
responsible for reporting the loan to SLATE.''
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    FINRA originally proposed six modifiers and indicators set forth in 
proposed Rule 6530(c), which would have applied to specific scenarios 
where additional detail is appropriate to clarify the information 
required to be reported pursuant to proposed Rule 6530(a)(2) and 
(b)(2).\36\ These modifiers or indicators would have been appended to 
all SLATE reports.\37\ FINRA stated that it planned to use these 
modifiers for data validation purposes (e.g., in instances where 
FINRA's data

[[Page 1565]]

validation logic identified the reported rate as potentially 
erroneous).\38\ Partial Amendment No. 1 removed the proposed 
requirement to append to each SLATE report specified modifiers and 
indicators. Partial Amendment No. 1 also modified proposed Rule 6510 
(Definitions) by removing the definition of the term ``affiliate'' 
because that term is no longer needed given the deletion of the related 
indicator.\39\
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    \36\ See Notice, 89 FR 38207-08.
    \37\ These modifiers and indicators would have been the 
following: Exclusive Arrangement; Loan to Affiliate; Unsettled Loan; 
Terminated Loan; Rate or Fee Adjustment; and Basket Loan. For a 
discussion of each of these modifiers and indicators, see Notice, 89 
FR 38208.
    \38\ See Notice, 89 FR 38208.
    \39\ See supra note 18.
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    Partial Amendment No. 1 added proposed Rule 6530(a)(4) (Reporting 
Loan Rates Based on a Spread to a Benchmark or Reference Rate) to 
permit Covered Persons to--as an alternative to reporting the rebate 
rate or lending fee or rate for a Covered Securities Loan--report the 
spread and identity of the benchmark or reference rate for Covered 
Securities Loans that are priced based on a spread to a benchmark or 
reference rate. Specifically, new proposed Rule 6530(a)(4)(B) would 
provide that, where a rebate rate or lending fee or rate is determined 
based on a spread to a benchmark or reference rate, a Covered Person 
may report: (1) the rebate rate or lending fee or rate as of the date 
the Covered Securities Loan was effected; (2) the spread; and (3) the 
identity of the benchmark or reference rate. Alternatively, a Covered 
Person may report only the rebate rate or lending fee or rate.

B. Reporting Securities Loan Modifications

    Proposed Rule 6530(b) would govern the reporting requirements 
applicable to Covered Persons for reporting Loan Modifications. 
Proposed Rule 6510 would define ``Loan Modification'' as a change to 
any ``Data Element'' with respect to a Covered Securities Loan 
(irrespective of whether such Covered Securities Loan was previously 
reported to SLATE), where ``Data Element'' refers to the required non-
confidential data elements reported pursuant to proposed Rule 
6530(a)(2). Proposed Rule 6530(b)(1) (When and How Loan Modifications 
Are Reported) would require that Loan Modifications be reported within 
the same timeframes applicable to the reporting of Initial Covered 
Securities Loans. Specifically, as modified by Partial Amendment No. 1, 
for Loan Modifications effected on a business day at or after 12:00:00 
a.m. ET through 7:00:00 p.m. ET, the required information must be 
reported the same day by 11:59:59 ET.\40\ As modified by Partial 
Amendment No. 1, for Loan Modifications effected on a business day 
after 7:00:00 p.m. ET, the required information must be reported no 
later than the next business day (T+1) by 11:59:59 ET; \41\ Loan 
Modifications effected on a Saturday, a Sunday, a federal or religious 
holiday, or other day on which SLATE is not open at any time during 
that day (determined using ET) must be reported the next business day 
(T+1) by 11:59:59 ET.\42\
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    \40\ As originally proposed in the Notice, a Loan Modification 
effected on a business day at or after 12:00:00 a.m. ET through 
7:45:00 p.m. ET would have been reported the same day by 8:00:00 
p.m. ET.
    \41\ As originally proposed in the Notice, a Loan Modification 
effected on a business day after 7:45:00 p.m. ET would have been 
reported no later than the next business day (T+1) by 8:00:00 p.m. 
ET.
    \42\ As originally proposed in the Notice, a Loan Modification 
effected on a Saturday, a Sunday, a federal or religious holiday, or 
other day on which SLATE is not open at any time during that day 
(determined using ET) would have been reported the next business day 
(T+1) by 8:00:00 p.m. ET.
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    Proposed Rule 6530(b)(2) (Loan Modifications--Information To Be 
Reported) would specify the items of information that must be reported 
to FINRA. Specifically, as modified by Partial Amendment No. 1,\43\ 
proposed Rule 6530(b)(2)(A) through (E) would require that each Loan 
Modification report contain the information below:
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    \43\ As originally proposed in the Notice, for Loan 
Modifications, each SLATE report would have contained the following 
data elements: if the Covered Securities Loan is an allocation of an 
omnibus loan effected pursuant to an agency lending agreement, the 
unique internal identifier for the associated omnibus loan; the 
expected settlement date for modifications to the loan amount (if 
the expected settlement date is a date other than the date of the 
Loan Modification), or the effective date for all other Loan 
Modifications (if the effective date is a date other than the date 
of the Loan Modification); whether the Covered person is the lender, 
borrower or intermediary; and such modifiers and indicators as 
required by either the Rule 6500 Series or the SLATE Participant 
specification. Partial Amendment No. 1 removed these proposed data 
elements. In light of the removal of these data elements, Partial 
Amendment No. 1 re-lettered the paragraphs under proposed Rule 
6530(b)(2). Changes from Partial Amendment No. 1 regarding specific 
data elements are discussed below with respect to such data 
elements.
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    (A) The unique identifier assigned by FINRA to the Initial Covered 
Securities Loan, or where a Covered Person's daily submission includes 
two or more reports related to the same Covered Securities Loan and 
FINRA has not yet assigned a unique identifier to the Covered 
Securities Loan, the identifier reported pursuant to paragraph 
(a)(2)(U) of this Rule; \44\
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    \44\ As originally proposed in the Notice, the following 
information concerning this requirement would have been reported 
with respect to Loan Modifications: the unique identifier assigned 
by FINRA to the Initial Covered Securities Loan, or, if a unique 
identifier has not yet been assigned by FINRA, the unique internal 
identifier assigned to the Covered Securities Loan by the Covered 
Person responsible for reporting the loan to SLATE.
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    (B) If known, the MPID of the Covered Person; \45\
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    \45\ Partial Amendment No. 1 added the text ``[i]f known'' to 
the beginning of this data element.
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    (C) The date of the Loan Modification;
    (D) The time of the Loan Modification; and \46\
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    \46\ Partial Amendment No. 1 added the word ``and'' between 
paragraphs (b)(2)(D) and (b)(2)(E).
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    (E) (i) If the Loan Modification occurs after the Data Elements for 
such Covered Securities Loan are reported to SLATE, and results in a 
change to information previously required to be reported to SLATE, the 
specific modification and the specific Data Elements being modified, or 
(ii) If the Loan Modification is to a Covered Securities Loan for which 
reporting to SLATE 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, 
all Data Elements as of the date of modification and an identifier 
described in paragraph (a)(2)(U) of this Rule.\47\
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    \47\ As originally proposed in the Notice, this data element 
would have concerned ``[t]he modified Data Elements for a Loan 
Modification to a Covered Securities Loan previously reported to 
SLATE or all Data Elements for a Loan Modification to a Covered 
Securities Loan that was not previously required to be reported to 
SLATE.'' Partial Amendment No. 1 replaced that text with the text 
included above.
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    As originally proposed in the Notice, Rule 6530.01 (Intraday Loan 
Modifications) would have addressed a Covered Person's reporting 
obligations when multiple Loan Modifications occur on a given day. 
Specifically, if a Covered Securities Loan (whether or not previously 
reported to SLATE) were modified multiple times throughout the day, 
proposed Rule 6530.01 would have set forth the requirement for a 
Covered Person to report each Loan Modification that occurred on a 
given day as set forth in proposed Rule 6530(b).\48\ Partial Amendment 
No. 1 removed proposed Rule 6530.01.
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    \48\ See Notice, 89 FR 38209.
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    As originally proposed in the Notice, Rule 6530.02 (Changes to the 
Parties to a Covered Securities Loan) would have provided that, with 
respect to a previously reported Covered Securities Loan, following the 
addition or removal of a party required to be identified pursuant to 
Rule 6530(a)(2)(O) a Covered Person must: (1) report the termination of 
the previously reported Covered Securities Loan as a Loan Modification 
pursuant to Rule 6530(b) that reflects the date and time the party was 
added or removed and select the Terminated Loan indicator; and (2) 
report an Initial Covered Securities Loan pursuant to Rule 6530(a) that 
reflects the new parties to the loan, if known (other than the customer 
from whom a Broker or Dealer borrows fully paid or

[[Page 1566]]

excess margin securities pursuant to SEA Rule 15c3-3(b)(3)). Partial 
Amendment No. 1 removed originally proposed Rule 6530.02.

C. Compliance With Reporting Obligations

    FINRA proposed to adopt, as modified by Partial Amendment No. 1, 
proposed Rule 6530(c) (Compliance with Reporting Obligations) to 
implement provisions regarding Covered Persons' ongoing reporting 
obligations and the use of third parties in meeting Exchange Act Rule 
10c-1a and FINRA 6500 Rule Series obligations.\49\ Specifically, 
proposed Rule 6530(c)(1) provides that Covered Persons (other than 
Covered Persons that engage a Reporting Agent) have an ongoing 
obligation to report Initial Covered Securities Loans and Loan 
Modifications to FINRA timely, accurately, and completely. In addition, 
a Covered Person may employ an agent for the purpose of submitting loan 
information to SLATE; however, unless the Covered Person has retained a 
Reporting Agent as permitted under Exchange Act Rule 10c-1a, the 
primary responsibility for the timely, accurate, and complete reporting 
of loan information to SLATE remains the non-delegable duty of the 
Covered Person with the reporting obligation. Similar to requirements 
that exist with respect to reporting obligations under other FINRA 
rules,\50\ proposed Rule 6530(c)(2) provides that a member's pattern or 
practice of late reporting without exceptional circumstances may be 
considered conduct inconsistent with high standards of commercial honor 
and just and equitable principles of trade, in violation of FINRA Rule 
2010.
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    \49\ Partial Amendment No. 1 re-lettered this provision 
paragraph to (c).
    \50\ See, e.g., FINRA Rule 6380A(a)(4); FINRA Rule 6622(a)(4); 
FINRA Rule 6623; FINRA Rule 6730(f).
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    As originally proposed in the Notice, even where a member employs a 
Reporting Agent consistent with Rule 10c-1a(a)(2), the member would 
nonetheless have been required to take reasonable steps to ensure that 
the Reporting Agent is in fact complying with the securities lending 
reporting requirements of Rule 10c-1a and proposed FINRA Rule 6530 on 
its behalf. Originally proposed Rule 6530(d)(3) \51\ would have 
provided that a member relying on a Reporting Agent has an obligation 
under FINRA Rule 3110 (Supervision) to take reasonable steps to ensure 
that the Reporting Agent is complying with Rule 10c-1a and FINRA Rule 
6530 on its behalf. Partial Amendment No. 1 removed this proposed 
requirement.
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    \51\ See supra note 49.
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    As modified by Partial Amendment No. 1, proposed Rule 6530(c)(3) 
\52\ would provide that, if a Covered Person makes a good faith 
determination that it has a reporting obligation under Rule 10c-1a,\53\ 
the Covered Person or Reporting Agent, as applicable, must report the 
Covered Securities Loan as provided in proposed Rule 6530. If the 
Reportable Security is not entered into the SLATE system, proposed Rule 
6530(c)(3) would also require the Covered Person or Reporting Agent, as 
applicable, to promptly notify and provide FINRA Operations, in the 
form and manner required by FINRA, the information specified in Rule 
6530(a)(2)(A) and (B), along with such other information as FINRA deems 
necessary to enter the Reportable Security for reporting through SLATE. 
FINRA stated that this requirement would enable FINRA to set the 
security up in its systems and facilitate reporting of the Covered 
Securities Loan to SLATE, as required by Rule 10c-1a and proposed Rule 
6530.\54\
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    \52\ As originally proposed in the Notice, this paragraph would 
have been (d)(4). Partial Amendment No. 1 re-lettered and re-
numbered this paragraph to (c)(3).
    \53\ As originally proposed in the Notice, this requirement 
would have applied with respect to a reporting obligation under both 
Rule 10c-1a and SLATE. Partial Amendment No. 1 removed the text 
``and this Rule 6500 Series'' from proposed Rule 6530(c)(3).
    \54\ Notice, 89 FR 38210.
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D. Participation in SLATE

    Proposed Rule 6520 (Participation in SLATE) would establish the 
requirements applicable to Covered Persons and Reporting Agents with 
respect to participation in SLATE. Rule 6510 would define a ``SLATE 
Participant'' as ``any person that reports securities loan information 
to SLATE, directly or indirectly.'' ``SLATE Participant'' therefore 
would include both persons who connect to SLATE directly to report 
Covered Securities Loan information, including Reporting Agents, as 
well as any Covered Person who has engaged a Reporting Agent or other 
agent.
    Paragraph (1) of proposed Rule 6520(a) (Mandatory Participation) 
would provide that participation in SLATE is mandatory for purposes of 
reporting Covered Securities Loans. Such mandatory participation would 
obligate a Covered Person to submit Covered Securities Loan information 
to SLATE in conformity with Rule 10c-1a and the FINRA Rule 6500 Series. 
Proposed Rule 6520(a)(2) would provide that participation in SLATE 
would be conditioned on the SLATE Participant's initial and continuing 
compliance with specified requirements. Specifically, SLATE 
Participants must: (1) obtain an MPID for reporting Covered Securities 
Loans to SLATE; (2) execute and comply with the SLATE Participant 
application agreement and all applicable rules and operating procedures 
of FINRA and the SEC; and (3) maintain the physical security of the 
equipment located on the premises of the SLATE Participant to prevent 
unauthorized entry of information into SLATE. Proposed Rule 6520(a)(3) 
would provide that SLATE Participants would be obligated to inform 
FINRA of non-compliance with, or changes to, any of the participation 
requirements set forth in paragraph (a)(2) of this Rule.
    Proposed Rule 6520(b) (Reporting Agents) would set forth the 
participation requirements specific to Reporting Agents. Proposed Rule 
6520(b) would require a SLATE Participant acting as a Reporting Agent 
to provide FINRA with a list naming each Covered Person on whose behalf 
the Reporting Agent is providing information to SLATE and any updates 
\55\ to the list of such persons by the end of the day on which any 
such change occurs, in the form and manner specified by FINRA. FINRA 
stated that this requirement is consistent with Rule 10c-1a(b)(4).\56\
---------------------------------------------------------------------------

    \55\ Partial Amendment No. 1 changed the word ``changes,'' as 
originally proposed in the Notice, to ``updates.''
    \56\ Notice, 89 FR 38210.
---------------------------------------------------------------------------

    Finally, proposed Rule 6520(c) (SLATE Participant Obligations) 
would provide that, upon execution and receipt by FINRA of the SLATE 
Participant application agreement, a SLATE Participant may commence 
input of Covered Securities Loan reports into SLATE. Proposed Rule 
6520(c) also would require that a SLATE Participant must report Covered 
Securities Loan information using its MPID and would provide that a 
SLATE Participant may access SLATE via a FINRA-approved facility during 
SLATE System Hours.\57\
---------------------------------------------------------------------------

    \57\ As originally proposed in the Notice, SLATE System Hours 
would have meant the hours SLATE is open, which would be 6:00:00 
a.m. ET through 7:59:59 p.m. ET on a business day, unless otherwise 
announced by FINRA. Partial Amendment No. 1 modified this proposed 
text from ``7:59:59 p.m. Eastern Time'' to ``11:59:59 p.m. Eastern 
Time.''
---------------------------------------------------------------------------

E. Dissemination of Loan Information

    Proposed Rule 6540 (Dissemination of Loan Information) would 
provide for the public dissemination of securities loan data reported 
to SLATE and information pertaining to the aggregate loan transaction 
activity and distribution of loan rates for each Reportable Security.

[[Page 1567]]

The publicly available data would include: (1) next day (T+1) loan-
level data dissemination for Initial Covered Securities Loans and Loan 
Modifications (except for the loan amount); (2) T+20 dissemination of 
the loan amount for Initial Covered Securities Loans and Loan 
Modifications; and (3) daily loan statistics (i.e., aggregate loan 
activity and distribution of loan rates).
1. T+1 Loan-Level Data Dissemination
    Under proposed Rule 6540(a) (Next Day Dissemination), as modified 
by Partial Amendment No. 1, for each Initial Covered Securities Loan 
and Loan Modification reported to SLATE on a given business day, no 
later than the morning of the next business day, FINRA would make 
publicly available: (1) for an Initial Covered Securities Loan,\58\ the 
unique identifier assigned by FINRA to the Covered Securities Loan; (2) 
for a Loan Modification, the unique identifier assigned by FINRA to the 
Covered Securities Loan if reported to SLATE or otherwise identified by 
FINRA; \59\ (3) the security identifier(s) specified in Rule 
6530(a)(2)(A) or (B) that FINRA determines is appropriate to 
disseminate; and (4) the requisite Data Elements,\60\ except the amount 
of Reportable Securities loaned.\61\
---------------------------------------------------------------------------

    \58\ Partial Amendment No. 1 added the text ``for an Initial 
Covered Securities Loan.''
    \59\ Partial Amendment No. 1 added this paragraph (a)(2) to 
proposed Rule 6540 and re-numbered the subsequent paragraphs under 
proposed Rule 6540(a).
    \60\ See Notice, 89 FR 38211.
    \61\ See Partial Amendment No. 1, 89 FR 92234-35.
---------------------------------------------------------------------------

2. T+20 Loan Amount Dissemination
    As discussed in greater detail in the Notice,\62\ and as described 
in Partial Amendment No. 1,\63\ pursuant to Rule 6540(b) (Delayed 
Dissemination), for each Initial Covered Securities Loan and Loan 
Modification reported to SLATE, 20 business days after the date on 
which the Initial Covered Securities Loan was effected or the loan 
amount was modified, FINRA would make publicly available: (1) for an 
Initial Covered Securities Loan,\64\ the unique identifier assigned by 
FINRA to the Covered Securities Loan; (2) for a Loan Modification, the 
unique identifier assigned by FINRA to the Covered Securities Loan if 
reported to SLATE or otherwise identified by FINRA; \65\ (3) the 
security identifier(s) specified in Rule 6530(a)(2)(A) or (B) that 
FINRA determines is appropriate to disseminate; and (4) the amount of 
Reportable Securities loaned reported to SLATE. FINRA stated that, for 
Initial Covered Securities Loans, the 20-day delay period would begin 
the day after the Covered Securities Loan is effected (even in the case 
of late reports).\66\
---------------------------------------------------------------------------

    \62\ See Notice, 89 FR 38211.
    \63\ See Partial Amendment No. 1, 89 FR 92235.
    \64\ Partial Amendment No. 1 added the text ``for an Initial 
Covered Securities Loan.''
    \65\ Partial Amendment No. 1 added this paragraph (b)(2) to 
proposed Rule 6540 and re-lettered the subsequent paragraphs under 
proposed Rule 6540(b).
    \66\ Notice, 89 FR 38211.
---------------------------------------------------------------------------

3. Daily Loan Statistics
    In addition to T+1 loan-level data disseminated pursuant to 
proposed Rule 6540(a), FINRA would disseminate statistics regarding 
Covered Securities Loans reported to FINRA, including aggregate loan 
activity and distribution of loan rebate rates and lending fees.
    Pursuant to paragraph (1) (Aggregate Loan Transaction Activity) of 
proposed Rule 6540(c), for each Reportable Security for which an 
Initial Covered Securities Loan or Loan Modification is reported to 
SLATE on a given business day, FINRA would disseminate, no later than 
the morning of the next business day, aggregated loan activity in the 
Reportable Security (along with the security identifier specified in 
Rule 6530(a)(2)(A) or (B) that FINRA determines is appropriate to 
disseminate). As modified by Partial Amendment No. 1, the aggregated 
data would include, for each Reportable Security, under proposed Rule 
6540(c)(1), the aggregate volume of securities \67\ subject to an 
Initial Covered Securities Loan or modification to the amount of 
Reportable Securities loaned, reported on the prior business day.
---------------------------------------------------------------------------

    \67\ Partial Amendment No. 1 removed the text ``(both in total 
and by collateral type)'' following the word ``securities.''
---------------------------------------------------------------------------

    FINRA stated that these data would provide the public with useful 
information concerning the daily lending activity in Reportable 
Securities, including insight into how this activity is distributed 
across collateral types.\68\ To that end, proposed Rule 6540.01 (De 
Minimis Loan Transaction Activity), as modified by Partial Amendment 
No. 1, would state that FINRA will not include aggregate volume 
information for a Reportable Security unless there were reports 
submitted to SLATE on the prior business day for at least ten distinct 
Covered Securities Loans in the Reportable Security (represented by 
different FINRA-assigned unique loan identifiers).\69\
---------------------------------------------------------------------------

    \68\ Notice, 89 FR 38212.
    \69\ As originally proposed in the Notice, Rule 6540.01 (De 
Minimis Loan Transaction Activity) would have provided that FINRA 
may omit from the aggregate loan activity volume information for 
Reportable Securities for which there were three or fewer types of 
Initial Covered Securities Loan and Loan Modification events 
reported to SLATE in total on the prior business day. Notice, 89 FR 
38212 n.74.
---------------------------------------------------------------------------

    Partial Amendment No. 1 also removed four other originally proposed 
provisions related to FINRA's dissemination of aggregate loan 
transaction activity. As originally proposed in the Notice, the 
aggregated loan transaction activity data disseminated pursuant to 
proposed Rule 6540(c)(1) would also have included under: (1) proposed 
Rule 6540(c)(1)(B), the aggregate volume of securities (both in total 
and broken down by collateral type) subject to a rebate rate or fee 
modification reported on the prior business day; (2) proposed Rule 
6540(c)(1)(C), the aggregate volume of securities subject to an Initial 
Covered Securities Loan or modification to the amount of Reportable 
Securities loaned subject to a loan with a specified term and subject 
to a loan without a specified term reported on the prior business day; 
(3) proposed Rule 6540(c)(1)(D), the aggregate volume of securities 
subject to an Initial Covered Securities Loan or modification to the 
amount of Reportable Securities loaned to one or more borrower types 
specified in Rule 6530(a)(2)(N) reported on the prior business day; and 
(4) proposed Rule 6540(c)(1)(E), the aggregate number of Initial 
Covered Securities Loans and terminated Covered Securities Loans (both 
in total and broken down by collateral type) reported on the prior 
business day.
    Pursuant to paragraph (2) (Loan Rate Distribution Data) of proposed 
Rule 6540(c), for each Reportable Security for which an Initial Covered 
Securities Loan or Loan Modification is reported to SLATE on a business 
day, FINRA would also disseminate, not later than the morning of the 
next business day, the security identifier (specified in Rule 
6530(a)(2)(A) or (B)) that FINRA determines is appropriate to identify 
the relevant Reportable Security and information pertaining to the 
distribution of loan rebate rates or lending fees or rates, as 
applicable,\70\ including: the highest rebate rate, lowest rebate rate, 
and volume weighted average of the rebate rates by U.S. currency and 
non-U.S. currency, as applicable,\71\ reported to SLATE for

[[Page 1568]]

Initial Covered Securities Loans collateralized by cash and, 
separately, for Loan Modifications collateralized by cash (where the 
Loan Modification involved a change to the rebate rate). FINRA would 
also disseminate the highest lending fee or rate, lowest lending fee or 
rate, and volume weighted average of the lending fees or rates reported 
for Initial Covered Securities Loans not collateralized by cash and, 
separately, for Loan Modifications not collateralized by cash (where 
the Loan Modification involved a change to the lending fee or rate). 
FINRA stated that these rate distribution metrics would provide market 
participants with both an overall view of the range of daily loan 
pricing for each Reportable Security, as well as insight into the 
relationship between loan rates/fees and loan amounts.\72\
---------------------------------------------------------------------------

    \70\ FINRA stated that, in addition to the items of information 
specified in paragraphs (A) and (B) of proposed Rule 6540(c)(2), 
FINRA may, in its discretion, publish or distribute additional 
metrics regarding loan rebate rates and lending fees free of charge. 
Notice, 89 FR 38212 n.79.
    \71\ Partial Amendment No. 1 added the text ``by U.S. currency 
and non-U.S. currency, as applicable.'' FINRA stated that the 
modification made by Partial Amendment No. 1 is appropriate because 
the currency used as collateral will impact the rebate rate reported 
to SLATE and, therefore, separating the rate information by U.S. 
currency collateral and non-U.S. currency collateral will make the 
disseminated information more useful. Partial Amendment No. 1, 89 FR 
92232.
    \72\ Notice, 89 FR 38212.
---------------------------------------------------------------------------

    Proposed Rule 6540(d) (Loan Transaction Information Not 
Disseminated), as modified by Partial Amendment No. 1, would specify 
that FINRA will not disseminate any Confidential Data Elements reported 
to SLATE.\73\ As proposed in Rule 6540.02 (Means of Data 
Dissemination), FINRA would make the data pursuant to proposed Rule 
6540(a) through (c) available on FINRA's website free of charge for 
personal, non-commercial purposes only. For other uses, FINRA would 
publish or distribute SLATE data for fees that have been filed with the 
SEC pursuant to Rule 19b-4 under the Exchange Act.
---------------------------------------------------------------------------

    \73\ As originally proposed in the Notice, FINRA would not have 
disseminated any modifier or indicator required by either the Rule 
6500 Series or the SLATE Participant specification that FINRA 
determines shall not be publicly disseminated. Partial Amendment No. 
1 removed this language.
---------------------------------------------------------------------------

F. Other Provisions

    Proposed Rule 6550 (Emergency Authority) would provide that, as 
market conditions may warrant, FINRA, in consultation with the 
Commission, may suspend the reporting or dissemination of certain 
Covered Securities Loans, or the reporting of certain Data Elements or 
Confidential Data Elements or the dissemination of certain Data 
Elements for such period of time as FINRA deems necessary. FINRA stated 
that this proposed rule is consistent with FINRA's rules governing 
other reporting facilities that it operates.\74\
---------------------------------------------------------------------------

    \74\ Notice, 89 FR 38212 (citing FINRA Rule 6770).
---------------------------------------------------------------------------

    FINRA stated that, if the Commission approves the proposed rule 
change, unless an extension is provided pursuant to Commission order, 
the implementation date of the proposed FINRA rules establishing the 
reporting requirements will be January 2, 2026; and the implementation 
date of the proposed FINRA rules establishing the dissemination 
requirements will be April 2, 2026.\75\
---------------------------------------------------------------------------

    \75\ Notice, 89 FR 38213.
---------------------------------------------------------------------------

III. Summary of Comments, FINRA's Response, and Commission Findings

    After reviewing the Notice, Partial Amendment No. 1, and comment 
letters received, the Commission finds that the Proposal is consistent 
with the requirements of the Exchange Act and the rules and regulations 
thereunder applicable to a national securities association.\76\ In 
particular, the Commission finds that the Proposal is consistent with 
Section 15A(b)(6) of the Exchange Act,\77\ which requires, among other 
things, that FINRA rules be designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers. The Commission also finds that the Proposal is consistent, in 
particular, with Section 15A(b)(9) of the Exchange Act,\78\ which 
requires that FINRA rules do not impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act.
---------------------------------------------------------------------------

    \76\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f). See also infra Part 
III.E.
    \77\ 15 U.S.C. 78o-3(b)(6).
    \78\ 15 U.S.C. 78o-3(b)(9).
---------------------------------------------------------------------------

    In adopting Rule 10c-1a, the Commission stated that the rule's 
requirements are designed to increase the transparency of information 
available to brokers, dealers, and investors with respect to loans or 
borrowing securities.\79\ Rule 10c-1a requires, among other things, 
that FINRA implement rules regarding the format and manner of its 
collection of information described in Rule 10c-1a(c) through (e) and 
make publicly available such information in accordance with rules 
promulgated pursuant to Section 19(b) and Rule 19b-4.\80\ Rule 10c-1a 
also requires that FINRA make publicly available, in accordance with 
Rule 10c-1a's specified timeframes, certain securities loan information 
that FINRA receives.\81\ As discussed in greater detail below, in Part 
III, the Proposal is consistent with these requirements.
---------------------------------------------------------------------------

    \79\ Reporting of Securities Loans, Securities Exchange Act 
Release No. 98737 (October 13, 2023), 88 FR 75644 (November 3, 2023) 
(``Rule 10c-1a Adopting Release''), at 75646.
    \80\ 17 CFR 240.10c-1a(f).
    \81\ See 17 CFR 240.10c-1a(g).
---------------------------------------------------------------------------

    Price transparency plays a fundamental role in promoting fairness 
and efficiency of U.S. capital markets. The Proposal, by implementing 
the applicable requirements of Rule 10c-1a, would increase transparency 
in the securities lending market through improvements to the 
comprehensiveness, breadth, accuracy, and accessibility of securities 
lending data.\82\ The loan information filed in SLATE reports and 
disseminated by FINRA will be more comprehensive and include additional 
data fields than the data currently offered by commercial data 
vendors.\83\ Moreover, this information will be available to all market 
participants.\84\ This increased transparency will, among other things, 
allow end borrowers and beneficial owners to determine the extent to 
which their broker-dealers and lending agents are obtaining terms that 
are better, worse, or consistent with current market conditions for 
loans with similar characteristics.\85\ The Proposal would facilitate 
this comparison by providing comprehensive transaction-by-transaction 
information about the cost to borrow and other loan characteristics 
that are currently mostly unavailable to end borrowers and beneficial 
owners.\86\ Furthermore, the Proposal, by implementing the applicable 
requirements of Rule 10c-1a, will increase transparency in the 
securities lending market, which will have positive effects on capital 
formation, in particular, by improving price discovery in securities 
markets and improving balance sheet management by financial 
institutions.\87\
---------------------------------------------------------------------------

    \82\ See Rule 10c-1a Adopting Release, 88 FR 75706.
    \83\ See Rule 10c-1a Adopting Release, 88 FR 75706-7.
    \84\ See Rule 10c-1a Adopting Release, 88 FR 75707.
    \85\ See Rule 10c-1a Adopting Release, 88 FR 75707.
    \86\ See Rule 10c-1a Adopting Release, 88 FR 75707.
    \87\ See Rule 10c-1a Adopting Release, 88 FR 75724.

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[[Page 1569]]

    The Proposal, by improving transparency and efficiency in the 
securities lending market consistent with Rule 10c-1a, would thus help 
protect investors and promote just and equitable principles of trade, 
consistent with Section 15A(b)(6). By implementing the requirements of 
Rule 10c-1a, the Proposal would improve upon current data sources that 
identifies the parties to the loans, indicates when a broker-dealer 
loans its own securities to its customers, and indicates whether the 
purpose of such a loan was to close out a failure to deliver.\88\ 
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.\89\ 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.\90\
---------------------------------------------------------------------------

    \88\ See Rule 10c-1a Adopting Release, 88 FR 75715-16.
    \89\ See Rule 10c-1a Adopting Release, 88 FR 75716.
    \90\ See Rule 10c-1a Adopting Release, 88 FR 75716.
---------------------------------------------------------------------------

    The disclosure of party identities and purpose information under 
the Proposal may facilitate better surveillance by FINRA for regulatory 
compliance by its members and may improve its ability to enforce such 
regulations. For example, for FINRA, the information on whether the 
security is loaned from a broker-dealer's securities inventory to its 
customer may assist FINRA in determining whether a broker-dealer 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 broker-dealers.\91\ FINRA's enhanced 
surveillance capabilities facilitated by the Proposal could 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.\92\ FINRA can also use the 
information to monitor when broker-dealers are building up risk, 
thereby protecting broker-dealers' customers against potential 
instabilities.\93\ 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.\94\
---------------------------------------------------------------------------

    \91\ See Rule 10c-1a Adopting Release, 88 FR 75716.
    \92\ See Rule 10c-1a Adopting Release, 88 FR 75716.
    \93\ See Rule 10c-1a Adopting Release, 88 FR 75716.
    \94\ See Rule 10c-1a Adopting Release, 88 FR 75716.
---------------------------------------------------------------------------

    The Commission received comments on the proposed rule change.\95\ 
Some commenters expressed general support for the proposed rule 
change.\96\ One commenter stated that the proposed rule change will 
``aid in the protection of investors by ensuring they are appropriately 
informed about the terms of securities loans and the parties involved'' 
and that the proposed ``requirement to report comprehensive data 
elements will contribute to a fair and orderly market.'' \97\ Another 
commenter stated that the proposed rule change ``is a great idea.'' 
\98\ One commenter stated its agreement with the proposed rule change 
and that it will ``build a stronger market.'' \99\ Comments regarding 
specific aspects of the proposed rule change are discussed below, in 
Parts III.A through III.J.
---------------------------------------------------------------------------

    \95\ See supra note 8.
    \96\ See, e.g., Letter from Anonymous (May 14, 2024); Letter 
from Jimit Raithatha (August 7, 2024); Letter from Patrick O'Ney 
(August 9, 2024); Letter from Heinrich M. (August 9, 2024); Letter 
from Corey (September 12, 2024); Letter from Anonymous (September 
16, 2024). See also Form Letter A; Form Letter D; Form Letter E; 
Letter from Freddy Lo (August 9, 2024); Letter from Graham Ladner 
(August 9, 2024); Letter from Kevin McNulty, Managing Director, Head 
of RegTech, EquiLend Holdings LLC (August 27, 2024) (``EquiLend 
Letter 2''), at 1; Letter from Jane Plumberg (September 10, 2024); 
Letter from Traci Olafson (September 12, 2024).
    \97\ Letter from Jennifer (May 15, 2024).
    \98\ Letter from Suzanne Shatto (May 22, 2024). See also Letter 
from Suzanne Shatto (August 21, 2024).
    \99\ Letter from Derek Madden (September 12, 2024).
---------------------------------------------------------------------------

A. Loan Information To Be Reported

1. Data Elements Not Included in Rule 10c-1a
    Some commenters stated that the proposed rule change, as originally 
proposed in the Notice, would impose on market participants reporting 
requirements that go beyond the requirements of Rule 10c-1a.\100\ Some 
commenters identified the data elements that would be required to be 
reported under the proposed rule change, as originally proposed in the 
Notice, that they stated were not included under Rule 10c-1a, 
including: (1) the expected settlement date of the Covered Securities 
Loan; (2) any other fees or charges (i.e., the dollar cost of any other 
fees or charges in addition to the rebate rate or securities lending 
fee separately required to be reported); \101\ (3) whether the Covered 
Person is the lender, borrower, or intermediary; (4) if the Covered 
Securities Loan is an allocation of an omnibus loan effected pursuant 
to an agency lending agreement, the unique internal identifier for the 
associated omnibus loan assigned by the Covered Person responsible for 
reporting the Covered Securities Loan to SLATE; (5) the expected 
settlement date for modifications to the loan amount (if the expected 
settlement date is a date other than the date of the Loan 
Modification), or the effective date for all other Loan Modifications 
(if effective date is a date other than the date of the Loan 
Modification); (6) such modifiers and indicators as are required by 
FINRA under the Rule 6500 Series or the SLATE Participant 
specification; and (7) the unique internal identifier assigned to the 
Covered Securities Loan by the Covered Person responsible for reporting 
the loan to SLATE.\102\ Some commenters stated that the additional data 
and information requirements that are not specifically mentioned in 
Rule should be removed.\103\ Some commenters stated that the proposed

[[Page 1570]]

rule change, as originally proposed in the Notice, would result in the 
disclosure of highly sensitive information and contribute to 
significant increased costs, burdens, and complexity for implementation 
and compliance due to the introduction of additional data elements that 
go beyond the requirements of Rule 10c-1a.\104\
---------------------------------------------------------------------------

    \100\ See, e.g., Letter from Robert Toomey, Managing Director 
and Associate General Counsel, and Joseph Corcoran, Managing 
Director and Associate General Counsel, Securities Industry and 
Financial Markets Association (May 28, 2024) (``SIFMA Letter''), at 
3; Letter from Sarah A. Bessin, Deputy General Counsel, Investment 
Company Institute, et al. (May 24, 2024) (``Associations Collective 
Letter''), at 2; Letter from Paul Cellupica, General Counsel and 
Kimberly Thomasson Assistant General Counsel, Investment Company 
Institute, et al. (July 30, 2024) (``ICI Letter''), at 2; Letter 
from Brian P. Lamb, CEO, EquiLend Holdings LLC (May 28, 2024) 
(``EquiLend Letter 1''), at 6-7; Letter from Fran Garritt, Head of 
Business, and Mark Whipple, Chairman of the Board of Directors, 
International Securities Lending Association Americas (July 16, 
2024) (``ISLA Americas Letter 1''), at 4; Letter from Tony Holland, 
Director of Market Practice, International Securities Lending 
Association (May 28, 2024) (``ISLA Letter 1''), at 2-3; Letter from 
Jennifer W. Han, Executive Vice President, Chief Counsel and Head of 
Global Regulatory Affairs, Managed Funds Association (July 31, 2024) 
(``MFA Letter''), at 2; Letter from Lindsey Weber Keljo, Esq., 
Head--Asset Management Group, and William C. Thum, Managing Director 
and Associate General Counsel, Securities Industry and Financial 
Markets Association Asset Management Group (May 28, 2024) (``SIFMA 
AMG Letter 1''), at 2; Letter from William C. Thum, Managing 
Director and Associate General Counsel, Securities Industry and 
Financial Markets Association Asset Management Group (July 31, 2024) 
(``SIFMA AMG Letter 2''), at 2; Letter from Matt Billings, 
President, Robinhood Financial, LLC and Robinhood Securities, LLC 
(August 30, 2024) (``Robinhood Letter''), at 2; Letter from Robert 
Sloan, Managing Partner, S3 Partners, LLC (August 5, 2024) (``S3 
Partners Letter''), at 4.
    \101\ See Notice, 89 FR 38206 n.30.
    \102\ See SIFMA Letter, at 3-4. See also EquiLend Letter 1, at 
6-7; ISLA Letter 1, at 2, 5, 8.
    \103\ See, e.g., EquiLend Letter 1, at 1, 6-7; SIFMA Letter, at 
4; ICI Letter, at 2-3; MFA Letter, at 7.
    \104\ See, e.g., SIFMA AMG Letter 1, at 2; SIFMA AMG Letter 2, 
at 2, 4-6; SIFMA Letter, at 4; ISLA Letter 1, at 2; ISLA Americas 
Letter 1, at 4, 9; ICI Letter, at 3-4; EquiLend Letter 1, at 1, 6-7. 
See also Associations Collective Letter, at 2; MFA Letter, at 2; 
Letter from Senator Bill Hagerty (October 25, 2024) (``Hagerty 
Letter''), at 1.
---------------------------------------------------------------------------

    Some commenters stated that the ``increased complexity'' of the 
securities loan information in the proposed rule change, as originally 
proposed in the Notice, as compared to the Rule 10c-1a information, 
could increase Covered Persons' reliance on Reporting Agents for 
compliance purposes, which could increase costs and data security risks 
for the industry.\105\ One commenter stated that the expansion of the 
number of reportable fields under the proposed rule change, as 
originally proposed in the Notice, could require Covered Persons using 
a Reporting Agent to share with that Reporting Agent ``very sensitive 
transaction level details, including the identity of each party to the 
transaction.'' \106\ The commenter also stated its concern that, if 
this data were to become exposed by a data security incident, ``lenders 
would choose to restrict lending, which could negatively impact 
lendable supply and market liquidity.'' \107\
---------------------------------------------------------------------------

    \105\ See ISLA Americas Letter 1, at 8-9; ISLA Letter 1, at 7; 
SIFMA AMG Letter 2, at 7.
    \106\ ISLA Americas Letter 1, at 9.
    \107\ ISLA Americas Letter 1, at 9.
---------------------------------------------------------------------------

    One commenter stated that some of the additional data fields in the 
proposed rule change, as originally proposed in the Notice, may not 
currently be captured by market participants at the trade level and 
were not considered in the Commission's cost-benefit analysis of Rule 
10c-1a.\108\ Another commenter stated that the addition of these data 
elements in the proposed rule change, as originally proposed in the 
Notice, ``would constitute an impermissible end-run around the 
Commission rulemaking process . . . without being subject to the public 
comments and economic analyses required to be performed under such 
rulemaking process.'' \109\ Another commenter stated that the proposed 
rule change, as originally proposed in the Notice, ``significantly 
exceed[s]'' FINRA's rulemaking mandate under Rule 10c-1a.\110\ Another 
commenter stated that ``the significant increase in reportable fields 
and complexity'' of the proposed rule change, as originally proposed in 
the Notice, warrants ``a proper cost-benefit analysis as required under 
Federal agency rulemaking.'' \111\
---------------------------------------------------------------------------

    \108\ See EquiLend Letter 1, at 7.
    \109\ SIFMA Letter, at 4. See also Robinhood Letter, at 2; MFA 
Letter, at 2-3.
    \110\ MFA Letter, at 2-3.
    \111\ ISLA Americas Letter 1, at 4-5. See also SIFMA AMG Letter 
2, at 7-8; Hagerty Letter, at 1-3. FINRA rule filings are not agency 
rulemakings. As discussed above, in Part I, FINRA filed the Proposal 
with the Commission pursuant to Section 19(b)(1) Exchange Act and 
Rule 19b-4 thereunder.
---------------------------------------------------------------------------

    In response, Partial Amendment No. 1 removed the following data 
elements from the proposed rule change's reporting requirements for 
Initial Covered Securities Loans and Loan Modifications: (1) the 
expected settlement date of the Covered Securities Loan; (2) any other 
fees or charges (i.e., the dollar cost of any other fees or charges in 
addition to the rebate rate or securities lending fee separately 
required to be reported); (3) whether the Covered Person is the lender, 
borrower, or intermediary; \112\ (4) if the Covered Securities Loan is 
an allocation of an omnibus loan effected pursuant to an agency lending 
agreement, the unique internal identifier for the associated omnibus 
loan assigned by the Covered Person responsible for reporting the 
Covered Securities Loan to SLATE; (5) the expected settlement date for 
modifications to the loan amount (if the expected settlement date is a 
date other than the date of the Loan Modification), or the effective 
date for all other Loan Modifications (if effective date is a date 
other than the date of the Loan Modification); and (6) such modifiers 
and indicators as are required by FINRA under the Rule 6500 Series or 
the SLATE Participant specification. With the exception of the data 
element concerning the unique identifier assigned to the Covered 
Securities Loan by the Covered Person responsible for reporting the 
loan to SLATE, where a Covered Person's daily submission includes two 
or more reports related to the same Covered Securities Loan, and FINRA 
has not yet assigned a unique identifier to the Initial Covered 
Securities Loan,\113\ all of the additional data elements listed above 
that commenters objected to as being beyond the scope of Rule 10c-1a 
were removed in Partial Amendment No. 1.
---------------------------------------------------------------------------

    \112\ FINRA stated that the removal of this data element is 
appropriate because it simplifies the initial reporting framework. 
FINRA also stated that the file submission process would provide 
information sufficient to allow FINRA to identify the submitting 
party and therefore the ability to ascertain whether a SLATE report 
is being submitted by the Covered Person, a Reporting Agent, or 
another party. See Partial Amendment No. 1, 89 FR 92231. Some 
commenters supported Partial Amendment No. 1's removal of originally 
proposed Rules 6530(a)(2)(V) and 6530(b)(2)(G). See Letter from Fran 
Garritt, Head of Business, and Mark Whipple, Chairman of the Board 
of Directors, International Securities Lending Association Americas 
(Dec. 6, 2024) (``ISLA Americas Letter 2''), at 5; Letter from 
Robert Toomey, Managing Director and Associate General Counsel, et 
al. (December 6, 2024) (``SIFMA and SIFMA AMG Letter''), at 3.
    \113\ See infra Part III.A.3 (discussing why the Proposal's data 
element concerning the unique identifier assigned to the Covered 
Securities Loan by the Covered Person responsible for reporting the 
loan to SLATE is necessary to be reported in order for FINRA to 
comply with the requirements of Rule 10c-1a(g)).
---------------------------------------------------------------------------

    In light of the removal of the text ``any other fees or charges'' 
as a data element that must be reported separately from the rebate rate 
(for a Covered Securities Loan collateralized by cash) or the 
securities lending fee (for a Covered Securities Loan not 
collateralized by cash), as applicable, Partial Amendment No. 1 also 
added the text ``or any other fee or charges'' to the Covered 
Securities Loan information specified in proposed Rule 6530(a)(2)(H) 
and the text ``or rate, or any other fee or charges'' to the Covered 
Securities Loan information specified in proposed Rule 6530(a)(2)(I). 
Proposed Rules 6530(a)(2)(H) and 6530(a)(2)(I) mirror Rule 10c-1a(c)(8) 
and (c)(9), respectively, which helps to ensure the collection of data 
elements required to be reported pursuant to Rule 10c-1a(c) through 
(e). The Proposal is reasonably designed to facilitate the collection 
of pricing information, which is a material term of a Covered 
Securities Loan, consistent with Rule 10c-1a.\114\
---------------------------------------------------------------------------

    \114\ See Rule 10c-1a Adopting Release, 88 FR 75669.
---------------------------------------------------------------------------

    FINRA stated that, while Partial Amendment No. 1 removed several of 
the originally proposed fields and the indicators and modifiers to 
facilitate a timely initial implementation of SLATE, the absence of 
these elements may impact the quality and completeness of the resultant 
SLATE data.\115\ FINRA stated that, in some cases, FINRA has identified 
alternative means of addressing the data gap.\116\ In other cases, 
FINRA plans to reassess the need for the data after gaining experience

[[Page 1571]]

with the operation of SLATE and the initial data set and will revisit 
whether changes are appropriate,\117\ including to improve the quality 
and completeness of SLATE data, and that any such efforts would be 
subject to a separate proposed rule change filed with the Commission 
and subject to notice and comment.\118\
---------------------------------------------------------------------------

    \115\ Partial Amendment No. 1, 89 FR 92229 n.21.
    \116\ FINRA Letter, at 4. FINRA provided the example that a 
Covered Person that agrees to a Covered Securities Loan that 
ultimately does not settle would still be required to report the 
termination of that loan pursuant to proposed Rule 6530(b)(2) by 
submitting a Loan Modification to terminate a Covered Securities 
Loan. However, because the securities were never transferred to the 
borrower, the Loan Modification termination report would not modify 
the loan amount to zero (unlike in the case of a loan that was 
terminated because the shares were returned, which would modify the 
loan amount to zero), which would allow FINRA to identify the loan 
as being terminated because it was unsettled as opposed to a return 
of shares. FINRA Letter, at 4 n.19.
    \117\ FINRA Letter, at 4.
    \118\ Partial Amendment No. 1, 89 FR 92229 n.21. See FINRA 
Letter, at 4.
---------------------------------------------------------------------------

    The data elements required to be included in SLATE reports are 
consistent with the data elements required to be reported pursuant to 
Rule 10c-1a. Further, as discussed below, in Part III.A.3, the data 
element concerning the unique identifier assigned to the Covered 
Securities Loan by the Covered Person responsible for reporting the 
loan to SLATE is consistent with Rule 10c-1a. The Proposal is 
reasonably designed to facilitate the collection of loan information 
consistent with Rule 10c-1a. FINRA's inclusion of the data elements in 
proposed Rules 6530(a)(2) and 6530(b)(2) is reasonably designed to 
facilitate the timely implementation of SLATE while helping to ensure 
the collection of data elements required to be reported pursuant to 
Rule 10c-1a(c) through (e) and the publication of data required 
pursuant to Rule 10c-1a(g).
2. Modifiers and Indicators Not Included in Rule 10c-1a
    Commenters identified modifiers and indicators in the proposed rule 
change, as originally proposed in the Notice, as data elements that 
they stated were not specified in Rule 10c-1a: (1) Exclusive 
Arrangement; (2) Loan to Affiliate; (3) Unsettled Loan; (4) Terminated 
Loan; (5) Rate or Fee Adjustment; and (6) Basket Loan.\119\ Some 
commenters stated that the additional data and information requirements 
that are not specifically mentioned in Rule 10c-1a should be 
removed.\120\
---------------------------------------------------------------------------

    \119\ See, e.g., SIFMA Letter, at 3-4; EquiLend Letter 1, at 6-
7; ICI Letter, at 2-3. See also ISLA Americas Letter 1, at 13-14.
    \120\ See, e.g., EquiLend Letter 1, at 1, 6-7; SIFMA Letter, at 
4; ICI Letter, at 2-3; MFA Letter, at 7.
---------------------------------------------------------------------------

    Some commenters stated that the Loan to Affiliate indicator would 
not provide useful information and could potentially expose 
confidential information.\121\ Some commenters stated that the 
intermediary negotiating a loan may not be aware of an affiliate 
relationship between the borrower and lender, requiring additional 
resources to monitor whether an affiliate relationship was 
established.\122\ Another commenter stated that, because requiring the 
reporting of the Loan to Affiliate indicator ``may be costly'' and 
require ``additional resources'' for compliance, this proposed 
requirement ``at least warrants a cost-benefit analysis.'' \123\ One 
commenter stated that the inclusion of the Unsettled Loan indicator 
will greatly increase reporting complexity and increase the odds that 
reported data will be ``unclear or confusing.'' \124\ The commenter 
stated that the Unsettled Loan indicator is unnecessary because, 
according to the commenter, it is ``generally accepted market practice 
to cancel loans that remain unsettled'' and because the cancelation of 
a previously reported trade is already contemplated elsewhere within 
the proposed rule change.\125\
---------------------------------------------------------------------------

    \121\ See ISLA Americas Letter 1, at 14; SIFMA AMG Letter 2, at 
6; ISLA Letter 1, at 8.
    \122\ See ISLA Letter 1, at 8; ICI Letter, at 4-5; ISLA Americas 
Letter 1, at 14; SIFMA AMG Letter 2, at 6. See also S3 Partners 
Letter, at 5.
    \123\ ISLA Americas Letter 1, at 14.
    \124\ ISLA Americas Letter 1, at 11.
    \125\ ISLA Americas Letter 1, at 11.
---------------------------------------------------------------------------

    In the Notice, FINRA stated that it planned to use the proposed 
modifiers for data validation purposes.\126\ One commenter stated that 
there is ``increased complexity'' and that ``significantly increasing 
the number of reportable data fields, requiring the reporting of all 
intraday activity, and imposing a data validation process has created 
commercial opportunities for data service providers at the expense of 
market participants, and ultimately end investors.'' \127\ One 
commenter requested clarification of the use of the Rate or Fee 
Adjustment modifier for data validation and whether ``FINRA will be 
performing validation testing to a defined tolerance level and a 
rejection/correction process.'' \128\ The commenter stated that, if 
FINRA were to perform such validations, ``there is the potential for a 
large number of rejections that could result in a substantial amount of 
manual intervention.'' \129\
---------------------------------------------------------------------------

    \126\ See Notice, 89 FR 38208.
    \127\ ISLA Americas Letter 1, at 9.
    \128\ ISLA Letter 1, at 7. See Robinhood Letter, at 2.
    \129\ ISLA Letter 1, at 7.
---------------------------------------------------------------------------

    In response, Partial Amendment No. 1 removed the originally 
proposed requirement to append the applicable modifiers or indicators 
as specified by FINRA to all SLATE reports: (1) Exclusive Arrangement; 
(2) Loan to Affiliate; (3) Unsettled Loan; (4) Terminated Loan; \130\ 
(5) Rate or Fee Adjustment; and (6) Basket Loan. FINRA stated that it 
removed these modifiers and indicators in the interest of achieving the 
timely implementation of SLATE and the new Rule 6500 Series.\131\ In 
proposing the inclusion of these modifiers and indicators in SLATE 
reports, FINRA stated that it intended to use the modifiers and 
indicators to provide regulators and the public with important 
information regarding the reported securities loan.\132\ In later 
removing this proposed requirement, FINRA stated its plans to (1) 
reassess the need for the data after gaining experience with the 
operation of SLATE and the initial data set and (2) revisit whether 
changes are appropriate. FINRA stated that any such efforts would be 
subject to a separate proposed rule change filed with the Commission 
and as such, subject to notice and comment.\133\ All of the modifiers 
and indicators listed above that commenters objected to as being beyond 
Rule 10c-1a were removed in Partial Amendment No. 1. Some commenters 
supported Partial Amendment No. 1's removal of these modifiers and 
indicators.\134\
---------------------------------------------------------------------------

    \130\ FINRA stated that, while FINRA removed the requirement 
that Covered Persons append a Terminated Loan indicator, FINRA is 
retaining the requirement that Covered Persons populate a field with 
the termination date of the Covered Securities Loan, which is 
expressly required to be reported to an RNSA under Rule 10c-
1a(c)(11). Accordingly, FINRA stated that, when reporting to SLATE 
an Initial Covered Securities Loan that is an open loan, a Covered 
Person would be required to leave the termination date field blank; 
when reporting an Initial Covered Securities Loan that is a term 
loan, a Covered Person would report the loan's termination date in 
the termination date field. Partial Amendment No. 1, 89 FR 92229 
n.20.
    \131\ See FINRA Letter, at 4.
    \132\ See Notice, 89 FR 38208.
    \133\ Partial Amendment No. 1, 89 FR 92229 n.21. See FINRA 
Letter, at 4.
    \134\ See ISLA Americas Letter 2, at 4; SIFMA and SIFMA AMG 
Letter, at 2.
---------------------------------------------------------------------------

    The Proposal is reasonably designed to facilitate the collection of 
loan information consistent with Rule 10c-1a. The list of data elements 
in proposed Rules 6530(a)(2) and 6530(b)(2) is reasonably designed to 
facilitate the timely implementation of SLATE while helping to ensure 
the collection of data elements required to be reported pursuant to 
Rule 10c-1a(c) through (e).
3. Data Elements Modified by Partial Amendment No. 1
    The Commission received comments on the proposed rule change, as 
originally proposed in the Notice, addressing the reporting to SLATE of 
rebate rates based on a spread to a benchmark. Commenters requested 
flexibility to report the loan fees as a lending fee, a loan rebate 
rate, or a spread to a benchmark rate along with the associated 
benchmark rate, reducing the number of modifications that would be 
required to be reported as a result of fluctuations in the 
benchmark.\135\ Some commenters stated that FINRA should allow for the 
reporting of a spread and

[[Page 1572]]

a benchmark rate because reporting benchmark rate changes would be 
onerous and costly and would not provide useful information.\136\ In 
addition, one commenter recommended that FINRA ensure that SLATE can 
accommodate negative rebates, stating that even for cash collateral 
loans, there may be scenarios where the loan is negotiated at a fee 
rather than a rebate (e.g., when a security is particularly hard to 
borrow).\137\
---------------------------------------------------------------------------

    \135\ See ISLA Americas Letter 1, at 12; ICI Letter, at 7; SIFMA 
AMG Letter 2, at 7; FIF Letter, at 7.
    \136\ See SIFMA AMG Letter 2, at 7; ICI Letter, at 7; FIF 
Letter, at 7.
    \137\ ISLA Americas Letter 1, at 11.
---------------------------------------------------------------------------

    In response, Partial Amendment No. 1 added proposed Rule 6530(a)(4) 
to permit Covered Persons to--in addition to reporting the rebate rate 
or lending fee or rate for a Covered Securities Loan--also report the 
spread and identity of the benchmark or reference rate for Covered 
Securities Loans that are priced based on a spread to a benchmark. 
Specifically, proposed Rule 6530(a)(4)(B) provides that, where a rebate 
rate or lending fee or rate is determined based on a spread to a 
benchmark or reference rate, a Covered Person may report: (1) the 
rebate rate or lending fee or rate as of the date the Covered 
Securities Loan was effected; (2) the spread; and (3) the identity of 
the benchmark or reference rate. Alternatively, a Covered Person may 
report only the rebate rate or lending fee or rate. One commenter on 
Partial Amendment No. 1 supported proposed Rule 6530(a)(4).\138\
---------------------------------------------------------------------------

    \138\ See ISLA Americas Letter 2, at 4-5.
---------------------------------------------------------------------------

    FINRA stated that this will provide Covered Persons with additional 
options regarding the manner in which they may report a rebate rate or 
lending fee or rate, and that these proposed amendments are appropriate 
to provide Covered Persons flexibility with how they must report the 
rebate rate or lending fee.\139\ FINRA stated that this flexibility 
should address commenters' concern that Covered Persons would be 
required to report loan rate modifications when the rebate rate changes 
solely as a result of a change to the underlying benchmark rate (where 
there is no change in the negotiated spread or identity of the 
benchmark). To accommodate market practices and rebate rate 
variability, FINRA stated that it intends to accept negative values in 
the rebate rate field if the collateral type is reported as cash. 
SLATE's validation logic will accept a wide range of values in the 
rebate rate/lending fee or rate fields, and SLATE will not reject 
reports because a cash collateral loan is reported with a negative 
rebate rate.\140\
---------------------------------------------------------------------------

    \139\ See Partial Amendment No. 1, 89 FR 92230. FINRA stated 
that a Covered Person would be required to report a Loan 
Modification pursuant to proposed Rule 6530(b)(2) in the event of a 
change to the negotiated spread or to the identity of the benchmark 
or reference rate. Partial Amendment No. 1, 89 FR 92230 n.29. See 
Rule 10c-1a Adopting Release, 88 FR 75672 (stating that if a 
registered national securities association (``RNSA'') chooses to 
allow market participants to report a spread and a benchmark, then 
no modification would be required to be reported from day to day 
unless there were a change in the negotiated spread or benchmark).
    \140\ See FINRA Letter, at 8.
---------------------------------------------------------------------------

    Proposed Rule 6530(a)(4) (Reporting Loan Rates Based on a Spread to 
a Benchmark or Reference Rate) is reasonably designed to facilitate the 
collection of pricing information, which is a material term of a 
Covered Securities Loan.\141\ It also is consistent with Rule 10c-
1a(c)(8).\142\ Proposed Rule 6530(a)(4) is reasonably designed to 
provide the flexibility that commenters requested while helping to 
ensure the collection of data elements required to be reported pursuant 
to Rule 10c-1a(c) through (e).
---------------------------------------------------------------------------

    \141\ See Rule 10c-1a Adopting Release, 88 FR 75669.
    \142\ See Rule 10c-1a Adopting Release, 88 FR 75668-71.
---------------------------------------------------------------------------

    As discussed above in Part III.A.2, commenters stated that the 
internal loan and omnibus loan identifiers, as originally proposed in 
the Notice, extended beyond the data elements specified in Rule 10c-1a 
and increased the proposed rule change's complexity and implementation 
burdens.\143\ In response, Partial Amendment No. 1 removed these 
provisions.\144\ However, to allow FINRA to link same-day T+0 reports 
that relate to the same Covered Securities Loan in fulfilling its data 
dissemination obligations under Rule 10c-1a(g), Partial Amendment No. 1 
added proposed Rule 6530(a)(2)(U), which is a targeted provision 
providing that, where a Covered Person's daily submission includes two 
or more reports related to the same Covered Securities Loan (e.g., an 
Initial Covered Securities Loan and a Loan Modification to terminate 
the Covered Securities Loan), and FINRA has not yet assigned a unique 
identifier to the Initial Covered Securities Loan, the Covered Person 
must report a unique identifier assigned to the Covered Securities Loan 
by the Covered Person responsible for reporting the loan to SLATE. 
FINRA stated that this requirement is limited to instances where a 
Covered Person's daily submission includes two or more T+0 reports 
related to the same Covered Securities Loan--which is the circumstance 
that gives rise to the audit trail gap sought to be addressed by the 
requirement.\145\ Similarly, with respect to Loan Modifications, where 
a Covered Person's daily submission includes two or more T+0 reports 
related to the same Covered Securities Loan, the Covered Person must 
report the identifier that was provided with respect to the associated 
same-day report for that Covered Securities Loan. One commenter 
supported proposed Rule 6530(a)(2)(U).\146\
---------------------------------------------------------------------------

    \143\ See, e.g., SIFMA Letter, at 3; ICI Letter, at 2. As 
originally proposed in the Notice, Rules 6530(a)(2)(W) and 
6530(b)(2)(A) would have required Covered Persons to report the 
unique internal identifier assigned to the covered securities loan. 
With respect to an allocation of an omnibus loan effected pursuant 
to an agency lending agreement, proposed Rules 6530(a)(2)(X) and 
6530(b)(2)(B) would have required Covered Persons to report the 
unique internal identifier for the associated omnibus loan.
    \144\ See Partial Amendment No. 1, 89 FR 92231. FINRA stated 
that it had intended originally to use the reported information to 
identify where multiple loan reports were related to a single 
omnibus loan, thereby providing additional clarity in the loan 
activity statistics disseminated to the public and to improve the 
completeness of the audit trail available to regulators. Partial 
Amendment No. 1, 89 FR 92231.
    \145\ See Partial Amendment No. 1, 89 FR 92231.
    \146\ See ISLA Americas Letter 2, at 5.
---------------------------------------------------------------------------

    FINRA stated that, without a way to link such reports, it would be 
unable to accurately incorporate modifications into the daily loan 
statistics where FINRA cannot identify the amount of securities 
impacted by the modification.\147\ Further, it would be unable to 
determine the information necessary to incorporate the modification 
into the volume information described in proposed Rule 6540(c)(1). 
FINRA stated that this requirement involving a unique identifier is 
appropriate and necessary in that it streamlines initial SLATE 
reporting requirements while continuing to allow FINRA to accurately 
record and disseminate information on transactions reported pursuant to 
Rule 10c-1a. FINRA stated that this requirement is necessary to allow 
FINRA to link same-day reports that relate to the same Covered 
Securities Loan, which allows FINRA to accurately record transactions 
reported pursuant to Rule 10c-1a and to incorporate modifications into 
the daily loan statistics.\148\
---------------------------------------------------------------------------

    \147\ Partial Amendment No. 1, 89 FR 92231.
    \148\ FINRA Letter, at 5.
---------------------------------------------------------------------------

    Proposed Rule 6530(a)(2)(U) is reasonably designed to allow FINRA 
to link same-day reports that relate to the same Covered Securities 
Loan and accurately record transactions reported pursuant to Rule 10c-
1a.\149\ The Proposal addresses comments that the originally proposed 
internal loan and omnibus loan identifiers reporting

[[Page 1573]]

requirements are not included in Rule 10c-1a while helping to ensure 
the collection of data elements required to be reported pursuant to 
Rule 10c-1a(c) through (e) and the publication of data required by Rule 
10c-1a(g). Rule 10c-1a(g) requires that an RNSA, 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 certain information publicly 
available.\150\ In adopting Rule 10c-1a, the Commission stated that the 
assignment of unique identifiers is necessary for an RNSA to easily 
track certain covered securities loans and facilitate the 
identification and reporting of any subsequent modifications.\151\ 
Although the data element in proposed Rule 6530(a)(2)(U) does not 
mirror a particular data element included in Rule 10c-1a, as one 
commenter stated,\152\ its reporting is necessary for FINRA to 
accurately record, incorporate, and disseminate modifications to daily 
loan statistics to fulfill the requirements of Rule 10c-1a(g). The 
Proposal is reasonably designed to facilitate the collection and 
dissemination of loan information consistent with Rule 10c-1a.
---------------------------------------------------------------------------

    \149\ See Rule 10c-1a Adopting Release, 88 FR 75667 n.365.
    \150\ See Rule 10c-1a(g)(1)(i)(A), (g)(3).
    \151\ See Rule 10c-1a Adopting Release, 88 FR 75685.
    \152\ See SIFMA Letter, at 3-4.
---------------------------------------------------------------------------

4. Data Elements Not Modified by Partial Amendment No. 1
    One commenter stated that the proposed data element concerning the 
LEI of the issuer should be removed or made optional to include in a 
SLATE report because, according to the commenter, issuer LEIs are not 
easily accessible and are not always available.\153\ Another commenter 
stated that it would be ``highly costly'' for market participants to 
build out their systems to obtain LEI information (as compared to using 
existing identifiers) because LEI information is ``not available to 
market participants in a systematic way.'' \154\ One commenter stated 
that it should be optional to use the LEI of a ``third-country issuer'' 
(i.e., a non-European Union (``EU'') issuer) because ``a large 
percentage of third-country issuers have not obtained LEIs.'' \155\ 
Another commenter requested that FINRA clarify whether a Covered Person 
would be permitted to report an issuer's LEI even if such LEI has 
lapsed.\156\
---------------------------------------------------------------------------

    \153\ ISLA Letter 1, at 7. See EquiLend Letter 2, at 2; SIFMA 
AMG Letter 2, at 7.
    \154\ SIFMA AMG Letter 2, at 7.
    \155\ ISLA Americas Letter 1, at 15. See ISLA Americas Letter 2, 
at 8.
    \156\ FIF Letter, at 10.
---------------------------------------------------------------------------

    In response, FINRA stated that the comments regarding the reporting 
of an issuer's LEI, if the issuer has a non-lapsed LEI, are examples of 
requirements that are established directly by Rule 10c-1a and cannot be 
amended by FINRA.\157\ FINRA also stated that proposed Rule 
6530(a)(2)(A)'s requirement to report the LEI of an issuer, if non-
lapsed, mirrors the requirement in Rule 10c-1a(c)(1).\158\ The 
Commission agrees that this proposed requirement that the LEI of the 
issuer must be included in a SLATE report if the issuer has a non-
lapsed LEI is consistent with Rule 10c-1a(c)(1). FINRA's proposed 
limitation for SLATE regarding the LEI of an issuer, which requires 
reporting only if the issuer has a non-lapsed LEI (i.e., instead of 
including lapsed LEIs, too), is consistent with the requirements of 
Rule 10c-1a(c)(1).\159\ The reporting of the issuer's LEI, to the 
extent the issuer has a non-lapsed LEI, facilitates the identification 
of the security about which the Covered Securities Loan information is 
being provided. The proposed inclusion of an issuer's LEI, if the 
issuer has a non-lapsed LEI, is reasonably designed to facilitate the 
collection and dissemination of loan information consistent with Rule 
10c-1a.\160\
---------------------------------------------------------------------------

    \157\ FINRA Letter, at 10.
    \158\ FINRA Letter, at 10 n.39.
    \159\ See 17 CFR 240.10c-1a(c)(1).
    \160\ See Rule 10c-1a Adopting Release, 88 FR 75670-71.
---------------------------------------------------------------------------

    One commenter recommended that, as opposed to each SLATE reporter 
tracking the status of a Covered Securities Loan, the SLATE system 
``should perform the calculations of loan status'' (e.g., Initial 
Covered Securities Loan, Loan Modification, pre-existing Loan 
Modifications) and other derived information, centrally.\161\ This 
commenter stated that ``[c]entralization within SLATE of these 
functions should not only reduce costs but also increase data 
quality.'' \162\ The commenter's suggestion that SLATE should ``perform 
the calculations of loan status'' would require the daily reporting of 
the full list of loan positions, including those that were effected 
prior to SLATE implementation, and those that have not changed. Such 
information is not included in the securities loan information that is 
required to be reported pursuant to Rule 10c-1a nor did FINRA include 
it in its proposal. As discussed above, in Parts III.A.1 and III.A.2, 
the Proposal aligns the loan information reported to SLATE with the 
data elements in Rule 10c-1a(c) through (e) and is reasonably designed 
to facilitate the timely implementation of SLATE while helping to 
ensure the collection of data elements required to be reported pursuant 
to Rule 10c-1a(c) through (e). Rule 10c-1a requires, among other 
things, that Covered Persons provide to FINRA specified loan 
information that relates to the loan status.\163\ Further, the 
reporting of loan information as it relates to loan status is necessary 
for FINRA to link reports and disseminate volume information as is 
required in Rule 10c-1a(g)(5). The Proposal, which requires Covered 
Persons to track the status of a reported Covered Securities Loan, is 
reasonably designed to facilitate the collection and dissemination of 
loan information consistent with Rule 10c-1a.
---------------------------------------------------------------------------

    \161\ See S3 Partners Letter, at 2.
    \162\ S3 Partners Letter, at 2-3.
    \163\ See, e.g., 17 CFR 240.10c-1a(d)(1), (d)(2).
---------------------------------------------------------------------------

    Some commenters stated, without providing any specificity, that 
``broader transparency measures'' than those required by Rule 10c-1a 
are necessary and beneficial to the market.\164\
---------------------------------------------------------------------------

    \164\ See Form Letter D; Letter from Freddy Lo (August 9, 2024); 
Letter from Jane Plumberg (September 10, 2024); Letter from Traci 
Olafson (September 12, 2024); Letter from Anonymous (September 16, 
2024).
---------------------------------------------------------------------------

    Rule 10c-1a sets forth a list of specified loan information that 
Covered Persons must report and that FINRA must collect and make 
publicly available. Further, the Commission also agrees with the 
comment discussed above that the proposed rule change will ``aid in the 
protection of investors by ensuring they are appropriately informed 
about the terms of securities loans and the parties involved'' and that 
the proposed ``requirement to report comprehensive data elements will 
contribute to a fair and orderly market.'' \165\ The Proposal's list of 
required data elements is appropriately tailored to help increase the 
transparency of information available to brokers, dealers, and 
investors with respect to the loan or borrowing of securities 
consistent with the transparency goals of Rule 10c-1a.\166\
---------------------------------------------------------------------------

    \165\ Letter from Jennifer (May 15, 2024).
    \166\ See Rule 10c-1a Adopting Release, 88 FR 75715.
---------------------------------------------------------------------------

5. Requests for Clarification
    One commenter on the proposed rule change, as originally proposed 
in the Notice, requested confirmation whether, if FINRA does not 
generate a ``UTI'' for a Covered Securities Loan, the Covered Person 
responsible for reporting it would be required to generate a UTI.\167\

[[Page 1574]]

The commenter also stated that, under the EU's Securities Finance 
Transaction Regulation (``SFTR''), firms agree which party will be 
responsible for generating and distributing the UTI prior to a 
trade.\168\ The commenter recommended that FINRA ``follow the SFTR 
waterfall protocol, where possible for generation and distribution of 
UTI's, as many firms will already be familiar with this method for the 
purposes of reporting their EU securities loans.'' \169\
---------------------------------------------------------------------------

    \167\ ISLA Letter 1, at 9. The proposed FINRA rules do not use 
the acronym ``UTI,'' which the commenter did not define but may 
refer to the term ``unique transaction identifier'' and, under the 
proposed rule change, as originally proposed in the Notice, the 
``unique internal identifier assigned to the Covered Securities Loan 
by the Covered Person responsible for reporting the loan to SLATE.'' 
Notice, 89 FR 38207, 39209.
    \168\ ISLA Letter 1, at 9.
    \169\ ISLA Letter 1, at 9. Another commenter recommended that 
FINRA ``assign a Submission Unique Identifier based on the 
concatenation of fields in the full data inventory file that will 
uniquely identify a submission.'' S3 Partners Letter, at 3. As 
discussed in the Rule 10c-1a Adopting Release, it is appropriate to 
allow the administrative details of the process of assigning a 
unique identifier under Rule 10c-1a to be left to the discretion of 
an RNSA. See Rule 10c-1a Adopting Release, 88 FR 75685.
---------------------------------------------------------------------------

    As discussed above, proposed Rule 6530(a)(2)(U) would provide that, 
where a Covered Person's daily submission includes two or more reports 
related to the same Covered Securities Loan for which FINRA has not yet 
assigned a unique loan identifier, the Covered Person must report a 
unique identifier assigned to the Covered Securities Loan by the 
Covered Person responsible for reporting the loan to SLATE. This is the 
only scenario in which the Covered Person is responsible for generating 
and reporting a unique loan identifier. In response to the commenter's 
suggestion that FINRA follow the SFTR waterfall protocol, the 
assignment of a unique identifier may be appropriate for consistency 
with FINRA's rules and systems, even if a Covered Securities Loan 
already has an identifier that is reported to the SFTR.\170\ FINRA is 
required by Rule 10c-1a(g)(1) to assign a unique identifier to each 
covered securities loan. Proposed Rule 6530(a)(2)(U) is reasonably 
designed to facilitate the dissemination of accurate loan information 
consistent with Rule 10cndash;1a(g).
---------------------------------------------------------------------------

    \170\ See Rule 10c-1a Adopting Release, 88 FR 75685.
---------------------------------------------------------------------------

B. Timing for SLATE Reports

    One commenter on the proposed rule change, as originally proposed 
in the Notice, recommended that ``FINRA develop the SLATE system so 
that it can accept files transmitted outside of [the SLATE system] 
hours for processing the following business day.'' \171\ The commenter 
stated that restricting SLATE file submissions to U.S. hours, given the 
``extra-territorial scope'' of Rule 10c-1a, could cause compliance 
difficulties because firms have staff located outside of the U.S.\172\ 
Other commenters also recommended an expansion of the SLATE reporting 
hours in the proposed rule change, as originally proposed in the 
Notice.\173\ One commenter asked whether the SLATE system would provide 
feedback outside of the SLATE system hours.\174\
---------------------------------------------------------------------------

    \171\ ISLA Americas Letter 1, at 17. Other commenter letters 
provided similar comments on Partial Amendment No. 1. See ISLA 
Americas Letter 2, at 7; SIFMA and SIFMA AMG Letter, at 7 (providing 
an alternative that the SLATE system could open at 6:00:00 a.m. ET).
    \172\ ISLA Americas Letter 1, at 17.
    \173\ See FIF Letter, at 4-5 (stating that SLATE should accept 
files until 11:59 p.m. ET); EquiLend Letter 2, at 1-2 (stating that 
the reporting deadline should be extended to 8:30 p.m. ET for 
Reporting Agents to allow for additional time to collect and prepare 
Covered Persons' data).
    \174\ See FIF Letter, at 4.
---------------------------------------------------------------------------

    In response, Partial Amendment No. 1 extended the reporting 
deadline to 11:59:59 p.m. ET and made a corresponding change to the 
definition of ``SLATE System Hours'' in proposed Rule 6510 to specify 
that the SLATE system is open through 11:59:59 p.m. ET. FINRA stated 
that the extension of SLATE System Hours is appropriate to provide 
additional time to process SLATE submissions at the end of the day. 
FINRA stated that, while the SLATE system will provide reporters 
feedback on submissions that are submitted during SLATE System Hours, 
the SLATE system will not accept reports submitted after the close of 
the SLATE system.\175\ One commenter on Partial Amendment No. 1 stated 
that the extension of the SLATE System Hours will ease the reporting 
burden on covered firms.\176\ Another commenter on Partial Amendment 
No. 1 stated that it appreciates that FINRA extended the cut-off time 
for SLATE reports to be filed.\177\ The Proposal's timing requirements 
for filing a SLATE report regarding an Initial Covered Securities Loan 
are reasonably designed to facilitate the collection of transaction 
data. FINRA's response to the comments regarding the extension of SLATE 
System Hours to provide additional time to process SLATE submissions, 
as well as provide reporters feedback on such submissions, at the end 
of the day, is reasonable and appropriate, as well as consistent with 
Rule 10c-1a's end-of-day reporting requirements for covered securities 
loans. Additionally, the Proposal's timing requirements for filing a 
SLATE report, including those with respect to filing a SLATE report 
outside of SLATE System Hours, are consistent with FINRA's experience 
in establishing and maintaining systems that are designed to capture 
transaction reporting.\178\
---------------------------------------------------------------------------

    \175\ FINRA Letter, at 9 n.34.
    \176\ See ISLA Americas Letter 2, at 7.
    \177\ See SIFMA and SIFMA AMG Letter, at 7.
    \178\ See, e.g., Rule 10c-1a Adopting Release, 88 FR 75682, 
75685; FINRA Rule 6730(a); FINRA Rule 6273.
---------------------------------------------------------------------------

    Some commenters stated that the originally proposed 7:45:00 p.m. ET 
cut-off time for same-day reporting would not capture certain end-of-
day activity, which would make end of day processes challenging.\179\ 
One commenter stated that the cut-off time for same-day reporting 
should be moved up to 4:00 p.m. ET to align with the ``close of 
trading'' such that loans effected after 4:00 p.m. would not need to be 
reported until the next business day.\180\
---------------------------------------------------------------------------

    \179\ See EquiLend Letter, at 1; FIF Letter, at 4-5.
    \180\ See FIF Letter, at 5.
---------------------------------------------------------------------------

    In response, Partial Amendment No. 1 changed the reporting cut-off 
time in proposed Rule 6530(a)(1)(A) and (b)(1)(A) to 7:00:00 p.m. ET. 
FINRA stated that the modification of the proposed loan cut-off time 
from 7:45:00 p.m. ET to 7:00:00 p.m. ET would provide additional time 
to report loans that are effected near the end of the day, including 
time to complete any necessary security set up in SLATE.\181\ The 
Proposal's inclusion of 7:00:00 p.m. ET instead of 4:00 p.m. ET, as the 
commenter suggested, for the cut-off time for same-day reporting is 
reasonable because it provides, in response to comments,\182\ 
additional time to process submissions to SLATE (that contain Rule 10c-
1a information) and to provide feedback on such submissions, at the end 
of the day.\183\ Thus, the Proposal is reasonably designed to 
facilitate the collection of loan information consistent with Rule 10c-
1a.
---------------------------------------------------------------------------

    \181\ See Partial Amendment No. 1, 89 FR 92232.
    \182\ See, e.g., EquiLend Letter, at 1; FIF Letter, at 4-5.
    \183\ Rule 10c-1a Adopting Release, 88 FR 75648 n.72. FINRA 
stated that, given the operation of the securities lending market, 
including that many loans will not be finalized until after the 
traditional 4:00 p.m. ET close of the U.S. equities markets, FINRA 
does not believe it would be appropriate to move the cut-off time 
for same-day reporting to 4:00 p.m. ET. FINRA also stated that the 
fixed income markets generally have later trading hours, and the 
same-day reporting cut-off time for transactions in many TRACE-
eligible securities is 6:15:00 p.m. ET. FINRA Letter, at 9 n.34.

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[[Page 1575]]

C. When and How Loan Information Is Reported

1. Initial Covered Securities Loans
    One commenter on the proposed rule change, as originally proposed 
in the Notice, requested a ``clear and concise'' definition of the term 
``effected.'' \184\ The commenter stated that it would like to 
understand if the term ``effected'' means (1) ``an `event date' file 
i.e., the event date that the trade took place,'' (2) ``an execution 
timestamp that would carry both date and time,'' or (3) the date when a 
trade is verbally agreed upon.\185\ Another commenter recommended that 
the ``interpretation for time `effected' and `agrees to a covered 
securities loan' is prior to loan settlement but only once all 
contractual terms, including the identity of the lender, are agreed.'' 
\186\ The commenter further stated that, until all contractual terms of 
a securities loan, including the final details related to the identity 
of the lender, are agreed between the lending agent, as agent for the 
lender and the borrower, the trading desk will view the borrower's 
offer discussions as a ``potential loan--not an actual loan'' and will 
book the securities loan into its system when all contractual terms are 
agreed upon.\187\ This commenter stated that ``[o]nly when the 
securities loan is booked into the lending agent's trading system, will 
the lending agent view it to be `effected'--an actual securities loan 
pending settlement.'' \188\ Whether a securities loan must be reported 
as an Initial Covered Securities Loan will depend upon the facts and 
circumstances, including the structure of such lending program.\189\
---------------------------------------------------------------------------

    \184\ ISLA Letter 1, at 4.
    \185\ ISLA Letter 1, at 3-4.
    \186\ ISLA Americas Letter 1, at 6.
    \187\ ISLA Americas Letter 1, at 6.
    \188\ ISLA Americas Letter 1, at 6.
    \189\ See, e.g., Rule 10c-1a Adopting Release, at 88 FR 75664.
---------------------------------------------------------------------------

    The requirement for covered persons to report to FINRA, by the end 
of the day on which a covered securities loan is effected, specified 
loan information--which includes, among others, the date the covered 
securities loan was effected, the time the covered securities loan was 
effected, and the name of the platform or venue where the covered 
securities loan was effected--is established by Rule 10c-1a(c)(3)-
(c)(5). In adopting Rule 10c-1a, the Commission stated that 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 Rule 10c-
1a.\190\
---------------------------------------------------------------------------

    \190\ See Rule 10c-1a Adopting Release, 88 FR 75681.
---------------------------------------------------------------------------

    Further, the Commission stated that use of the term ``agrees to'' 
in the definition of covered person under Rule 10c-1a clarifies that 
covered securities loans are required to be reported after the parties 
agree to the loan, which is before settlement.\191\ Parties to a 
securities loan may agree to some of the basic terms initially, but 
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.\192\ The Proposal's requirement for end-of-day reporting 
after a Covered Securities Loan has been ``effected'' is consistent 
with the requirement in Rule 10c-1a(c) that a covered person shall 
provide specified loan information to FINRA by the end of the day on 
which the covered securities loan is effected. The Proposal's end-of-
day reporting requirement, therefore, is reasonably designed and is 
appropriately balanced to facilitate the collection of timely 
information while helping to prevent an excessive number of incomplete 
or slightly modified reports that otherwise would occur throughout the 
day yet without providing sufficient incremental value.\193\
---------------------------------------------------------------------------

    \191\ See Rule 10c-1a Adopting Release, 88 FR 75666, 75666 
n.358.
    \192\ See, e.g., Rule 10c-1a Adopting Release, 88 FR 75680-81.
    \193\ See Rule 10c-1a Adopting Release, 88 FR 75680.
---------------------------------------------------------------------------

    One commenter stated that a Covered Person should instead be 
required to file a SLATE report only for a loan that has been settled, 
whereby the Covered Person would report the date and time that it 
recorded the Covered Securities Loan in its books and records.\194\ The 
commenter stated that in many cases where a lending agent is involved, 
the parties to the loan do not know the identity of the counterparty 
until the loan is settled.\195\
---------------------------------------------------------------------------

    \194\ See FIF Letter, at 4.
    \195\ See FIF Letter, at 4.
---------------------------------------------------------------------------

    Consistent with the requirements of Rule 10c-1a, an Initial Covered 
Securities Loan is required to be reported prior to settlement.\196\ As 
discussed above, in this Part, settlement does not impact the initial 
requirement to report all loans (and modifications) within the required 
timeframes under Rule 10c-1a.\197\ With respect to the comment that the 
parties to the loan do not know the identity of the counterparty until 
the loan is settled,\198\ proposed Rule 6530(a)(2)(N) uses the 
qualifier ``if known'' with respect to the requirement for a SLATE 
report for an Initial Covered Securities Loan to include 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 Rule 15c3-3(b)(3)). FINRA's use of the qualifier 
``if known'' in proposed Rule 6530(a)(2)(N) mirrors that used in Rule 
10c-1a(e)(1), which concerns the legal name of each party to a covered 
securities loan. Proposed Rule 6530(a)(2)(N), therefore, is reasonably 
designed to facilitate the collection of loan information consistent 
with Rule 10c-1a(e)(1).
---------------------------------------------------------------------------

    \196\ See Rule 10c-1a Adopting Release, 88 FR 75666.
    \197\ See Rule 10c-1a Adopting Release, 88 FR 75681.
    \198\ See FIF Letter, at 4.
---------------------------------------------------------------------------

    One commenter on Partial Amendment No. 1 stated that unsettled 
loans are not transactions because no loan transaction ``occurs'' and 
that, therefore, unsettled loans should not be required to be reported 
to SLATE.\199\ The commenter stated that a Covered Person may have to 
incur incremental costs to report unsettled loans to SLATE, given that 
these ``unconsummated transactions'' may not be captured on the books 
and records of the Covered Person ``comparably to how consummated loan 
transactions are recorded.'' \200\
---------------------------------------------------------------------------

    \199\ See SIFMA and SIFMA AMG Letter, at 4.
    \200\ SIFMA and SIFMA AMG Letter, at 4.
---------------------------------------------------------------------------

    The term ``Covered Securities Loan'' under proposed Rule 6510(j) 
mirrors the definition under Rule 10c-1a, which means a transaction in 
which any person on behalf of itself or one or more other persons lends 
a reportable security to another person. In adopting Rule 10c-1a, the 
Commission stated that the reporting requirement did not require ``that 
the loan be settled'' and also acknowledged that various entities will 
incur costs in developing recording and reporting systems to comply 
with Rule 10c-1a.\201\ The Proposal's requirement regarding the 
reporting of unsettled loans that are Covered Securities Loans is 
consistent with Rule 10c-1a. The Proposal is reasonably designed to 
facilitate the collection of loan information consistent with Rule 10c-
1a.
---------------------------------------------------------------------------

    \201\ See Rule 10c-1a Adopting Release, 88 FR 75662, 75662 
n.288, 75717.
---------------------------------------------------------------------------

2. Loan Modifications
    Proposed Rules 6530.01 (Intraday Loan Modifications) and 6530.02 
(Changes to the Parties to a Covered Securities Loan), as originally 
proposed in the Notice, included a requirement

[[Page 1576]]

that all intraday changes to a Covered Securities Loan be reported as 
Loan Modifications, which several commenters stated is inconsistent 
with the requirements of Rule 10c-1a.\202\ One commenter stated that 
the proposed rule change's inclusion of intraday activity as required 
reporting would be misleading to the public.\203\ One commenter stated 
that the intraday reporting requirements in the proposed rule change, 
as originally proposed in the Notice, are ``costly and burdensome'' and 
that ``the costs and complexity of reporting these intraday loan 
modifications greatly undermines any purported utility.'' \204\ Another 
commenter stated that it is not clear that FINRA has ``adequately 
analyzed the costs and benefits'' of the proposed rule change's 
intraday reporting requirement.\205\ One commenter recommended 
consolidating Loan Modification and Loan Correction events, as well as 
Loan Cancellation and Delete Loan events, stating that tracking 
multiple event types would be complex and burdensome.\206\
---------------------------------------------------------------------------

    \202\ See ISLA Americas Letter 1, at 6-8; ISLA Letter 1, at 4; 
SIFMA AMG Letter 1, at 2; SIFMA AMG Letter 2, at 2-4; SIFMA Letter, 
at 4-6; Associations Collective Letter, at 2; ICI Letter, at 5-7; 
FIF Letter, at 2-3; Robinhood Letter, at 2. See also S3 Partners 
Letter, at 2.
    \203\ See ISLA Americas Letter 1, at 8.
    \204\ ISLA Americas Letter 1, at 8. See ICI Letter, at 6-7; 
Robinhood Letter, at 2.
    \205\ Associations Collective Letter, at 2.
    \206\ See ISLA Americas Letter 1, at 17; ISLA Americas Letter 2, 
at 8.
---------------------------------------------------------------------------

    In response, FINRA stated that Covered Persons must report Loan 
Modifications consistent with Rule 10c-1a.\207\ FINRA stated that 
proposed Rule 6530 is not intended to alter when loan events are 
required to be reported as Loan Modifications (including terminations) 
or when new loans must be reported under Rule 10c-1a.\208\ To the 
extent a loan event is not reportable under Rule 10c-1a, there would 
likewise be no SLATE reporting obligations. FINRA stated that, to make 
this clearer, Partial Amendment No. 1 removed originally proposed Rules 
6530.01 (Intraday Loan Modifications) and 6530.02 (Changes to the 
Parties to a Covered Securities Loan).\209\ Some commenters supported 
Partial Amendment No. 1's removal of these two originally proposed 
provisions.\210\
---------------------------------------------------------------------------

    \207\ See Partial Amendment No. 1, 89 FR 92229.
    \208\ See Partial Amendment No. 1, 89 FR 92229.
    \209\ See Partial Amendment No. 1, 89 FR 92229. See also FINRA 
Letter, at 5.
    \210\ See ISLA Americas Letter 2, at 3-4; SIFMA and SIFMA AMG 
Letter, at 2.
---------------------------------------------------------------------------

    The Commission agrees that the Proposal's inclusion of an end-of-
day reporting requirement for Initial Covered Securities Loans and Loan 
Modifications is consistent with the requirements of Rule 10c-1a. 
Consistent with Rule 10c-1a, which requires the individual reporting of 
the specific modification and the specific data element being 
modified,\211\ under proposed Rule 6510(e), the term Loan Modification 
means a change to any Data Element with respect to a Covered Securities 
Loan (irrespective of whether such Covered Securities Loan was 
previously reported to SLATE). This definition is reasonably designed 
to facilitate the collection of Loan Modification information and is 
consistent with the requirements of paragraphs (d)(1)(ii) and (d)(2) of 
Rule 10c-1a, which require the reporting of modified data elements by 
the end of the day on which a covered securities loan is modified.
---------------------------------------------------------------------------

    \211\ See Rule 10c-1a Adopting Release, 88 FR 75671.
---------------------------------------------------------------------------

    Commenters on the proposed rule change, as originally proposed in 
the Notice, recommended that FINRA clarify that loan information 
concerning intraday events is not required to be reported until all 
terms of a loan are agreed upon.\212\ In response, FINRA stated its 
understanding that, based on the Rule 10c-1a Adopting Release, Loan 
Modifications are required to be reported to an RNSA pursuant to Rule 
10c-1a once the Loan Modification is finalized, and that indicative 
terms are not reportable.\213\ FINRA stated that the Rule 10c-1a 
Adopting Release explains that Rule 10c-1a's ``final end-of-day 
requirement was intended to better capture final loan information.'' 
\214\ FINRA also stated that whether or not a loan has been effected is 
a legal/factual question and that Covered Persons must report loan 
events, including Loan Modifications, in a manner consistent with Rule 
10c-1a.\215\ FINRA's response regarding the reporting of information 
concerning Loan Modifications, as well as the Proposal's requirement 
for the reporting of information concerning Loan Modifications, are 
consistent with the requirements of Rule 10c-1a. Further, the Proposal 
is reasonably designed to facilitate the collection of information 
regarding Loan Modifications consistent with Rule 10c-1a.
---------------------------------------------------------------------------

    \212\ See ICI Letter, at 8. See also FIF Letter, at 3.
    \213\ FINRA Letter, at 6 (citing Rule 10c-1a Adopting Release, 
88 FR 75679-80).
    \214\ FINRA Letter, at 6 (citing Rule 10c-1a Adopting Release, 
88 FR 75679-80).
    \215\ FINRA Letter, at 6 (citing Rule 10c-1a Adopting Release, 
88 FR 75681).
---------------------------------------------------------------------------

    One commenter on the proposed rule change, as originally proposed 
in the Notice, requested clarification as to whether intraday reporting 
of ``lifecycle events'' is required, and whether there is a specific 
sequence in which firms must report.\216\ As discussed above, in this 
Part, FINRA stated that Covered Persons must report Loan Modifications 
consistent with Rule 10c-1a.\217\ The Proposal is consistent with Rule 
10c-1a's requirement for the end-of-day reporting of same-day loan 
modifications. In adopting Rule 10c-1a, the Commission stated that 
whether there is a change that will trigger the reporting of a Loan 
Modification data element may involve a facts-and-circumstances-based 
determination.\218\ There may be certain lifecycle events in the course 
of an open-ended loan and 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.\219\ In these cases, the Covered Person (or Reporting Agent) may 
elect to report the required information as either a termination (and 
therefore a modification) of an existing loan and a creation of a new 
loan, or as two modifications to an open-ended loan.\220\ SLATE does 
not impose a timing sequence for the reporting of Loan Modifications 
that are effected on the same day, as the commenter asked,\221\ and the 
Proposal would not prohibit a Covered Person (or its Reporting Agent) 
from reporting Loan Modifications in chronological order so long as 
such reporting is done in accordance with the Proposal and Rule 10c-1a.
---------------------------------------------------------------------------

    \216\ ISLA Letter 1, at 9-10 (suggesting that reporting 
``lifecycle events'' be done in ``chronological order for ease'').
    \217\ See FINRA Letter, at 6.
    \218\ See, e.g., Rule 10c-1a Adopting Release, 88 FR 75672.
    \219\ See Rule 10c-1a Adopting Release, 88 FR 75672.
    \220\ See Rule 10c-1a Adopting Release, 88 FR 75672.
    \221\ See ISLA Letter 1, at 9-10.
---------------------------------------------------------------------------

    One commenter stated that it sought clarity as to whether a market 
participant who ``books a loan'' that is not reported ``at the time,'' 
and such loan is modified that same day, could report the Initial 
Covered Securities Loan along with all ``subsequent lifecycle events,'' 
at 6:00 p.m., by reporting the Initial Covered Securities Loan and Loan 
Modification.\222\ Proposed Rule 6530(a)(2)(U) and proposed Rule 
6530(a)(b)(A) are designed to permit such reporting (i.e., reporting 
the Initial Covered Securities Loan along with all ``subsequent 
lifecycle events,'' at 6:00 p.m., by reporting the Initial Covered 
Securities

[[Page 1577]]

Loan and Loan Modification) while allowing FINRA to link same-day 
reports that relate to the same Covered Securities Loan, accurately 
record transactions reported pursuant to Rule 10c-1a, and incorporate 
Loan Modification information into the daily loan statistics.\223\ The 
Proposal is reasonably designed to facilitate end-of-day reporting for 
same-day Initial Covered Securities Loans and Loan Modifications not 
previously reported consistent with Rule 10c-1a.
---------------------------------------------------------------------------

    \222\ See ISLA Letter 1, at 9.
    \223\ See FINRA Letter, at 5.
---------------------------------------------------------------------------

    One commenter suggested that, to differentiate from ``other 
securities lending industry participants, such as prime brokers, 
engage[d] in intraday activities that could be reported as lifecycle 
events, . . . FINRA and the Commission . . . [should] consider the 
inclusion of a flag that identifies a party as a lending agent, in 
which case, such intraday lifecycle events would not need to be 
reported.'' \224\ As discussed above, in this Part, FINRA stated that 
Covered Persons must report Loan Modifications consistent with Rule 
10c-1a.\225\ The commenter's suggested flag is not required by Rule 
10c-1a to be reported to an RNSA. FINRA's decision not to include a 
flag that identifies a party as a lending agent, as suggested by the 
commenter,\226\ is consistent with Rule 10c-1a.\227\
---------------------------------------------------------------------------

    \224\ ISLA Americas Letter 1, at 8.
    \225\ See Rule 10c-1a Adopting Release, 88 FR 75681-82.
    \226\ ISLA Americas Letter 1, at 8.
    \227\ See Rule 10c-1a Adopting Release, 88 FR 75667 n.365 
(describing Rule 10c-1a as allowing FINRA ``the necessary 
flexibility to propose and implement rules regarding the format and 
manner with respect to the collection of information'').
---------------------------------------------------------------------------

    Another commenter sought clarification on the ``treatment of 
corporate actions'' under the proposed rule change, as originally 
proposed in the Notice, where, according to the commenter, firms may 
need to adjust the terms of an existing Covered Securities Loan (e.g., 
during a tender offer).\228\ This commenter stated that FINRA should 
``propose specific guidelines that recognize such changes and 
adjustments and consider the utility to investors of reporting based on 
what may be outlier events and that may occur long after the actual 
lending activity,'' without providing any specificity as to what the 
``guidelines'' should address.\229\ FINRA's decision not to include in 
the Proposal ``specific guidelines,'' as the commenter suggested, is 
reasonable because covered Persons must report Loan Modifications 
consistent with Rule 10c-1a, and Loan Modifications are required to be 
reported once they are finalized.\230\ The Proposal is reasonably 
designed to facilitate the reporting of Loan Modification information 
consistent with Rule 10c-1a(d).
---------------------------------------------------------------------------

    \228\ See Robinhood Letter, at 2.
    \229\ Robinhood Letter, at 2.
    \230\ See Rule 10c-1a Adopting Release, 88 FR 75667 n.365.
---------------------------------------------------------------------------

    With regard to allocations of securities loans by lending agents, 
one commenter stated that, ``until the reallocation is finalized, there 
is no utility to requiring a covered person to report potential loan 
modifications.'' \231\ Another commenter requested confirmation that an 
intermediary would not report a block (i.e., omnibus) transaction to 
SLATE and would instead report the allocations for the block 
transaction once the allocations have been finalized.\232\ One 
commenter stated that requiring the reporting of allocations of an 
omnibus loan contradicted the Commission's decision in Rule 10c-1a 
``not to treat reallocations among a pooled loan's underlying 
constituents as a new covered loan or as a modification.'' \233\
---------------------------------------------------------------------------

    \231\ ISLA Americas Letter 1, at 6.
    \232\ FIF Letter, at 6.
    \233\ ICI Letter, at 7. See FIF letter, at 6 (requesting 
confirmation that an intermediary would not be required to report an 
omnibus transaction to SLATE and would report only finalized 
allocations). In response, FINRA cited the Rule 10c-1a Adopting 
Release, which states that ``[w]hether 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 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).'' Rule 10c-1a 
Adopting Release, 88 FR 75664 (citation omitted).
---------------------------------------------------------------------------

    As discussed above, FINRA stated its understanding that, under Rule 
10c-1a(d), loan modifications are required to be reported once they are 
finalized, and that indicative terms are not reportable.\234\ FINRA 
stated that, in the context of omnibus loans and reallocations, 
proposed Rule 6530 does not alter which entities must be reported as 
parties to a loan, whether a change to the parties to a loan triggers a 
reporting obligation, or whether such report must reflect a 
modification or a new loan (and therefore, also a termination of the 
prior loan); rather, these obligations are prescribed by Rule 10c-1a as 
discussed in the Rule 10c-1a Adopting Release.\235\ FINRA stated its 
understanding that Rule 10c-1a generally requires that a change in the 
parties to a loan be reported as a termination of the prior loan and 
the initiation of a new loan (reflecting the new parties, if 
known).\236\ In adopting Rule 10c-1a, the Commission stated that 
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.\237\ The Proposal's information reporting requirements 
concerning omnibus loans that are Covered Securities Loans, by 
mirroring the requirements in Rule 10c-1a(e)(1), are reasonably 
designed to facilitate the collection of loan information consistent 
with Rule 10c-1a.\238\
---------------------------------------------------------------------------

    \234\ FINRA Letter, at 6.
    \235\ FINRA Letter, at 7.
    \236\ FINRA Letter, at 7 (citing Rule 10c-1a Adopting Release, 
88 FR 75664).
    \237\ See Rule 10c-1a Adopting Release, 88 FR 75664.
    \238\ See Rule 10c-1a Adopting Release, 88 FR 75664.
---------------------------------------------------------------------------

    Another commenter stated that the proposed rule change, as 
originally proposed in the Notice, would require that ``all Partials 
and Full Returns to be checked for settlement first, prior to being 
reported.'' \239\ This commenter suggested to align SLATE with the 
SFTR, which the commenter stated ``only requests the final close out of 
a trade to be reported, i.e., under SFTR, partials only have to be 
reported on a contractual settlement basis as opposed to an actual 
settlement basis.'' \240\ The commenter stated that, under the proposed 
rule change, as originally proposed in the Notice, ``market 
participants would have to consider how to monitor settlement 
separately to what they are reporting for regulatory purposes,'' which 
the commenter stated would be challenging for systems from a books a 
records perspective.\241\ The commenter also stated that ``[i]ncluding 
partials that follow the settlement driven reporting requirement i.e., 
the need to check for successful settlement prior to regulatory 
reporting, is going to create several challenges for market 
participants.'' \242\
---------------------------------------------------------------------------

    \239\ ISLA Letter 1, at 4.
    \240\ ISLA Letter 1, at 4.
    \241\ ISLA Letter 1, at 4. See S3 Partners Letter, at 4.
    \242\ ISLA Letter 1, at 4-5.
---------------------------------------------------------------------------

    As discussed above in Part III.A.1, Partial Amendment No. 1 removed 
the originally proposed requirement for the reporting of certain 
information, including the Unsettled Loan indicator, the expected 
settlement date for Covered Securities Loans, and the expected 
settlement date for modifications to the loan amount (if the expected 
settlement date is a date other than the date of the loan 
modification). FINRA stated that it eliminated the settlement-related 
elements in the interest of achieving the timely

[[Page 1578]]

implementation of SLATE.\243\ FINRA also stated that it plans to 
reassess the need for some data after gaining experience with the 
operation of SLATE and the initial data set, and that any such efforts 
would be subject to a separate proposed rule change filed with the 
Commission and as such, subject to notice and comment. SLATE is 
designed to be consistent with Rule 10c-1a, which imposes a unique and 
different regulatory regime from the SFTR, with differences in their 
underlying objectives.\244\ FINRA's decision in the Proposal not to 
require the reporting of settlement-related data elements--the 
Unsettled Loan indicator, the expected settlement date for Covered 
Securities Loans, and the expected settlement date for modifications to 
the loan amount (if the expected settlement date is a date other than 
the date of the loan modification)--addresses comments concerning the 
potential need to monitor the settlement of Covered Securities 
Loans.\245\ Further, the Proposal is consistent with Rule 10c-1a 
because above-mentioned settlement-related data elements are not 
required to be reported pursuant to Rule 10c-1a(c) through (e).
---------------------------------------------------------------------------

    \243\ FINRA Letter, at 4.
    \244\ See Rule 10c-1a Adopting Release, 88 FR 75681.
    \245\ See, e.g., ISLA Letter 1, at 4; S3 Partners Letter, at 4.
---------------------------------------------------------------------------

    Commenters stated that the proposed rule change, as originally 
proposed in the Notice, should allow reporters to submit a single, 
consolidated daily file. One commenter stated that the proposed rule 
change should ``implement the single, consolidated, end-of-day 
reporting requirement contemplated by SEC Rule 10c-1a.'' \246\ Another 
commenter recommended to allow reporters to submit a single daily file 
of all required elements associated with their current inventory'' 
including ``every loan required to be reported including new and 
modified loans.'' \247\ FINRA's decision not to accept SLATE reports in 
the form of a single daily file is reasonable . In adopting Rule 10c-
1a, the Commission provided FINRA with the necessary flexibility to 
propose and implement rules regarding the format and manner with 
respect to the collection of information.\248\ As such, the Proposal's 
requirements concerning the manner of reporting are consistent with 
FINRA's experience in establishing and maintaining systems that are 
designed to capture transaction reporting \249\ as well as the 
requirements of Rule 10c-1a.\250\ As discussed above, in Part III.C.2, 
the Proposal's requirement for reporting information concerning Loan 
Modifications is consistent with the requirements of Rule 10c-1a.
---------------------------------------------------------------------------

    \246\ See SIFMA Letter, at 6. See also Robinhood Letter, at 2; 
SIFMA AMG Letter 2, at 3.
    \247\ S3 Partners Letter, at 1.
    \248\ See Rule 10c-1a Adopting Release, 88 FR 75667 n.365.
    \249\ See, e.g., Rule 10c-1a Adopting Release, 88 FR 75682, 
75685; FINRA Rule 6730.
    \250\ See Rule 10c-1a Adopting Release, 88 FR 75671.
---------------------------------------------------------------------------

D. Definitions

    One commenter stated that the proposed rule change, as originally 
proposed in the Notice, appears to sustain ``the ongoing lack of 
clarity regarding whether certain uses of securities that are not 
documented or priced as securities loans in the market may nonetheless 
be reportable under Rule 10c-1a as `covered securities loans.' '' \251\ 
The commenter stated that rehypothecating shares to make delivery on 
short positions should not be treated as a Covered Securities Loan for 
purposes of Rule 10c-1a.\252\ Another commenter stated that the 
delivery by a broker-dealer of securities to settle a short sale--and 
the consequent carrying of a short position in a brokerage account--is 
not reportable under Rule 10c-1a as a ``covered securities loan.'' 
\253\
---------------------------------------------------------------------------

    \251\ MFA Letter, at 5.
    \252\ See MFA Letter, at 5.
    \253\ SIFMA Letter, at 8-9.
---------------------------------------------------------------------------

    In response, FINRA stated that whether a particular transaction is 
a ``covered securities loan'' is an example of an issue that is not 
related to determinations that FINRA has made regarding the proposed 
reporting requirements or dissemination provisions of SLATE.\254\ FINRA 
stated that these comments are addressed in the Rule 10c-1a Adopting 
Release. Further, FINRA stated that, with respect to a Covered 
Securities Loan used to close out a fail-to-deliver pursuant to Rule 
204 of Regulation SHO, where the broker-dealer is complying by entering 
into a bona fide arrangement to borrow the security by no later than 
the beginning of regular trading hours on the settlement day following 
the settlement date in question, firms would view such loans as having 
been agreed to in the morning consistent with the timing parameters of 
Rule 204 of Regulation SHO (albeit that the loan is not required to be 
reported until the end of the day under Rule 10c-1a).\255\ One 
commenter on Partial Amendment No. 1 sought clarity on whether certain 
conduct constitutes ``effecting, accepting, or facilitating'' a lending 
transaction.\256\
---------------------------------------------------------------------------

    \254\ See FINRA Letter, at 9-10.
    \255\ FINRA Letter, at 6-7. The Commission agrees with FINRA. 
See 17 CFR 242.204(b).
    \256\ See Letter from Tony Holland, Director of Market Practice, 
International Securities Lending Association (December 20, 2024).
---------------------------------------------------------------------------

    The Commission agrees with FINRA that the definition of ``covered 
securities loan'' is addressed by Rule 10c-1a(j)(2) and is discussed in 
the Rule 10c-1a Adopting Release.\257\ In adopting Rule 10c-1a, the 
Commission stated that the definition of covered securities loan 
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.\258\ Because the definitions of Covered Securities 
Loan and Reportable Security in SLATE mirror the definitions of 
``covered securities loan'' and ``reportable security'' in Rule 10c-1a, 
respectively, FINRA has reasonably set forth the scope of SLATE reports 
and distinguished Covered Securities Loans from other types of 
transactions that are not required to be reported.\259\ The definitions 
under the Proposal are reasonably designed to facilitate compliance 
with, and clarify the scope of, SLATE reporting consistent with Rule 
10c-1a.
---------------------------------------------------------------------------

    \257\ See, e.g., Rule 10c-1a Adopting Release, 88 FR 75658, 
75661-67, 75689.
    \258\ Rule 10c-1a Adopting Release, 88 FR 75649.
    \259\ See Rule 10c-1a Adopting Release, 88 FR 75666-67.
---------------------------------------------------------------------------

    Commenters on the proposed rule change, as originally proposed in 
the Notice, sought clarity on the jurisdictional scope of the proposed 
rule change, including the applicability to foreign entities and 
foreign securities.\260\ One commenter asked whether securities that 
are traded within the U.S. and have `` `F-share' tickers'' are 
Reportable Securities under Rule 10c-1a.\261\ With regard to foreign 
securities traded outside of the U.S., the commenter asked if a 
transaction would be reportable under Rule 10c-1a in the U.S. if the 
security has multiple SEDOLs/tickers, where only one of which is 
Consolidated Audit Trail (``CAT'') reportable, and the securities 
lending trade references one of the other SEDOLs/tickers (i.e., the 
foreign ticker traded on a foreign exchange, and thus not the ``F-
shares ticker'').\262\
---------------------------------------------------------------------------

    \260\ See, e.g., SIFMA Letter, at 8; ISLA Letter 1, at 2.
    \261\ Letter from Tony Holland, Director of Market Practice, 
International Securities Lending Association (July 16, 2024) (``ISLA 
Letter 2''), at 2-3.
    \262\ ISLA Letter 2, at 4-5. The acronym ``SEDOL'' stands for 
``Stock Exchange Daily Official List,'' which is a list of security 
identifiers used in the United Kingdom and Ireland for clearing 
purposes.

---------------------------------------------------------------------------

[[Page 1579]]

    In response, FINRA listed these comments as examples of issues not 
related to determinations that FINRA has made regarding the proposed 
reporting requirements or dissemination provisions of SLATE but instead 
are addressed in the Rule 10c-1a Adopting Release.\263\ As discussed 
above, in this Part, Rule 10c-1a(j) defines the terms ``reportable 
security,'' which in part sets the scope of Rule 10c-1a(a). 
Accordingly, a security is a ``reportable security'' under Rule 10c-1a 
if it is a 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, TRACE, or RTRS, or any reporting system that replaces one of 
these systems.\264\ With respect to the cross-border application of 
Rule 10c-1a, the Commission stated that, section 10(c) of the Exchange 
Act, by its terms, 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.\265\ Based on that 
language, the Commission concluded in the Rule 10c-1a Adopting Release 
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.\266\ The Commission 
further stated that, because Rule 10c-1a is intended to be co-extensive 
with the regulatory scope of section 10(c), it is of the view that Rule 
10c-1a'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.\267\
---------------------------------------------------------------------------

    \263\ See FINRA Letter, at 9-10.
    \264\ See 17 CFR 240.10c-1a(j)(3).
    \265\ Rule 10c-1a Adopting Release, 88 FR 75689.
    \266\ Rule 10c-1a Adopting Release, 88 FR 75689.
    \267\ Rule 10c-1a Adopting Release, 88 FR 75689.
---------------------------------------------------------------------------

E. Compliance With Reporting Obligations

    One commenter stated that the proposed rule change, as originally 
proposed in the Notice, differs from Rule 10c-1a because the proposed 
rule change would allow third-party service providers, who may not be 
registered in any capacity with the Commission, to provide the same 
service as a Reporting Agent ``without the oversight or regulatory 
responsibility of a Reporting Agent,'' whereas Rule 10c-1a 
``specifically allows for Covered Persons to use the services of a 
Reporting Agent only.'' \268\ The commenter stated that ``the 
permissible activities'' of these third-party service providers 
``demands further clarification and an express set of qualification 
criteria that distinguishes such permissible activities from those that 
are inherent'' with respect to Reporting Agents and Covered Persons to 
avoid providing ``a back door'' through which the third-party service 
providers ``can escape SEC and FINRA oversight and liability'' as a 
Reporting Agent.\269\
---------------------------------------------------------------------------

    \268\ See EquiLend Letter 1, at 1.
    \269\ EquiLend Letter 1, at 6.
---------------------------------------------------------------------------

    In response, FINRA stated that nothing in the Proposal modifies the 
parameters the Commission set forth regarding the use of a ``reporting 
agent,'' which is a defined term under Rule 10c-1a(j), for purposes of 
reporting loan information pursuant to Rule 10c-1a. FINRA stated that, 
while the Commission established the role of a reporting agent (in the 
Rule 10c-1a Adopting Release), it did not preclude firms from using 
other types of third parties to facilitate reporting (albeit that 
covered persons may not rely on such other parties in the same manner 
reserved for reporting agents under Rule 10c-1a).\270\
---------------------------------------------------------------------------

    \270\ See FINRA Letter, at 15 (citing Rule 10c-1a Adopting 
Release, 88 FR 75655).
---------------------------------------------------------------------------

    The Commission agrees with FINRA that the Proposal does not, and 
cannot, modify Rule 10c-1a's definition of ``reporting agent.'' In 
adopting the definition of ``reporting agent'' under Rule 10c-1a, the 
Commission stated that the definition strikes a balance between 
increasing participation and competition in the marketplace for such 
services, while applying the definition only to entities over which the 
Commission has direct oversight.\271\ The ability to use a Reporting 
Agent does not prevent Covered Persons from contracting privately with 
third-party vendors to assist in reporting. 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 FINRA, as 
reliance on a Reporting Agent would.\272\ Allowing clearing agencies, 
as well as brokers or dealers, to act as reporting agents under Rule 
10c-1a 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.\273\
---------------------------------------------------------------------------

    \271\ See Rule 10c-1a Adopting Release, 88 FR 75655.
    \272\ See 17 CFR 240.10c-1a(a)(2); Rule 10c-1a Adopting Release, 
88 FR 75655.
    \273\ Rule 10c-1a Adopting Release, 88 FR 75655.
---------------------------------------------------------------------------

    Commenters on the proposed rule change addressed Rule 
6530(c)(3),\274\ which requires, among other things, that, if a Covered 
Person makes a good faith determination that it has a reporting 
obligation under Rule 10c-1a and the Rule 6500 Series, the Covered 
Person or Reporting Agent, as applicable, must report the Covered 
Securities Loan as provided in proposed Rule 6530, and if a Reportable 
Security is not entered into the SLATE system, the Covered Person or 
Reporting Agent, as applicable, must promptly notify and provide FINRA 
Operations, in the form and manner required by FINRA, the information 
specified in Rule 6530(a)(2)(A) and (B), along with such other 
information as FINRA deems necessary to enter the Reportable Security 
for reporting through SLATE.\275\ Commenters stated that requiring a 
Covered Person or Reporting Agent to notify FINRA to add securities to 
SLATE would be burdensome,\276\ inefficient,\277\ open to manual 
error,\278\ and duplicative and unnecessary.\279\ One commenter stated 
that this is a highly manual process that could ``lead to a time-lag 
when setting up new static data that does not already exist within the 
SLATE system.'' \280\ One commenter recommended that the notification 
requirement be revised or removed, and stated that it is ``not an 
appropriate delegation of duties'' to require a Covered Person to 
notify FINRA Operations of Reportable Securities not included in the 
SLATE system.\281\ One commenter stated that FINRA should have primary 
responsibility for adding Reportable Securities to the SLATE system and 
not impose this obligation on Covered Persons.\282\ One commenter 
requested clarification on if the Covered Person could be subject to 
``liability'' for failing to notify FINRA about Reportable Securities 
not entered into SLATE.\283\ Another commenter stated that FINRA should 
consider the example of the CAT, where, the commenter stated, ``there 
is no separate process for an

[[Page 1580]]

industry member to request that a symbol be added to CAT.'' \284\
---------------------------------------------------------------------------

    \274\ As originally proposed in the Notice, this provision was 
included as proposed Rule 6530(d)(4). See supra Part II.C.
    \275\ ISLA Letter 1, at 3; ISLA Americas Letter 1, at 15; ISLA 
Americas Letter 2, at 9; ICI Letter, at 8.
    \276\ ICI Letter, at 8; ISLA Americas Letter 1, at 15; ISLA 
Americas Letter 2, at 9.
    \277\ ICI Letter, at 8; ISLA Letter 1, at 3; ISLA Americas 
Letter 1, at 15.
    \278\ ISLA Letter 1, at 3.
    \279\ FIF Letter, at 8-9.
    \280\ See ISLA Letter 1, at 3.
    \281\ ISLA Americas Letter 1, at 15. See ISLA Americas Letter 2, 
at 9.
    \282\ ICI Letter, at 8.
    \283\ ISLA Letter 1, at 13.
    \284\ See FIF Letter, at 8-9.
---------------------------------------------------------------------------

    In response, FINRA stated that, under Rule 10c-1a, it is the 
covered person's (or, where applicable, a reporting agent's) 
responsibility to ensure that it submits required reports in compliance 
with applicable rules; Rule 10c-1a does not assign to an RNSA the 
responsibility to identify all reportable securities.\285\ FINRA stated 
that, as FINRA typically does with its other over-the-counter 
facilities, FINRA intends to create a SLATE security list that it will 
make available to Covered Persons and other SLATE participants 
(leveraging reference data from the CAT NMS list, TRACE, and the 
MSRB).\286\ FINRA stated, however, that a Covered Person remains 
obligated to determine whether a securities loan transaction that it 
has engaged in is reportable under Rule 10c-1a, regardless of whether 
the security appears on FINRA's SLATE security list.\287\ FINRA stated 
that, for this reason, proposed Rule 6530(c)(3), as modified by Partial 
Amendment No. 1, requires that, if a Covered Person makes a good faith 
determination that it has a reporting obligation under Rule 10c-1a with 
respect to a securities loan, and the Reportable Security is not 
already entered into the SLATE system, the Covered Person (or its 
Reporting Agent) must promptly notify FINRA and work with FINRA 
Operations to enter the Reportable Security into the SLATE system.\288\ 
One commenter on Partial Amendment No. 1 stated that FINRA should 
publish a SLATE securities list daily based on a consolidated feed of 
TRACE, RTRS, and CAT eligible securities.\289\
---------------------------------------------------------------------------

    \285\ See FINRA Letter, at 15.
    \286\ FINRA Letter, at 15-16.
    \287\ FINRA Letter, at 16.
    \288\ FINRA Letter, at 16.
    \289\ SIFMA and SIFMA AMG Letter, at 5.
---------------------------------------------------------------------------

    FINRA's decision to require Covered Persons or Reporting Agents, as 
applicable, to promptly notify and provide FINRA Operations with a 
Reportable Security that is not entered into the SLATE system is 
reasonable.\290\ In proposing Rule 6530(c)(3), FINRA stated that the 
requirement would enable FINRA to set the security up in its systems 
and facilitate reporting of the Covered Securities Loan to SLATE, as 
required by Rule 10c-1a and proposed Rule 6530.\291\ The proposed 
requirement to add Reportable Securities to the SLATE system is 
reasonably designed to facilitate the collection of loan information 
consistent with Rule 10c-1a.\292\
---------------------------------------------------------------------------

    \290\ See Rule 10c-1a Adopting Release, 88 FR 75667 n.365. In 
adopting Rule 10c-1a, the Commission stated that there may be costs 
for reporting entities associated with determining whether a loan is 
a covered securities loan, including whether a particular security 
is a reportable security. Rule 10c-1a Adopting Release, 88 FR 75718 
n.974.
    \291\ Notice, 89 FR 38210.
    \292\ See Rule 10c-1a Adopting Release, 88 FR 75667 n.365.
---------------------------------------------------------------------------

    Some commenters addressed the statement in the Notice that ``the 
member must nonetheless take reasonable steps to ensure that the 
Reporting Agent is in fact complying with the securities lending 
reporting requirements of SEA Rule 10c-1a and proposed FINRA Rule 6530 
on its behalf.'' \293\ One commenter stated that such a requirement 
deviates from Rule 10c-1a and could impact ``the very point of engaging 
a reporting agent'' because it ``shift[s] reporting compliance (outside 
of a written agreement and timely access to data) back to the covered 
person creating a reconciliation loop that will be time consuming, 
costly and operationally intensive.'' \294\ Another commenter stated 
that the costs of increased reliance on Reporting Agents for compliance 
purposes would be compounded by the proposed requirement that Covered 
Persons ensure that Reporting Agents file timely, accurate, and 
complete data.\295\
---------------------------------------------------------------------------

    \293\ See Notice, 89 FR 38210.
    \294\ ISLA Americas Letter 1, at 10.
    \295\ SIFMA AMG Letter 2, at 7.
---------------------------------------------------------------------------

    In response, Partial Amendment No. 1 removed from the proposed rule 
change the requirement that a Covered Person take reasonable steps to 
ensure that the Reporting Agent is in fact complying with the 
securities lending reporting requirements of Rule 10c-1a. In doing so, 
FINRA stated that, in its oversight of member compliance with Rule 10c-
1a, in addition to reviewing whether members have complied with the 
requirements of Rule 10c-1a(a)(2) with respect to the use of Reporting 
Agents, FINRA also will review the timeliness and accuracy of SLATE 
reports submitted by Reporting Agents in light of a Reporting Agent's 
obligations under Rule 10c-1a(b) and the underlying requirements of 
Rule 10c-1a. FINRA stated that, after gaining experience with the SLATE 
program, FINRA will reevaluate whether any additional measures are 
appropriate.\296\ Any such efforts would be subject to a separate 
proposed rule change filed with the Commission and subject to notice 
and comment. Some commenters supported Partial Amendment No. 1's 
removal of this originally proposed requirement.\297\ The Proposal, 
which is consistent with Rule 10c-1a \298\ and similar requirements in 
rules concerning other FINRA trade reporting systems,\299\ is 
reasonably designed to facilitate the oversight of compliance with Rule 
10c-1a, given FINRA's expertise in administering other FINRA trade 
reporting systems.\300\
---------------------------------------------------------------------------

    \296\ Partial Amendment No. 1, 89 FR 92229 n.21.
    \297\ See ISLA Americas Letter 2, at 5; SIFMA and SIFMA AMG 
Letter, at 3.
    \298\ See 17 CFR 240.10c-1a(a), (b).
    \299\ See, e.g., FINRA Rule 6730(f).
    \300\ See Rule 10c-1a Adopting Release, 88 FR 75683.
---------------------------------------------------------------------------

F. Participation in SLATE

    One commenter requested that FINRA confirm its enforcement rules 
for non-U.S. firms for incorrect reporting.\301\ This commenter 
requested clarity on FINRA's proposed enforcement policy on non-FINRA 
members, specifically as it related to compliance for reporting to the 
SLATE system and violations or failures to pay SLATE reporting 
fees.\302\ The commenter also asked, from a cybersecurity perspective, 
what processes, policies, or procedures FINRA members have in place and 
whether the proposed requirement in Rule 6520(a)(2)(C) regarding the 
maintenance of the physical security of the equipment located on the 
premises of the SLATE Participant would apply to both domestic and non-
U.S. trading parties.\303\
---------------------------------------------------------------------------

    \301\ ISLA Letter 1, at 2.
    \302\ ISLA Letter 1, at 14.
    \303\ ISLA Letter 1, at 13.
---------------------------------------------------------------------------

    In response to comments regarding incorrect reporting, FINRA stated 
that it will review the timeliness and accuracy of reports to the SLATE 
system in light of the requirements under Rule 10c-1a(b) and the 
underlying requirements of Rule 10c-1a. FINRA also stated that, after 
gaining experience with the SLATE program, FINRA will reevaluate 
whether any additional measures are appropriate.\304\ Any such efforts 
would be subject to a separate proposed rule change filed with the 
Commission and subject to notice and comment. Further, in the Notice, 
FINRA stated that it may validate and reject submissions to SLATE that 
FINRA believes are noncompliant or otherwise inconsistent with Rule 
10c-1a or with the form and manner specified by FINRA for the data (as 
provided in FINRA rules, guidance, and technical documents and 
specifications), and may exclude any such information from disseminated 
SLATE data. FINRA stated that it may also block or reject any activity 
to the extent such activity puts the normal functioning of the SLATE 
system at risk.\305\
---------------------------------------------------------------------------

    \304\ FINRA Letter, at 4 n.18.
    \305\ Notice, 89 FR 38206.

---------------------------------------------------------------------------

[[Page 1581]]

    Incorrect reporting can result in a violation of Rule 10c-1a.\306\ 
The Proposal, which contains security- and confidentiality-related 
provisions that supplement existing FINRA cybersecurity-related rules 
for certain SLATE Participants,\307\ is reasonably designed to address 
cybersecurity concerns regarding the SLATE system. The proposed 
requirement for a SLATE Participant to maintain the physical security 
of the equipment located on its premises to prevent unauthorized entry 
of information into SLATE is reasonably designed to help prevent risk 
to the SLATE system that could hamper access to information regarding 
securities loans or compromise the integrity of the data reported to 
and disseminated by SLATE. The Proposal is consistent with the 
requirement in Rule 10c-1a(h)(4) that FINRA establish, maintain, and 
enforce reasonably designed written policies and procedures to maintain 
the security and confidentiality of the confidential information 
required to be reported to it. It also is reasonably designed to 
address the risk that disclosure of certain loan information would 
identify market participants or reveal information about the internal 
operations of market participants.\308\ The Proposal is reasonably 
designed to facilitate and enforce the integrity of the collected data 
that is designed to improve transparency and efficiency in the 
securities lending market consistent with Rule 10c-1a.
---------------------------------------------------------------------------

    \306\ See Rule 10c-1a(a).
    \307\ Cybersecurity, FINRA (last visited December 16, 2024), 
https://www.finra.org/rules-guidance/key-topics/cybersecurity#rules. 
In adopting Rule 10c-1a, the Commission stated that the rule 
collects sensitive information and that the costs of a data breach 
could be substantial. See Rule 10c-1a Adopting Release, 88 FR 75721 
n.1011. While Reporting Agents that are not FINRA members (e.g., 
registered clearing agencies and certain brokers or dealers) are not 
subject to these cybersecurity-related FINRA rules, they 
nevertheless may be subject, as applicable, to existing Commission 
rules designed to address cybersecurity-related concerns, such as 
Regulation SCI, which has provisions requiring, among other things, 
that policies and procedures be in place to help ensure the 
robustness and resiliency of market technology systems, see 17 CFR 
242.1001(a)(1), or Regulation S-P, which has provisions requiring 
policies and procedures aimed at protecting customer records or 
information and customer report information, see 17 CFR 248.30.
    \308\ See Rule 10c-1a Adopting Release, 88 FR 75687.
---------------------------------------------------------------------------

G. Dissemination of Loan Information

    Under the proposed rule change, as originally proposed in the 
Notice, FINRA would have disseminated, by the morning of the next 
business day, aggregate loan transaction activity, including 
information broken down into several subcategories (e.g., by borrower 
type or whether a loan is an open or term loan).\309\ Some commenters 
addressed the granularity of the aggregated data that FINRA would 
disseminate pursuant to the proposed rule change, as originally 
proposed in the Notice. Two commenters stated that, in Rule 10c-1a, the 
Commission had afforded FINRA deference as to the manner in which 
aggregate information is compiled and presented publicly.\310\ One 
commenter stated that such ``deference is limited to the manner in 
which aggregate data at the level of the entire dataset of reported 
coved securities loans is reported,'' without permitting FINRA to break 
down the dataset into smaller published subsets, or ``slices,'' based 
on specific criteria.\311\ Some commenters also stated such granular 
data (e.g., data broken down by borrower type) raises significant 
concerns that sensitive, proprietary trading strategy information may 
be disclosed.\312\ Commenters stated their concerns that the 
publication of more granular aggregated data potentially could allow 
market participants to ``extrapolate'' or ``back into'' individual loan 
amounts on a T+1 basis.\313\ One commenter stated that the proposed 
rule change's breakdown for aggregate transaction activity and 
distribution of loan rates should have been included in the proposing 
release for Rule 10c-1a and subjected to a cost-benefit analysis and 
formal rulemaking notice and comment period.\314\ The commenter 
recommended that FINRA ``reevaluate its proposed structure and instead 
propose a revised, less granular structure.'' \315\
---------------------------------------------------------------------------

    \309\ See Notice, 89 FR 38212.
    \310\ See SIFMA Letter, at 7; ISLA Americas Letter 1, at 16.
    \311\ SIFMA Letter, at 7. See SIFMA AMG Letter 2, at 5.
    \312\ SIFMA Letter, at 7. See ICI Letter, at 9; SIFMA AMG Letter 
2, at 5; Hagerty Letter, at 3.
    \313\ See SIFMA Letter, at 7; ISLA Americas Letter 1, at 16; MFA 
Letter, at 5-6.
    \314\ See SIFMA Letter, at 6-7.
    \315\ SIFMA Letter, at 7. See MFA Letter, at 7; SIFMA AMG Letter 
2, at 5.
---------------------------------------------------------------------------

    In response, Partial Amendment No. 1 removed the subcategories of 
volume data from the aggregate loan transaction activity to be 
disseminated until experience is gained with the impact of 
disseminating volume data.\316\ In particular, Partial Amendment No. 1 
removed paragraphs (c)(1)(A) through (E) and amended proposed Rule 
6540(c)(1) to provide that FINRA will disseminate the aggregate volume 
of securities subject to an Initial Covered Securities Loan or 
Modification to the amount of Reportable Securities loaned, reported on 
the prior business day. In the FINRA Letter, FINRA stated that Rule 
10c-1a requires an RNSA to disseminate ``information pertaining to the 
aggregate transaction activity and distribution of loan rates for each 
reportable security.'' \317\ FINRA stated that the Commission did not 
specify the precise manner in which aggregate transaction activity or 
the distribution of loan rates would be compiled and disseminated by an 
RNSA, thereby providing FINRA with discretion as to the formulation of 
the data (so long as the ``aggregate transaction activity'' represented 
the absolute value of loan transactions).\318\ FINRA stated that, in 
determining what aggregate data is appropriate for public 
dissemination, it remains very sensitive to concerns regarding 
potential information leakage.\319\
---------------------------------------------------------------------------

    \316\ See FINRA Letter, at 14.
    \317\ FINRA Letter, at 13 (citing 17 CFR 240.10c-1a(g)(5)).
    \318\ FINRA Letter, at 14 (citing Rule 10c-1a Adopting Release, 
88 FR 75684).
    \319\ FINRA Letter, at 14.
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    Further, in response to comments, FINRA stated that this change is 
appropriate and that FINRA would revisit the possibility of enhancing 
the aggregate loan transaction activity in the future, after gaining 
experience with the impact of disseminating volume data and analyzing 
what additional information could be useful (while continuing to be 
sensitive to potential information leakage concerns).\320\ FINRA stated 
that any future amendments to the dissemination provisions would be 
subject to a separate proposed rule change filed with the Commission 
and subject to notice and comment. Some commenters supported Partial 
Amendment No. 1's removal of the subcategories of volume data from the 
aggregate loan transaction activity to be publicly disseminated,\321\ 
one of whom supported FINRA's decision to revisit SLATE's dissemination 
provisions.\322\ The Proposal is reasonably designed to facilitate 
access to data that market participants can use to mitigate information 
asymmetries while taking account of commenter concerns regarding data 
security and confidentiality. The Proposal also is consistent with the 
requirements for the publication of data in Rule 10c-1a(g) and the 
broader transparency goals of Rule 10c-1a.\323\
---------------------------------------------------------------------------

    \320\ See Partial Amendment No. 1, 89 FR 92232.
    \321\ See ISLA Americas Letter 2, at 6; SIFMA and SIFMA AMG 
Letter, at 3.
    \322\ See ISLA Americas Letter 2, at 6.
    \323\ See Rule 10c-1a Adopting Release, 88 FR 75726. See also 
Rule 10c-1a Adopting Release, 88 FR 75707 n.849.

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[[Page 1582]]

    The Proposal is reasonably tailored to help ensure that the 
absolute value of transactions is disseminated such that net position 
changes should not be discernable in the data. This should help to 
address commenter concerns regarding potential exposure of proprietary 
information while still providing volume transparency to market 
participants. The Proposal is reasonably designed to facilitate the 
dissemination of loan information consistent with Rule 10c-1a.
    One commenter on Partial Amendment No. 1 stated that the Commission 
and FINRA should require that unsettled loans be excluded from any 
public dissemination of individual loan transaction data pursuant to 
proposed Rule 6540(a) and (b) and from any daily loan statistics 
published pursuant to proposed Rule 6540(c).\324\ The commenter stated 
that it does not see the value to the market in publishing data 
regarding unsettled loans and that including unsettled loans in 
publicly disseminated loan information ``would be misleading and cause 
investor confusion.'' \325\ The Commission disagrees that the inclusion 
of unsettled loans (that are Covered Securities Loans) in data 
disseminated pursuant to proposed Rule 6540 would be misleading and 
cause investor confusion, as the commenter suggested and instead 
believes that the omission of this data would be inconsistent with Rule 
10c-1a's broader transparency goals.\326\ For instance, the 
dissemination of data regarding unsettled loans that are Covered 
Securities Loans would provide information regarding the material terms 
of securities loans that have been agreed to.\327\ FINRA's decision to 
disseminate, pursuant to proposed Rule 6540, data regarding unsettled 
loans that are Covered Securities Loans is consistent with Rule 10c-
1a(g), which applies to ``covered securities loans,'' generally, 
without distinguishing those that are unsettled.
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    \324\ See SIFMA and SIFMA AMG Letter, at 4.
    \325\ SIFMA and SIFMA AMG Letter, at 4.
    \326\ See, e.g., Rule 10c-1a Adopting Release, 88 FR 75707.
    \327\ See Rule 10c-1a Adopting Release, 88 FR 75662 n.288.
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    Some commenters stated that the de minimis loan transaction 
activity threshold, as originally proposed in the Notice, was set too 
low.\328\ One commenter stated that the threshold of three loans is too 
low, ``especially when viewed in conjunction with the possibility that 
FINRA will publish granular volume buckets.'' \329\ Commenters stated 
that FINRA should consider whether the application of the threshold 
``should be mandatory and not an optional exclusion for confidentiality 
reasons.'' \330\ Another commenter stated that the discretionary 
authority to exclude de minimis loan transaction activity would ``have 
no mitigating effect whatsoever'' on the consequences of publicly 
disclosing sensitive, granular loan information.\331\ One commenter 
requested clarification as to whether FINRA ``will'' or ``may'' omit de 
minimis loan transaction activity.\332\
---------------------------------------------------------------------------

    \328\ See, e.g., ISLA Letter 1, at 10; ISLA Americas Letter 1, 
at 16; ICI Letter, at 9; SIFMA AMG Letter 2, at 5.
    \329\ ISLA Americas Letter 1, at 16.
    \330\ ISLA Letter 1, at 10. See ICI Letter, at 9.
    \331\ MFA Letter, at 6.
    \332\ ISLA Americas Letter 1, at 16.
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    In response, Partial Amendment No. 1 modified proposed Rule 6540.01 
to clarify that FINRA's application of the de minimis threshold will be 
non-discretionary and to provide that FINRA will not include aggregate 
volume information for a security unless there were reports submitted 
to SLATE on the prior business day for at least 10 distinct Covered 
Securities Loans in the Reportable Security (represented by different 
FINRA-assigned unique loan identifiers).\333\ In the FINRA Letter, 
FINRA stated that the de minimis exclusion was not intended to provide 
FINRA with discretion on a case-by-case basis as to whether to omit 
volume information that met the de minimis criteria.\334\ Some 
commenters supported Partial Amendment No. 1's increase to the de 
minimis threshold and clarification that application of the de minimis 
threshold is non-discretionary.\335\ One commenter stated that FINRA 
should consider further whether 10 distinct Covered Securities Loans 
may still be too low of a threshold.\336\ The commenter stated, without 
providing any support for its suggested figure, that a higher threshold 
of 25 distinct Covered Securities Loans would be more appropriate to 
address concerns that sophisticated market participants could use the 
aggregated volume information to extrapolate sensitive information by 
pairing the aggregate transaction activity data with data on individual 
loan transactions.\337\ Another commenter, however, stated that the 
threshold of 10 distinct Covered Securities Loans--in addition to the 
provision's use of the phrase ``will not include'' to clarify that the 
application of the de minimis threshold is non-discretionary--will 
facilitate the prevention of information leakage and enhance the 
integrity of securities loan reporting.\338\ The Commission agrees with 
this comment and that the Proposal's de minimis threshold of 10 
distinct Covered Securities Loans is reasonable. The threshold of 10 
distinct Covered Securities Loans will facilitate the prevention of 
information leakage and is less likely than the commenter's suggested 
threshold of 25 distinct Covered Securities Loans to reduce the 
transparency value of the disseminated information. The Proposal is 
consistent with the publication of data requirements of Rule 10c-1a(g), 
the data protection requirements in Rule 10c-1a(h)(4), and the broader 
transparency goals of Rule 10c-1a.\339\
---------------------------------------------------------------------------

    \333\ FINRA stated that it will not have insight into all of the 
relevant loan details necessary to generate the statistics described 
in proposed Rule 6540(c) with respect to modifications to loans for 
which reporting was not required pursuant to Rule 10c-1a(c) at the 
time the loan was agreed to or last modified (i.e., modifications 
reported to SLATE pursuant to Rule 10c-1a(d)(2)). FINRA stated that, 
therefore, the daily loan statistics that FINRA will publish will 
only reflect modifications to Covered Securities Loans that were 
previously reported to SLATE.
    \334\ FINRA Letter, at 14 n.52. This proposed de minimis 
provision is intended to address potential information leakage in 
circumstances where there are multiple reported events associated 
with the same loan on a given day. Partial Amendment No. 1, 89 FR 
92233 n.49.
    \335\ See ISLA Americas Letter 2, at 6; SIFMA and SIFMA AMG 
Letter, at 7.
    \336\ SIFMA and SIFMA AMG Letter, at 7.
    \337\ SIFMA and SIFMA AMG Letter, at 7.
    \338\ See ISLA Americas Letter 2, at 6.
    \339\ See Rule 10c-1a Adopting Release, 88 FR 75726. See also 
Rule 10c-1a Adopting Release, 88 FR 75687-88, 75707 n.849.
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H. Other Provisions

1. Emergency Authority
    Some commenters stated that the proposed suspension of the 
reporting or dissemination of certain Covered Securities Loans or Data 
Elements for periods deemed necessary by FINRA, as discussed above in 
Part II.F, would undermine the transparency that the proposed FINRA 
Rule 6500 Series aims to promote.\340\ These commenters stated that the 
proposed suspension ``would inadvertently create an information 
asymmetry, thus disadvantaging end borrowers and beneficial owners who 
rely on this data for making prudent investment decisions'' and 
``strongly advocate[d] for stringent guidelines governing the 
suspension of reporting requirements to avoid undermining these 
goals.'' \341\ Another commenter ``strongly advocate[d] for . . . the 
publication of the reasons and timeframe for suspension to avoid 
undermining [the proposed rule's] goals.'' \342\
---------------------------------------------------------------------------

    \340\ See, e.g., Form Letter A; Form Letter D.
    \341\ See, e.g., Form Letter A; Form Letter D.
    \342\ Letter from Jennifer (May 15, 2024).

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[[Page 1583]]

    In response, FINRA stated that it does not believe that the 
proposed provision, which would provide FINRA with limited, emergency 
authority regarding the suspension of the reporting or dissemination of 
certain Covered Securities Loans or Data Elements, would reduce the 
transparency intended to be provided under Rule 10c-1a. FINRA stated 
that, should the proposed emergency authority be used, any such action 
would be taken only as market conditions warrant and only in 
consultation with the SEC.\343\ FINRA stated that it has similar 
authority in connection with other transaction reporting facilities 
that it operates, and that it believes that such emergency authority is 
appropriate to maintain fair and orderly markets.\344\ This emergency 
authority is consistent with existing FINRA rules governing other 
transparency regimes.\345\ The Commission agrees that the proposed 
Emergency Authority provision of SLATE is reasonably designed to 
maintain fair and orderly markets as market conditions may warrant. 
Such authority, pursuant to proposed Rule 6550, could be exercised only 
in consultation with the Commission, which should help to ensure that 
the emergency authority is used in a manner consistent with the 
requirements and goals of Rule 10c-1a.
---------------------------------------------------------------------------

    \343\ FINRA Letter, at 13.
    \344\ FINRA Letter, at 13.
    \345\ See, e.g., FINRA Rule 6770 (Emergency Authority); 
Securities Exchange Act Release No. 60726 (September 28, 2009), 74 
FR 50991 (October 2, 2009), at 50996.
---------------------------------------------------------------------------

I. Costs and RNSA Fees

    Commenters stated that FINRA has yet to publish information about 
its contemplated Covered Securities Loan reporting fees and securities 
loan data products and associated fees, and requested that FINRA 
provide such information.\346\ Commenters stated that market 
participants and the Commission cannot adequately assess the costs and 
benefits of the Proposal without knowing what reporting fees FINRA 
plans to charge.\347\ Commenters also requested time to consider 
FINRA's contemplated SLATE reporting fees and data product fees.\348\ 
One commenter recommended in the absence of a proposed fee schedule 
``that any final rule promulgated by FINRA be conditional upon 
publication of proposed costs and public comment.'' \349\
---------------------------------------------------------------------------

    \346\ See Notice, 89 FR 38206. See, e.g., ISLA Letter 1, at 12; 
Associations Collective Letter, at 3; MFA Letter, at 2 n.7; 
Robinhood Letter, at 3 n.14; EquiLend Letter 1, at 7; SIFMA AMG 
Letter 1, at 2.
    \347\ See Associations Collective Letter, at 3; ICI Letter, at 
9; ISLA Americas Letter, at 5.
    \348\ See SIFMA Letter, at 7-8; SIFMA AMG Letter 1, at 2; 
EquiLend Letter 1, at 7.
    \349\ ISLA Americas Letter, at 11.
---------------------------------------------------------------------------

    On November 20, 2024, FINRA filed this proposed rule change with 
the Commission. Specifically, pursuant to Section 19(b)(1) of the 
Exchange Act and Rule 19b-4 thereunder, FINRA filed a proposed rule 
change to set forth in new FINRA Rule 7720 securities loan reporting 
fees and securities loan data products with associated fees.\350\ FINRA 
designated the SLATE Fee Filing as ``establishing or changing a due, 
fee or other charge'' under Section 19(b)(3)(A)(ii) of the Act and Rule 
19b-4(f)(2) thereunder, which renders it effective upon filing with the 
Commission. In addition, within the SLATE Fee Filing, FINRA estimates 
the costs it expects, at this juncture, to incur to build and operate 
SLATE, as well as the revenues it expects to receive from its proposed 
fees.\351\ To solicit comments on the proposed rule change from 
interested persons, the Commission published notice of the SLATE Fee 
Filing on its website on November 21, 2024, and publication of that 
notice in the Federal Register occurred on November 27, 2024, with a 
21-day comment period beginning on the date of Federal Register 
publication and expiring on December 18, 2024.\352\ The SLATE Fee 
Filing is responsive to commenters seeking the ability and time to 
understand what fees FINRA proposes to charge in connection with SLATE 
reporting and public dissemination of SLATE data, and what costs FINRA 
expects to incur, at this juncture, to build and operate SLATE.
---------------------------------------------------------------------------

    \350\ See Securities Exchange Act Release No. 101697 (Nov. 21, 
2024), 89 FR 93750 (Nov. 27, 2024) (``SLATE Fee Filing''). With 
respect to reporting, proposed FINRA Rule 7720 sets forth fees for: 
(1) SLATE system connectivity; (2) Initial Covered Securities Loan 
reporting; (3) Loan Modification reporting; (4) late reporting; and 
(5) reporting cancellations, corrections, or deletions. These 
reporting fees would be paid by SLATE Participants. See SLATE Fee 
Filing, 89 FR 93751. With respect to data products, proposed FINRA 
Rule 7720 sets forth fees for: (1) SLATE Loan-Level Data and Daily 
Loan Statistics, which refers to the data described in proposed 
FINRA Rule 6540(a)-(c); and (2) Historic SLATE Data, which refers to 
SLATE Loan-Level Data and Daily Loan Statistics from the beginning 
of SLATE data reporting through the end of the most recent calendar 
year. See SLATE Fee Filing, 89 FR 93751. These data product fees 
would be paid by any person or organization subscribing to receive 
from FINRA downloadable files of SLATE data for commercial purposes. 
See SLATE Fee Filing, 89 FR 93751. Pursuant to proposed FINRA Rule 
6540.02, which is part of the Proposal, FINRA would display (i.e., 
make viewable) SLATE data free of charge on its website for 
personal, non-commercial uses. See SLATE Fee Filing, 89 FR 93751. 
Additional detail regarding FINRA's proposed SLATE reporting fees 
and SLATE data product fees, as well as FINRA's related cost and 
revenue estimates, can be found in the SLATE Fee Filing.
    \351\ SLATE Fee Filing, 89 FR 93753. FINRA stated in the SLATE 
Fee Filing that it intends to reassess the SLATE reporting fees and 
data products and associated fees after the commencement of SLATE 
reporting and dissemination and obtaining additional information 
regarding reporting volumes and data product subscription interest. 
See SLATE Fee Filing, 89 FR 93753. And FINRA stated that, to the 
extent it determines that a change to the SLATE fee structure would 
be appropriate to better align SLATE revenues with the incremental 
direct ongoing costs incurred in connection with the SLATE program, 
FINRA would file a proposed rule change with the Commission to 
revise the proposed SLATE fees. See SLATE Fee Filing, 89 FR 93753.
    \352\ See SLATE Fee Filing, 89 FR 93750. Comments received in 
response to the SLATE Fee Filing can be found on the Commission's 
website at https://www.sec.gov/comments/sr-finra-2024-020/srfinra2024020.htm.
---------------------------------------------------------------------------

    Commenters on the Proposal also expressed views on how FINRA should 
allocate, via SLATE fees, the SLATE costs that it incurs.\353\ One 
commenter recommended that the Commission ensure FINRA imposes ``the 
costs of building and operating the reporting system equally on lenders 
and borrowers, instead of solely on lenders.'' \354\ Similarly, another 
commenter stated that the SLATE fees should ``be borne by market 
participants more broadly'' rather than solely by Covered Persons 
submitting data.\355\ One commenter expressed concern regarding the 
``disproportionate allocation of compliance costs'' to lenders and 
urged FINRA to exempt lenders (including lenders who may pool their 
data) from any fees associated with accessing SLATE data for commercial 
purposes to ensure equitable access to industry wide-data.\356\
---------------------------------------------------------------------------

    \353\ See, e.g., ICI Letter, at 9-10; ISLA Letter 1, at 12, 14; 
Letter from David Schwartz, Executive Director, Center for the Study 
of Financial Market Evolution (May 28, 2024) (``CSFME Letter''), at 
2-3. See also ISLA Americas Letter 2, at 9.
    \354\ ICI Letter, at 9-10.
    \355\ ISLA Letter 1, at 12, 14.
    \356\ CSFME Letter, at 2-3.
---------------------------------------------------------------------------

    That FINRA will incur costs to build and maintain SLATE and 
proposes to pass them to market participants through SLATE fees is 
consistent with Rule 10c-1a and what the Commission stated when 
adopting the rule, and also consistent with the Exchange Act.\357\ Rule 
10c-1a requires Covered Persons to report to an RNSA the required data 
elements set forth in the rule for Covered Securities loans, and 
requires the RNSA to make reported data publicly available. In the 
Adopting Release, the Commission stated that Rule 10c-1a will impose 
costs on an

[[Page 1584]]

RSNA, and that the RNSA may pass on these costs by imposing fees on 
entities that provide Rule 10c-1a information to the RNSA and/or 
consumers of the Rule 10c-1a data.\358\ This is what FINRA, the lone 
RNSA, has proposed to do in the SLATE Fee Filing. The proposed SLATE 
reporting fees would be paid by SLATE Participants under the SLATE Fee 
Filing, the effect of which may be that SLATE reporting fees are paid 
primarily by, and related SLATE costs borne by, Covered Person lenders 
and lending agents, i.e., entities that will provide Rule 10c-1a 
information to FINRA. And the proposed SLATE data product fees would be 
paid by, and related SLATE costs borne by, any person or organization 
subscribing to receive from FINRA downloadable files of SLATE data for 
commercial purposes, i.e., consumers of the Rule 10c-1a data.
---------------------------------------------------------------------------

    \357\ As stated elsewhere herein, the Commission has found that 
the Proposal, by implementing Rule 10c-1a, would help protect 
investors and promote just and equitable principles of trade, 
consistent with Section 15A(b)(6) of the Exchange Act. See, e.g., 
supra Part III.
    \358\ See Rule 10c-1a Adopting Release, 88 FR 75693. The 
Commission also understands that lenders may pass on their reporting 
costs to their customers. See Rule 10c-1a Adopting Release, 88 FR 
75693. In addition, a commenter has stated that it is more than 
likely that lending agents will pass on any fees that they bear. See 
ISLA Americas Letter 2, at 9. The Commission believes, however, that 
investors will ultimately benefit from the improved transparency 
provided by SLATE, as a result of enhanced price discovery and an 
improved ability to determine the extent to which their broker-
dealers and lending agents are obtaining terms consistent with 
market conditions for loans with similar characteristics. See supra 
notes 79-90 and accompanying text.
---------------------------------------------------------------------------

    To the extent commenters express views on what SLATE fees FINRA 
should charge or how FINRA should allocate SLATE fees,\359\ these 
comments are relevant to the Slate Fee Filing and not to this Proposal. 
Pursuant to the Section 19(b)(3)(A) and Rule 19b-4 procedures 
applicable to the SLATE Fee Filing, the Commission will separately 
consider whether the proposed fees set forth in the SLATE Fee Filing 
are consistent with Section 15A of the Exchange Act, and in particular 
Section 15A(b)(5),\360\ which requires that FINRA's rules 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 FINRA operates or controls. If it appears to the 
Commission that it is necessary or appropriate in the public interest, 
for the protection of investors, and otherwise in furtherance of the 
purposes of the Act, the Commission summarily may temporarily suspend 
the SLATE Fee Filing and institute proceedings to determine whether the 
SLATE Fee Filing should be approved or disapproved.\361\
---------------------------------------------------------------------------

    \359\ See, e.g., ISLA Americas Letter 2, at 9 (urging the 
Commission and FINRA to ensure that the cost structure related to 
the reporting of covered securities loans is equitable, and 
expressing an intention to submit comments with respect to the SLATE 
Fee Filing in a separate letter); CSFME Letter at 2-3 (urging that 
lenders be exempt from fees for SLATE data products to ensure 
equitable access to data).
    \360\ See 15 U.S.C. 78o-3(b)(5).
    \361\ See 15 U.S.C. 78s(b)(3)(C), 78s(b)(2)(B). The proposed 
SLATE reporting fees would not be implemented before January 2, 
2026, and the proposed SLATE data product fees would not be 
implemented before April 2, 2026. See SLATE Fee Filing, 89 FR 93753-
54 (stating that implementation of SLATE reporting fees and data 
product fees will correspond with Rule 10c-1a's compliance dates for 
the commencement of reporting to SLATE and SLATE data dissemination, 
respectively); Rule 10c-1a Adopting Release, 88 FR 75691 (setting 
forth Rule 10c-1a's compliance schedule). Should the Commission 
determine to suspend and institute proceedings on the SLATE Fee 
Filing, those proceedings would conclude before the January 2, 2026, 
implementation date for SLATE reporting fees. See 15 U.S.C. 
78s(b)(3)(C), 78s(b)(2)(B).
---------------------------------------------------------------------------

J. Other Issues Raised by Commenters Regarding the Proposal

1. Comment Period Extension
    Commenters on the proposed rule change, as originally proposed in 
the Notice, stated that the length of the comment period for FINRA's 
proposed rule change was too short, requesting that the comment period 
be extended.\362\ Commenters stated that a longer comment period was 
necessary to consider certain aspects of the proposed rule change, as 
originally proposed in the Notice.\363\ One commenter stated that, 
given that the proposed rule change, as originally proposed in the 
Notice, included requirements beyond those of Rule 10c-1a, ``it is 
especially important for the Commission to ensure it takes the time 
necessary to closely review FINRA's proposed rules and obtain fulsome 
public feedback.'' \364\
---------------------------------------------------------------------------

    \362\ See, e.g., ISLA Letter 1, at 1-2; SIFMA AMG Letter 1, at 
2; Associations Collective Letter, at 3; SIFMA AMG Letter 2, at 2, 
8.
    \363\ See SIFMA AMG Letter 1, at 2; SIFMA Letter, at 7-8.
    \364\ Associations Collective Letter, at 3.
---------------------------------------------------------------------------

    As discussed above, in Part I, the Commission extended until August 
5, 2024, the time period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to disapprove the proposed rule change. On August 
5, 2024, the Commission instituted proceedings to determine whether to 
approve or disapprove the proposed rule change, and allow for 
additional analysis of, and input from commenters with respect to, the 
scope and implementation of the proposed rules. On October 28, 2024, 
the Commission designated January 2, 2025, as the date by which the 
Commission shall either approve or disapprove the proposed rule change.
    Following the Commission's publication of its Notice of Designation 
of a Longer Period for Commission Action on a Proposed Rule Change to 
Adopt the FINRA Rule 6500 Series, some commenters submitted comments 
stating their concerns about--what commenters called--a 45-day 
``delay'' in implementing SLATE. Some commenters opposed the 
Commission's designation of a longer period within which to take action 
on FINRA's proposed rule change.\365\ Some commenters called the 
extension ``unacceptable'' or stated that the delay in the 
implementation of the FINRA rules could undermine the stability and 
transparency of the financial system and weaken investor 
confidence.\366\ The Commission's publication of its Notice of 
Designation of a Longer Period for Commission Action on a Proposed Rule 
Change to Adopt the FINRA Rule 6500 Series did not delay the 
implementation of SLATE. Pursuant to Rule 10c-1a, the date for the 
Proposal to be effective is no later than 12 months after the effective 
date of Rule 10c-1a, which is January 2, 2025.\367\
---------------------------------------------------------------------------

    \365\ See, e.g., Form Letter C.
    \366\ See, e.g., Form Letter C.
    \367\ See Rule 10c-1a Adopting Release, 88 FR 75691 (requiring 
that the proposed FINRA rules are effective no later than 12 months 
after the effective date of final Rule 10c-1a, and that covered 
persons must start reporting Rule 10c-1a information to an RNSA 
starting on the first business day 24 months after the effective 
date of final Rule 10c-1a).
---------------------------------------------------------------------------

2. SLATE Compliance Period(s)
    One commenter recommended that FINRA provide SLATE Participants 
with six months of user acceptance testing.\368\ The commenter stated 
that such testing ``will be a critical component of the development 
lifecycle--reducing risk and increasing the quality of submissions.'' 
\369\ Whether FINRA decides to provide for such testing, taking account 
of the applicable Rule 10c-1a compliance periods, is within FINRA's 
discretion to structure its systems and processes as it sees fit.\370\
---------------------------------------------------------------------------

    \368\ S3 Partners Letter, at 5.
    \369\ S3 Partners Letter, at 5.
    \370\ See, e.g., Rule 10c-1a Adopting Release, 88 75667 n.365.
---------------------------------------------------------------------------

    A commenter stated that the Commission should pause the Rule 10c-1a 
compliance dates until the legal challenge regarding Rule 10c-1a is 
resolved.\371\ Another commenter stated that the SEC and FINRA should 
``avoid pursuing'' the Proposal until the legal challenge is 
adjudicated.\372\ In general, the filing of a legal challenge to an 
agency rule does not itself alter the

[[Page 1585]]

compliance date(s) set forth in the rule. Accordingly, the challenge to 
Rule 10c-1a does not change the compliance date(s) set forth therein or 
the need for affected parties to comply with Rule 10c-1a.
---------------------------------------------------------------------------

    \371\ See Robinhood Letter, at 3 (referencing Nat'l Assoc. Priv. 
Fund Mgr. v. SEC, No. 23-60626 (5th Cir.)).
    \372\ See Hagerty Letter, at 3.
---------------------------------------------------------------------------

    Another commenter stated that the Commission should work with FINRA 
to afford FINRA an appropriate amount of additional time to address the 
feedback FINRA may receive on Partial Amendment No. 1, such as by 
allowing FINRA to consent to additional time for Commission 
consideration of the Proposal.\373\ As discussed above, in Parts I and 
III.J.1, January 2, 2025, is the date by which the Commission shall 
either approve or disapprove the Proposal and is the compliance date 
under Rule 10c-1a for the Proposal to be effective. The commenter's 
suggestion to allow additional time for the Proposal to be considered 
would extend consideration of the Proposal beyond, and therefore would 
be inconsistent with, the Rule 10c-1a compliance date for the Proposal 
to be effective.
---------------------------------------------------------------------------

    \373\ See SIFMA and SIFMA AMG Letter, at 2. The commenter 
suggested that the Commission ``allow[ ] FINRA to consent to 
additional time for Commission consideration of the SLATE proposal 
under Section 19(b)(2)(B)(ii) of the Exchange Act.'' SIFMA and SIFMA 
AMG Letter, at 2.
---------------------------------------------------------------------------

K. Issues Outside the Scope of the Proposal

    The Commission received comments on the Draft SLATE Participant 
Reporting Specifications.\374\ The SLATE Participant Reporting 
Specifications were not filed or required to be filed with the 
Commission as part of the Proposal. These issues are outside the scope 
of the Proposal, which, as discussed above in Parts III.A through 
III.J, is consistent with Section 15A(b)(6) of the Exchange Act. FINRA 
responded to comments regarding the Technical Specifications for SLATE 
Reporting in the FINRA Letter.\375\
---------------------------------------------------------------------------

    \374\ See, e.g., ISLA Americas Letter 1, at 13-14, 17; ISLA 
Americas Letter 2, at 4, 8; FIF Letter, at 3-4. See also FIF Letter, 
at 6, 8. FINRA has included on its website additional information 
regarding SLATE, including the Participation Specification for 
Securities Lending and Transparency Engine (SLATE\TM\). See 
Securities Lending and Transparency Engine, FINRA (last visited 
December 19, 2024), https://www.finra.org/filing-reporting/slate. 
Some commenters stated that reporting the data elements in proposed 
Rule 6530(a)(2)(I) and (J) will not always enable Covered Persons to 
provide a complete depiction of the specific fee arrangement used 
for certain reported covered securities loans within the limited 
space of the SLATE field for the rebate rate or lending fee. See 
SIFMA and SIFMA AMG Letter, at 4-5; ISLA Americas Letter 2, 6-7. The 
structuring of particular data fields within a SLATE report is 
discussed in the SLATE Participant Reporting Specifications, which 
were not filed or required to be filed with the Commission as part 
of the Proposal.
    \375\ See FINRA Letter, at 11-12.
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L. Consultation With the Treasury Department

    Pursuant to Section 19(b)(6) of the Act,\376\ the Commission has 
considered the sufficiency and appropriateness of existing laws and 
rules applicable to government securities brokers, government 
securities dealers, and their associated persons in approving the 
proposed rule change. Pursuant to Section 19(b)(5) of the Act,\377\ the 
Commission consulted with and considered the views of the Treasury 
Department in determining whether to approve the proposed rule change. 
The Treasury Department did not object to the proposed rule change.
---------------------------------------------------------------------------

    \376\ 15 U.S.C. 78s(b)(6).
    \377\ 15 U.S.C. 78s(b)(5) (providing that the Commission ``shall 
consult with and consider the views of the Secretary of the Treasury 
prior to approving a proposed rule filed by a registered securities 
association that primarily concerns conduct related to transactions 
in government securities, except where the Commission determines 
that an emergency exists requiring expeditious or summary action and 
publishes its reasons therefor'').
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\378\ that the proposed rule change (SR-FINRA-2024-007), as 
modified by Partial Amendment No. 1, be, and hereby is, approved.
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    \378\ 15 U.S.C. 78s(b)(2).
    \379\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\379\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-00179 Filed 1-7-25; 8:45 am]
BILLING CODE 8011-01-P
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