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US SEC adopts final rules on short selling information reporting and securities lending market

The US Securities and Exchange Commission (SEC) adopted rules to provide greater transparency into the short sale related data as well as the securities lending market. 

Final rule on short selling information reporting and amendment to the NMS Plan: The SEC adopted new Rule 13f-2 as well as an amendment to the National Market System (NMS Plan) governing the consolidated audit trail (CAT). 

  • The amendments to the NMS Plan governing CAT will require each CAT reporting firm that is reporting short sales to indicate when it is asserting use of the bona fide market making exception in Rule 203(b)(2)(iii) of Regulation SHO

Next steps for short selling: The final rules for Rule 13f-2, Form SHO, and amendment to the CAT NMS Plan will become effective 60 days after publication in the Federal Register.

  • The compliance date for Rule 13f-2 and Form SHO will be 12 months after the effective date of the adopting release, with public aggregate reporting to follow three months later, and the compliance date for the amendment to the CAT NMS Plan will be 18 months after the effective date of the adopting release

Final rule on to increase transparency in the securities lending market: The SEC adopted new Rule 10c-1a, which will require certain persons to report information about securities loans to a registered national securities association (RNSA) and require RNSAs to make publicly available certain information that they receive regarding those lending transactions. 

  • Rule 10c-1a will require certain confidential information to be reported to an RNSA to enhance the RNSA’s oversight and enforcement functions
  • Further, the new rule requires that an RNSA make certain information it receives, along with daily information pertaining to the aggregate transaction activity and distribution of loan rates for each reportable security, available to the public 
  • Currently, the Financial Industry Regulatory Authority (FINRA) is the only RNSA

Next steps for securities lending: The final rule will become effective 60 days after publication of the adopting release in the Federal Register. The compliance dates for the new rule will be as follows: 

  1. An RNSA is required to propose rules within four months of the effective date 
  2. The proposed RNSA rules are required to be effective no later than 12 months after the effective date
  3. Covered persons are required to report information required by the rule to an RNSA starting on the first business day 24 months after the effective date
  4. RNSAs are required to publicly report information within 90 calendar days of the reporting date

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