Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Adopt the FINRA Rule 6500 Series (Securities Lending and Transparency Engine (SLATETM)), 38203-38217 [2024-09847]
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Federal Register / Vol. 89, No. 89 / Tuesday, May 7, 2024 / Notices
Commission estimates that the total
annual hour burden to comply with
Rule 17g–5(a)(3) will be 61,899 hours.
The Commission further estimates that
this annual hour burden will result in
a total annual cost of $14,126,168. This
cost is attributable to costs that may be
incurred by NRSROs and arrangers of
asset-backed securities posting
information on a password-protected
website, as required by Rule 17g–5, and
preparing and procuring representations
to determine whether an exemption
under the rule applies, as well as costs
incurred by NRSROs preparing
certifications required under the rule to
gain access to websites maintained by
other NRSROs or arrangers of assetbacked securities.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information on respondents; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted by
July 8, 2024.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
Please direct your written comments
to: Dave Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F St NE, Washington, DC
20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: May 1, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–09850 Filed 5–6–24; 8:45 am]
BILLING CODE 8011–01–P
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SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–563, OMB Control No.
3235–0693]
Proposed Collection; Comment
Request; Extension: Rules 17g–8 and
17g–9
Upon Written Request, Copies
Available From: Securities and
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Exchange Commission, Office of FOIA
Services, 100 F Street NE, Washington,
DC 20549–2736
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rules 17g–8 and 17g–9
(17 CFR 240.17g–8 and 17 CFR 240.17g–
9) under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.). The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget for
extension and approval.
Rules 17g–8 and 17g–9 set forth
collection of information requirements.
Specifically, Rule 17g–8 requires
nationally recognized statistical rating
organizations (‘‘NRSROs’’) to establish,
maintain, enforce, and document
policies and procedures that are
reasonably designed to achieve the
objectives articulated in the rule.
Generally, these policies and procedures
pertain to (i) the procedures and
methodologies NRSROs use to
determine credit ratings, and (ii) the
symbols, numbers, or scores NRSROs
use to denote credit ratings.1 Rule 17g–
8 also requires that the policies and
procedures an NRSRO is required to
establish, maintain, and enforce
pursuant to Section 15E(h)(4)(A) of the
Securities Exchange Act of 1934 must,
at a minimum, include policies and
procedures reasonably designed to
achieve the objectives articulated in the
rule.2 Rule 17g–9 requires each NRSRO
to establish, maintain, enforce, and
document standards of training,
experience, and competence for the
individuals it employs to participate in
the determination of credit ratings that
are reasonably designed to achieve the
objective that the NRSRO produces
accurate credit ratings.3
Currently, there are 10 credit rating
agencies registered as NRSROs with the
Commission. The Commission estimates
that the total annual hour burden for
NRSROs to comply with Rule 17g–8 and
Rule 17g–9 is 1,450 hours and 34,658
hours, respectively. The Commission
further estimates that these annual hour
burdens will result in a total annual cost
with respect to Rule 17g–8 of $539,400
and with respect to Rule 17g–9 of
$12,951,746. These costs are attributable
to costs NRSROs may incur in
completing updates and other activities
relating to the policies and procedures
adopted pursuant to Rule 17g–8 and the
240.17g–8(a) and (b).
240.17g–8(c).
3 See 240.17g–9.
standards adopted pursuant to Rule
17g–9, and in conducting the periodic
testing of credit analysts pursuant to
standards adopted under Rule 17g–9.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information on respondents; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted by
July 8, 2024.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
Please direct your written comments
to: Dave Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F St NE, Washington, DC
20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: May 1, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–09849 Filed 5–6–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100046; File No. SR–
FINRA–2024–007]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a
Proposed Rule Change To Adopt the
FINRA Rule 6500 Series (Securities
Lending and Transparency Engine
(SLATETM))
May 1, 2024.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 1,
2024, the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
1 See
2 See
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38203
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 89, No. 89 / Tuesday, May 7, 2024 / Notices
and III below, which Items have been
prepared by FINRA. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing, as required by
Securities Exchange Act Rule 10c–1a, 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 text of the proposed rule change
is available on FINRA’s website at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
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(i) Background
On October 13, 2023, the Commission
adopted new SEA Rule 10c–1a 3 to
require any ‘‘covered person’’ 4 who
agrees to a ‘‘covered securities loan’’ 5 to
3 See 17 CFR 240.10c–1a (‘‘SEA Rule 10c–1a’’);
Securities Exchange Act Release No. 98737 (October
13, 2023), 88 FR 75644 (November 3, 2023)
(Reporting of Securities Loans) (‘‘Adopting
Release’’).
4 SEA Rule 10c–1a(j)(1) defines a ‘‘covered
person’’ as (i) any person that agrees to a covered
securities loan on behalf of a lender
(‘‘intermediary’’) other than a clearing agency when
providing only the functions of a central
counterparty pursuant to Rule 17Ad–22(a)(2) of the
Exchange Act or a central securities depository
pursuant to Rule 17Ad–22(a)(3) of the Exchange
Act; or (ii) any person that agrees to a covered
securities loan as a lender when an intermediary is
not used unless paragraph (j)(1)(iii) of this section
applies; or (iii) a broker or dealer when borrowing
fully paid or excess margin securities pursuant to
Rule 15c3–3(b)(3) of the Exchange Act.
5 SEA Rule 10c–1a(j)(2) defines a ‘‘covered
securities loan’’ as a transaction in which any
person on behalf of itself or one or more other
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provide specified information to a
Registered National Securities
Association (‘‘RNSA’’).6 The RNSA is
then required to make publicly available
information regarding reported
securities loans, as described in SEA
Rule 10c–1a.7 In its Adopting Release,
the Commission stated that SEA Rule
10c–1a would increase transparency in
the securities lending market, resulting
in a reduction of the information
disadvantage faced by end borrowers
and beneficial owners, improved price
discovery, increased competition among
providers of securities lending analytics
services, reduced costs associated with
tracking market conditions for brokerdealers and lending programs, and
improved decision-making by investors,
beneficial owners and other market
participants.8 The Commission stated its
belief that the rule would likely reduce
the borrowing costs of some securities,
improving price discovery, liquidity,
and capital formation in the underlying
security markets, and would benefit
investors by increasing the ability of
regulators to surveil, study, and provide
oversight of both the securities lending
market and individual market
participants.9
Covered Person Reporting Requirements
SEA Rule 10c–1a prescribes the items
of information that covered persons
must report to an RNSA regarding a
covered securities loan. These
reportable data elements include both
non-confidential items of information
that would be publicly disseminated
(i.e., the items of information specified
in SEA Rule 10c–1a(c)(1) through (12))
as well as confidential items of
information that would not be publicly
disseminated (i.e., the items of
persons, lends a reportable security to another
person, with exclusions for a position at a clearing
agency that results from central counterparty
services pursuant to Rule 17Ad–22(a)(2) of the
Exchange Act or central securities depository
services pursuant to Rule 17Ad–22(a)(3) of the
Exchange Act and the use of margin securities, as
defined in Rule 15c3–3(a)(4) of the Exchange Act,
by a broker or dealer. ‘‘Reportable security’’ is
defined in SEA Rule 10c–1a(j)(3) as any security or
class of an issuer’s securities for which information
is reported or required to be reported to the
consolidated audit trail as required by § 242.613 of
the Exchange Act and the CAT NMS Plan (‘‘CAT’’),
the Financial Industry Regulatory Authority’s Trade
Reporting and Compliance Engine (‘‘TRACE’’), or
the Municipal Securities Rulemaking Board’s RealTime Transaction Reporting System (‘‘RTRS’’), or
any reporting system that replaces one of these
systems.
6 SEA Rule 10c–1a(j)(5) defines an RNSA as an
association of brokers and dealers that is registered
as a national securities association pursuant to 15
U.S.C. 78o–3 of the Exchange Act. FINRA currently
is the only RNSA.
7 See SEA Rule 10c–1a(g).
8 See Adopting Release, 88 FR 75644, 75692.
9 See Adopting Release, 88 FR 75644, 75692–93.
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information specified in SEA Rule 10c–
1a(e)(1) through (3)).
Specifically, SEA Rule 10c–1a(c)
requires covered persons to report the
following non-confidential items of
information to an RNSA, if applicable,
by the end of the day 10 on which the
covered securities loan is effected:
(1) The legal name of the security
issuer, and the Legal Entity Identifier
(‘‘LEI’’) of the issuer, if the issuer has a
non-lapsed LEI;
(2) The ticker symbol, International
Securities Identification Number
(‘‘ISIN’’), Committee on Uniform
Securities Identification Procedures
(‘‘CUSIP’’), or Financial Instrument
Global Identifier (‘‘FIGI’’) of the
security, or other security identifier;
(3) The date the covered securities
loan was effected;
(4) The time the covered securities
loan was effected;
(5) The name of the platform or venue
where the covered securities loan was
effected;
(6) The amount, such as size, volume,
or both, of the reportable securities
loaned;
(7) The type of collateral used to
secure the covered securities loan;
(8) For a covered securities loan
collateralized by cash, the rebate rate or
any other fee or charges;
(9) For a covered securities loan not
collateralized by cash, the securities
lending fee or rate, or any other fee or
charges;
(10) The percentage of collateral to
value of reportable securities loaned
required to secure such covered
securities loan;
(11) The termination date of the
covered securities loan; and
(12) Whether the borrower is a broker
or dealer, a customer (if the person
lending securities is a broker or dealer),
a clearing agency, a bank, a custodian,
or other person.
With respect to the confidential items
of information, SEA Rule 10c–1a(e)
requires covered persons to report the
following items of information to an
RNSA, if applicable, by the end of the
day on which the covered securities
loan is effected:
(1) If known, the legal name of each
party to the covered securities loan,
other than the customer from whom a
broker or dealer borrows fully paid or
excess margin securities pursuant to
Rule 15c3–3(b)(3) of the Exchange Act,
Central Registration Depository (‘‘CRD’’)
or Investment Adviser Registration
Depository (‘‘IARD’’) Number, market
10 SEA Rule 10c–1a permits the RNSA to define
‘‘end of the day’’ for the purposes of the rule. See
Adopting Release, 88 FR 75644, 75648 n.72.
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participant identification (‘‘MPID’’), and
the LEI of each party to the covered
securities loan, and whether such
person is the lender, the borrower, or an
intermediary between the lender and
the borrower;
(2) If the person lending securities is
a broker or dealer and the borrower is
its customer, whether the security is
loaned from a broker’s or dealer’s
securities inventory to a customer of
such broker or dealer; and
(3) If known, whether the covered
securities loan is being used to close out
a fail to deliver pursuant to Rule 204 of
Regulation SHO or to close out a fail to
deliver outside of Regulation SHO.
SEA Rule 10c–1a also requires
covered persons to report specified
modifications to covered securities
loans. Specifically, if a loan
modification occurs after the nonconfidential data elements for the
covered securities loan were reported to
an RNSA pursuant to SEA Rule 10c–
1a(c), and results in a change to any of
the non-confidential data elements
previously provided to an RNSA, SEA
Rule 10c–1a(d)(1) requires a covered
person to provide to the RNSA: (1) the
date and time of the modification; (2)
the specific modification and the
specific non-confidential data element
being modified; and (3) the unique
identifier assigned by the RNSA to the
original covered securities loan. With
respect to a modification to a covered
securities loan for which reporting
under SEA Rule 10c–1a was not
required on the date the loan was agreed
to or last modified that results in a
change to any of the non-confidential
data elements required to be provided to
an RNSA under SEA Rule 10c–1a(c),
SEA Rule 10c–1a(d)(2) requires that the
covered person report all of the nonconfidential data elements to the RNSA
as of the date of the modification, as
well as the date and time of the
modification.
RNSA Publication of Data
SEA Rule 10c–1a(g) (RNSA
publication of data) sets forth the
requirements applicable to an RNSA
regarding securities loan data
publication. Specifically, SEA Rule 10c–
1a(g)(1) provides that, following receipt
of the non-confidential data elements
discussed above, as soon as practicable,
and not later than the morning of the
business day after the covered securities
loan is effected, the RNSA must assign
a unique identifier to the covered
securities loan, and make publicly
available for each covered securities
loan effected on the previous business
day: (1) the unique identifier assigned
by the RNSA; (2) the non-confidential
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data elements required to be reported
pursuant to SEA Rule 10c–1a(c), other
than the loan amount; and (3) the
security identifier under SEA Rule 10c–
1a(c)(1) or 10c–1a(c)(2) that the RNSA
determines is appropriate to identify the
security (e.g., the security’s ticker
symbol or CUSIP identifier).
SEA Rule 10c–1a(g)(2) provides that,
following receipt of the non-confidential
data elements reported pursuant to SEA
Rule 10c–1a(c), on the twentieth
business day after the covered securities
loan is effected, the RNSA must make
publicly available the loan amount
reported to the RNSA pursuant to SEA
Rule 10c–1a(c)(6) along with the
applicable loan and security identifying
information.
With respect to modifications to
covered securities loans previously
reported to the RNSA, SEA Rule 10c–
1a(g)(3)(i) provides that, following the
receipt of information regarding a
modification (pursuant to SEA Rule
10c–1a(d)), the RNSA must assign a
unique identifier to the covered
securities loan (if one has not already
been assigned), and as soon as
practicable, and not later than the
morning of the business day after the
covered securities loan is modified,
make publicly available information
pertaining to any modification to the
non-confidential data elements required
to be reported pursuant to SEA Rule
10c–1a(c), other than the loan amount.
With respect to covered securities loans
for which reporting was not required on
the date the loan was agreed to or last
modified (i.e., a loan for which nonconfidential data elements are reported
to an RNSA pursuant to paragraph (d)(2)
of SEA Rule 10c–1a), the RNSA must
make publicly available all of the nonconfidential data elements required to
be reported pursuant to SEA Rule 10c–
1a(c), other than the loan amount.11
With respect to loan amounts, SEA
Rule 10c–1a(g)(3)(ii) provides that, on
the twentieth business day after the
covered securities loan is modified, the
RNSA must make publicly available the
loan amount reported to the RNSA
pursuant to SEA Rule 10c–1a(c)(6) along
with the applicable loan and security
identifying information.
The RNSA is required to keep
confidential and not disseminate the
confidential data elements reported
pursuant to SEA Rule 10c–1a(e).12
11 See
SEA Rule 10c–1a(g)(3) and (3)(i).
SEA Rule 10c–1a(g)(4). In addition to
keeping the information confidential, an RNSA is
required to establish, maintain, and enforce
reasonably designed written policies and
procedures to maintain the security and
confidentiality of the confidential information. See
SEA Rule 10c–1a(h)(4).
12 See
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38205
In addition, SEA Rule 10c–1a(g)(5)
provides that, following the receipt of
information reported pursuant to SEA
Rule 10c–1a(c) when a covered
securities loan is effected, or reported
pursuant to SEA Rule 10c–1a(d) when a
covered securities loan is modified, the
RNSA must, as soon as practicable and
not later than the morning of the
business day after a covered securities
loan is effected or modified, make
publicly available, on a daily basis,
information pertaining to the aggregate
loan transaction activity and
distribution of loan rates for each
reportable security and the security
identifier(s) that an RNSA determines is
appropriate to identify the security (e.g.,
the security’s ticker symbol or CUSIP
identifier).
Reporting Agents
SEA Rule 10c–1a(a)(2) permits a
covered person to rely on a reporting
agent to fulfill its reporting obligations
under Rule 10c–1a. In order to use a
reporting agent to fulfill its SEA Rule
10c–1a information reporting
obligations, a covered person must: (1)
enter into a written agreement with the
reporting agent, and (2) provide the
reporting agent with timely access to the
required SEA Rule 10c–1a
information.13 A reporting agent that
assumes the reporting obligation on
behalf of a covered person (pursuant to
paragraph (a)(2)) is then required to
provide the SEA Rule 10c–1a
information to an RNSA, in the format
and manner required by the applicable
rule(s) of such RNSA (and within the
time periods specified in SEA Rule 10c–
1a(c) through (e)).14 A reporting agent is
also required to enter into a written
agreement with an RNSA that permits
the reporting agent to provide SEA Rule
10c–1a information to an RNSA on
behalf of a covered person 15 and to
provide an RNSA with a list naming
each covered person on whose behalf
the reporting agent is providing SEA
Rule 10c–1a information (and provide
an RNSA with any updates to the list of
such persons by the end of the day such
list changes).16
RNSA Rules, Fees and Data Retention
Requirements
SEA Rule 10c–1a(f) requires an RNSA
to implement rules regarding the format
and manner of its collection of
information described in paragraphs
10c–1a(c) through 10c–1a(e) and make
publicly available such information in
13 See
SEA Rule 10c–1a(a)(2).
SEA Rule 10c–1a(b)(1).
15 See SEA Rule 10c–1a(b)(3).
16 See SEA Rule 10c–1a(b)(4).
14 See
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accordance with rules promulgated by
the RNSA pursuant to section 19(b) of
the Exchange Act and Rule 19b–4
thereunder; SEA Rule 10c–1a(i) also
permits an RNSA to establish and
collect reasonable fees pursuant to rules
established under section 19(b) of the
Exchange Act and Rule 19b–4
thereunder.17 SEA Rule 10c–1a(h)
imposes data retention and availability
requirements on an RNSA related to its
collection of SEA Rule 10c–1a
information. Specifically, an RNSA
must retain the information collected
pursuant to paragraphs (c) through (e) of
SEA Rule 10c–1a in a convenient and
usable standard electronic data format
that is machine readable and text
searchable without any manual
intervention for a period of five years 18
and make the non-confidential
information collected pursuant to
paragraphs (c) and (d) of SEA Rule 10c–
1a available to the public (in the same
manner it is maintained) on an RNSA’s
website or similar means of electronic
distribution, without use restrictions,
for a period of at least five years.19 An
RNSA must also make the information
collected pursuant to paragraphs (b)(4)
and (c) through (e) of SEA Rule 10c–1a
available to the Commission; or other
persons as the Commission may
designate by order upon a demonstrated
regulatory need.20 With respect to the
confidential information collected by an
RNSA pursuant to paragraph (e) of SEA
Rule 10c–1a, paragraph (h)(4) requires
an RNSA to establish, maintain, and
enforce reasonably designed written
policies and procedures to maintain the
security and confidentiality of such
confidential information.
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(ii) Proposed Rule Change
Consistent with SEA Rule 10c–1a,
FINRA is proposing to adopt the new
FINRA Rule 6500 Series (Securities
Lending and Transparency Engine
(SLATE)) 21 to establish reporting
requirements for covered securities
loans and to provide for the
dissemination of individual and
17 See SEA Rule 10c–1a(f) and (i). FINRA does not
have regulatory authority over Covered Persons or
Reporting Agents that are non-FINRA members. As
FINRA does today, FINRA would refer to the SEC
potential violations of the federal securities laws
and rules by non-members, including failures to
comply with SEA Rule 10c–1a and FINRA rules
adopted pursuant to SEA Rule 10c–1a (e.g.,
potential SLATE reporting violations or failures to
pay when due any SLATE reporting fees).
18 See SEA Rule 10c–1a(h)(1).
19 See SEA Rule 10c–1a(h)(3).
20 See SEA Rule 10c–1a(h)(2).
21 SLATE is the automated system developed by
FINRA that, among other things, will accommodate
reporting and dissemination of loan reports where
applicable in covered securities loans. See proposed
Rule 6510(g).
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aggregate covered securities loan
information and loan rate statistics.22
Among other things, 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, including
prescribing required modifiers and
indicators. FINRA intends to file
separately a proposed rule change to
establish covered securities loan
reporting fees and securities loan data
products and associated fees.
Reporting Initial Covered Securities
Loans
Proposed Rule 6530(a) would govern
the reporting requirements applicable to
Covered Persons for reporting Initial
Covered Securities Loans.23 Proposed
Rule 6510(e) 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 SEA Rule 10c–1a.24
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, for Initial Covered
Securities Loans effected on a business
day at or after 12:00:00 a.m. Eastern
Time (‘‘ET’’) through 7:45:00 p.m. ET,
the required information must be
reported the same day before 8:00:00
p.m. ET.25 For Initial Covered Securities
Loans effected on a business day after
7:45:00 p.m. ET, the required
information must be reported no later
than the next business day (T+1) before
8:00:00 p.m. ET; 26 and Initial Covered
Securities Loans effected on a Saturday,
a Sunday, a federal or religious holiday
22 FINRA may validate and reject submissions to
SLATE that FINRA believes are noncompliant or
otherwise inconsistent with SEA 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 may also block or reject any
activity to the extent such activity puts the normal
functioning of the SLATE system at risk.
23 As discussed above, a Covered Person may
engage a Reporting Agent to comply with the
reporting obligations on its behalf, consistent with
the conditions of SEC Rule 10c–1a. See proposed
Rule 6510(k) (defining ‘‘Reporting Agent’’); see also
infra n.60.
24 See proposed Rule 6510(k) (among other
things, defining ‘‘Covered Person’’ and ‘‘Covered
Securities Loan’’ by reference to SEA Rule 10c–1a,
which defines ‘‘covered person’’ and ‘‘covered
securities loan’’ in paragraphs (j)(1) and (2),
respectively); see also supra notes 4–5.
25 See proposed Rule 6530(a)(1)(A).
26 See proposed Rule 6530(a)(1)(B).
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or other day on which SLATE is not
open at any time during that day
(determined using Eastern Time) must
be reported the next business day (T+1)
before 8:00:00 p.m. ET.27
Proposed Rule 6530(a)(2) (Loan
Information To Be Reported) would
specify the items of information that
must be reported to FINRA. Specifically,
proposed Rule 6530(a)(2)(A) through (N)
would require that Initial Covered
Securities Loan reports must contain the
below non-confidential data elements:
(1) The legal name of the security
issuer and the LEI of the issuer (if the
issuer has a non-lapsed LEI);
(2) Security symbol, CUSIP, ISIN, or
FIGI, if any;
(3) The date the Covered Securities
Loan was effected;
(4) The time the Covered Securities
Loan was effected;
(5) The expected settlement date of
the Covered Securities Loan;
(6) The platform or venue where the
Covered Securities Loan was effected; 28
(7) The amount of the Reportable
Securities loaned; 29
(8) The type of collateral used to
secure the Covered Securities Loan;
(9) For a Covered Securities Loan
collateralized by cash, the rebate rate;
(10) For a Covered Securities Loan not
collateralized by cash, the securities
lending fee;
(11) Any other fees or charges; 30
(12) The percentage of collateral to
value of Reportable Securities loaned
required to secure such Covered
Securities Loan;
(13) For a Covered Securities Loan
with a specified term, the termination
date of the Covered Securities Loan; 31
and
27 See
proposed Rule 6530(a)(1)(C).
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.
29 Proposed Rule 6530(a)(3) specifies that when
reporting the loan amount pursuant to
6530(a)(2)(G), 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 TRACE
or the MSRB’s RTRS, a Covered Person must report
the total par value of the securities loaned.
30 When reporting a rebate rate or lending fee
pursuant to 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.
31 This field would remain blank if reporting a
Covered Securities Loan without a specified term
(i.e., an open-ended loan). However, upon the
termination of an open-ended loan, as is the case
with a term loan, a Covered Person would be
required to submit a Loan Modification appending
the terminated loan indicator pursuant to proposed
Rule 6530(c)(4). See infra n.48 and accompanying
text.
28 FINRA
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(14) Whether the borrower is a
Broker 32 or Dealer,33 a customer (if the
person lending securities is a Broker or
Dealer), a Clearing Agency,34 a Bank,35
a Custodian,36 or other person.
Consistent with SEA Rule 10c–1a(e),
proposed Rule 6530(a)(2)(O) through (U)
would also require that Initial Covered
32 Proposed Rule 6510(j) would define ‘‘Broker’’
by reference to Exchange Act section 3(a). Exchange
Act section 3(a)(4)(A) defines a ‘‘broker’’ as any
person engaged in the business of effecting
transactions in securities for the account of others,
with exceptions for certain bank activities specified
in Exchange Act section 3(a)(4)(B).
33 Proposed Rule 6510(j) would define ‘‘Dealer’’
by reference to Exchange Act section 3(a). Exchange
Act section 3(a)(5)(A) defines a ‘‘dealer’’ as any
person engaged in the business of buying and
selling securities (not including security-based
swaps, other than security-based swaps with or for
persons that are not eligible contract participants)
for such person’s own account through a broker or
otherwise, with exceptions for persons not engaged
in the business of dealing (Exchange Act section
3(a)(5)(B)) and for certain bank activities specified
in Exchange Act section 3(a)(5)(C).
34 Proposed Rule 6510(j) would define ‘‘Clearing
Agency’’ by reference to Exchange Act section 3(a).
Exchange Act section 3(a)(23)(A) defines a ‘‘clearing
agency’’ as any person who acts as an intermediary
in making payments or deliveries or both in
connection with transactions in securities or who
provides facilities for comparison of data respecting
the terms of settlement of securities transactions, to
reduce the number of settlements of securities
transactions, or for the allocation of securities
settlement responsibilities. Such term also means
any person, such as a securities depository, who (i)
acts as a custodian of securities in connection with
a system for the central handling of securities
whereby all securities of a particular class or series
of any issuer deposited within the system are
treated as fungible and may be transferred, loaned,
or pledged by bookkeeping entry without physical
delivery of securities certificates, or (ii) otherwise
permits or facilitates the settlement of securities
transactions or the hypothecation or lending of
securities without physical delivery of securities
certificates. Exchange Act section 3(a)(23)(B)
provides exceptions to the definition of a ‘‘clearing
agency.’’
35 Proposed Rule 6510(j) would define ‘‘Bank’’ by
reference to Exchange Act section 3(a). Exchange
Act section 3(a)(6) defines a ‘‘bank’’ as (A) a
banking institution organized under the laws of the
United States or a Federal savings association, as
defined in section 1462(5)of title 12, (B) a member
bank of the Federal Reserve System, (C) any other
banking institution or savings association, as
defined in section 1462(4)of title 12, whether
incorporated or not, doing business under the laws
of any State or of the United States, a substantial
portion of the business of which consists of
receiving deposits or exercising fiduciary powers
similar to those permitted to national banks under
the authority of the Comptroller of the Currency
pursuant to section 92a of title 12, and which is
supervised and examined by State or Federal
authority having supervision over banks or savings
associations, and which is not operated for the
purpose of evading the provisions of this chapter,
and (D) a receiver, conservator, or other liquidating
agent of any institution or firm included in clauses
(A), (B), or (C).
36 Proposed Rule 6510(c) would define
‘‘Custodian’’ by reference to Exchange Act section
3(a)(4)(B)(viii) as a broker or bank that is providing
safekeeping or custody services as described in
Exchange Act section 3(a)(4)(B)(viii)(I)(aa) or (bb) in
connection with the Covered Securities Loan.
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Securities Loan reports contain the
below confidential data elements:
(1) If known, the legal name of each
party to the Covered Securities Loan
(other than the customer from whom a
Broker or Dealer borrows fully paid or
excess margin securities pursuant to
SEA Rule 15c3–3(b)(3));
(2) If known, the CRD Number or
IARD Number of each party to the
Covered Securities Loan, if applicable;
(3) If known, the MPID of each party
to the Covered Securities Loan;
(4) If known, the LEI of each party to
the Covered Securities Loan;
(5) If known, whether each party to
the Covered Securities Loan is the
lender, the borrower, or an intermediary
between the lender and the borrower;
(6) 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 the customer of
such Broker or Dealer; and
(7) 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.
Additionally, proposed Rule
6530(a)(2)(V) through (Y) would require
a Covered Person to report:
(1) Whether the Covered Person is the
lender, borrower or intermediary;
(2) The unique internal identifier
assigned to the Covered Securities Loan
by the Covered Person responsible for
reporting the loan to SLATE;
(3) 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; 37 and
(4) Such modifiers and indicators as
required by either the Rule 6500 Series
or the SLATE Participant specification.
FINRA intends to use the information
required by proposed Rule 6530(a)(2)(V)
37 Individual participants in agency lending
programs generally authorize an agent lender,
pursuant to agency lending agreements, to lend
their securities on their behalf. As discussed in the
Adopting Release, reporting obligations under SEA
Rule 10c–1a can depend 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). See generally Adopting
Release, 88 FR 75644, 75664. If the Initial Covered
Securities Loan is an allocation of an omnibus loan
effected pursuant to an agency lending agreement,
proposed Rule 6530(a)(2)(W) and (X) would require
that the SLATE report include both the Covered
Person’s unique internal identifier for the Covered
Securities Loan (i.e., the report of the allocation)
and the Covered Person’s unique internal identifier
for the associated omnibus loan.
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38207
(requiring Covered Persons to identify
whether the Covered Person is the
lender, borrower or intermediary),
proposed Rule 6530(a)(2)(W) (requiring
Covered Persons to report the unique
internal identifier it has assigned for the
loan), and proposed Rule 6530(a)(2)(X)
(requiring, for a loan that is an
allocation of an omnibus loan, that
Covered Persons report the unique
internal identifier it has assigned for the
associated omnibus loan) for data
validation and regulatory purposes. For
example, the Covered Person party type
(i.e., lender, borrower or intermediary)
would provide necessary information
regarding the identity of the Covered
Person under the Rule, including in
instances where a party other than the
Covered Person submits the report to
SLATE. The Covered Person’s internal
identifier for the loan would allow for
the identification of a Covered
Securities Loan in the audit trail prior
to the assignment of a loan identifier by
FINRA. For example, the internal
identifier assigned by a Covered Person
would be used to associate an Initial
Covered Securities Loan with a Loan
Modification submitted on the same
day, prior to the assignment of a loan
identifier by FINRA. The Covered
Person’s unique internal omnibus loan
identifier would be used to identify
allocations and reallocations of Covered
Securities Loans that are associated with
an omnibus-level loan arranged by an
agent lender. Obtaining this identifier
would allow FINRA, for example, to
provide the public with more granular
insight into the day’s loan activity in its
disseminated data.38 FINRA believes
that requiring Covered Persons to report
unique internal identifiers—in whatever
alphanumeric format preferred by the
firm—strikes an appropriate balance by
ensuring that FINRA receives important
information for use in identifying and
linking associated reports without
requiring firms to assign an identifier
using a prescribed format or convention.
The modifiers and indicators—set
forth in proposed Rule 6530(c)
(Modifiers and Indicators)—apply to
specific scenarios where additional
38 As required by SEA Rule 10c–1a(g)(5), FINRA
would make publicly available, on a daily basis,
information pertaining to the aggregate loan
transaction activity for each Reportable Security
based on the prior business day’s activity. The
omnibus loan identifier would allow FINRA to
identify allocations of an omnibus loan arranged by
an agent lender and determine when an Initial
Covered Securities Loan reported to SLATE is
actually a reallocation of some portion of a
preexisting omnibus loan. This would allow FINRA
to filter the amounts of any such loan reallocations
from the aggregate loan volumes that FINRA
proposes to disseminate for each Reportable
Security on a given day, as specified in proposed
FINRA Rule 6540(c)(1).
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detail is appropriate to clarify the
information required to be reported
pursuant to proposed Rule 6530(a)(2)
and (b)(2).39 FINRA intends to use these
modifiers and indicators to provide
regulators and the public with
important information regarding the
reported securities loan. Specifically,
proposed Rule 6530(c)(1) (Exclusive
Arrangement) would require a Covered
Person to append an indicator to
identify a loan made pursuant to an
exclusive arrangement with the
borrower or intermediary. An exclusive
arrangement is one in which a borrower
or intermediary has exclusive access to
a lender’s portfolio. Because exclusive
access to a lender’s portfolio can impact
the loan rate,40 the exclusive loan
indicator would help to identify loans
whose rates may not reflect current
market rates.
Proposed Rule 6530(c)(2) (Loan to
Affiliate) would require a Covered
Person to append an indicator to
identify a loan made to an Affiliate of
the lender or intermediary. For purposes
of this provision, ‘‘Affiliate’’ would be
defined as ‘‘an entity that controls, is
controlled by or is under common
control with a Covered Person.’’ 41
Because an affiliate relationship
between the borrower and lender or
intermediary can impact borrowing
costs,42 the affiliate loan indicator
would likewise help to identify loans
whose rates may not reflect current
market rates.43
39 SEA Rule 10c–1a prescribes generally the loan
information that parties must report to FINRA (i.e.,
the data elements listed in SEA Rule 10c–1a(c), loan
modifications identified in SEA Rule 10c-1a(d), and
confidential data elements listed in SEA Rule 10c–
1a(e)), and requires that FINRA establish rules
regarding the format and manner of its collection
of such information. See SEA Rule 10c–1a(f); see
also Adopting Release, 88 FR 75644, 75667 n.365
(explaining that the Commission is not specifying
the details as to the format of the required data, the
manner in which rates would be presented, or other
detailed information requested, to give an RNSA the
discretion to structure its systems and processes as
it sees fit and propose rules accordingly, provided
they are consistent with the final rule as adopted
as well as other requirements of the Exchange Act
applicable to an RNSA).
40 See Adopting Release, 88 FR 75644, 75695
n.732.
41 See proposed Rule 6710(a). For the purposes of
the definition of ‘‘Affiliate,’’ ‘‘control,’’ along with
any derivative thereof, means legal, beneficial, or
equitable ownership, directly or indirectly, of 25
percent or more of the capital stock (or other
ownership interest, if not a corporation) of any
entity ordinarily having voting rights. See proposed
Rule 6510(a). The term ‘‘common control’’ means
the same natural person or entity controls two or
more entities. See proposed Rule 6510(a).
42 See Adopting Release, 88 FR 75644, 75661
n.278 and accompanying text.
43 See Adopting Release, 88 FR 75644, 75661
n.279 (stating that ‘‘[t]o reduce any potential
confusion and misinterpretation of the data, an
RNSA could determine to, if it is able, develop
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Proposed Rule 6530(c)(3) (Unsettled
Loan) would require a Covered Person
to append an indicator to identify an
Initial Covered Securities Loan or
modification to the amount of
Reportable Securities loaned that did
not settle by the close of SLATE System
Hours 44 on the expected settlement date
reported to SLATE.45 Loans may be
agreed upon but ultimately not settle for
a variety of reasons (e.g., the lender is
unable to deliver the securities; the loan
fails due to mismatched instructions).46
The unsettled loan indicator would
provide clarity that the amount of
Reportable Securities loaned reported to
SLATE was not transferred to the
borrower, which may provide useful
insight into the day’s loan activity.47
Proposed Rule 6530(c)(4) (Terminated
Loan) would require a Covered Person
to indicate when a Covered Securities
Loan has been terminated. The
terminated loan indicator would
therefore be required to be appended on
reports of: (1) an Initial Covered
Securities Loan that did not and will not
settle; and (2) Loan Modifications
reporting the termination of a Covered
Securities Loan (whether an open-ended
or a term loan).48
Proposed Rule 6530(c)(5) (Rate or Fee
Adjustment) would require a Covered
Person to report the appropriate
modifier if a loan rebate rate or lending
fee accounts for: (1) a billing adjustment
or correction to amounts previously
rebated or charged; or (2) the value of
a distribution or other economic benefit
associated with the Reportable Security,
e.g., a corporate action. Similarly,
proposed Rule 6530(c)(6) (Basket Loan)
would require a Covered Person to
report the appropriate modifier if a loan
rebate rate or lending fee reflects a rate
or fee involving a basket of at least 10
methodologies to separate or identify [affiliate]
loans’’).
44 Proposed Rule 6510(i) would define ‘‘SLATE
System Hours’’ as ‘‘the hours SLATE is open, which
are 6:00:00 a.m. Eastern Time through 7:59:59 p.m.
Eastern Time on a business day, unless otherwise
announced by FINRA.’’
45 The unsettled loan indicator would generally
not be applicable to Loan Modifications involving
a decrease to the loan amount due to the return of
securities to the lender. See infra n.54.
46 To the extent an Initial Covered Securities Loan
or Loan Modification that was originally reported
with the unsettled loan indicator subsequently
settled, a Covered Person would be required to
report a Loan Modification to remove the unsettled
loan indicator to reflect that the previously reported
Initial Covered Securities Loan or Loan
Modification had settled.
47 FINRA expects to use the unsettled loan
indicator to filter the aggregate data that it would
disseminate pursuant to SEA Rule 10c–1a(g)(5), and
the indicator would be publicly disseminated with
the loan-level data that FINRA would disseminate
pursuant to SEA Rule 10c–1a(g)(1) through (3).
48 See proposed Rule 6530(c)(4).
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unique Reportable Securities for a single
agreed rate or fee for the entire basket.
In each of these scenarios, the modifier
would help to identify loans where the
rate or fee may not reflect the current
market. In addition to enhancing the
disseminated data and its value to
market participants, FINRA plans to use
these modifiers for data validation (e.g.,
in instances where FINRA’s data
validation logic identifies the reported
rate as potentially erroneous).
Reporting Securities Loan Modifications
Proposed Rule 6530(b) would govern
the reporting requirements applicable to
Covered Persons for reporting Loan
Modifications.49 Proposed Rule 6510(f)
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 and modifiers reported
pursuant to proposed Rule 6530(a)(2).50
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,
for Loan Modifications effected on a
business day at or after 12:00:00 a.m. ET
through 7:45:00 p.m. ET, the required
information must be reported the same
day before 8:00:00 p.m. ET.51 For Loan
Modifications effected on a business day
after 7:45:00 p.m. ET, the required
information must be reported no later
than the next business day (T+1) before
8:00:00 p.m. ET; 52 and 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 Eastern Time) must be reported
the next business day (T+1) before
8:00:00 p.m. ET.53
Proposed Rule 6530(b)(2) (Loan
Modifications—Information To Be
Reported) would specify the items of
information that must be reported to
FINRA. Specifically, proposed Rule
6530(b)(2)(A) through (I) would require
that each Loan Modification report
contain the information below:
49 As discussed above, a Covered Person may
engage a Reporting Agent to comply with the
reporting obligations on its behalf, consistent with
the conditions of SEC Rule 10c–1a. See proposed
Rule 6510(k) (defining ‘‘Reporting Agent’’); see also
infra n.60.
50 See proposed Rule 6510(d).
51 See proposed Rule 6530(b)(1)(A).
52 See proposed Rule 6530(b)(1)(B).
53 See proposed Rule 6530(b)(1)(C).
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(1) 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;
(2) 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;
(3) The MPID of the Covered Person;
(4) The date of the Loan Modification;
(5) The time of the Loan Modification;
(6) 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); 54
(7) Whether the Covered Person is the
lender, borrower or intermediary;
(8) The 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; 55 and
(9) Such modifiers and indicators as
required by either the Rule 6500 Series
or the SLATE Participant specification.
Proposed Rule 6530.01 (Intraday Loan
Modifications) addresses 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) is
modified multiple times throughout the
day, a Covered Person must report each
54 Covered Persons must report a decrease to the
loan amount resulting from a return of securities
only once the securities have been delivered
because returns are not considered ‘‘effected’’ until
the securities are actually returned. However,
Covered Persons must report all other Loan
Modifications on the date that the Loan
Modification was agreed upon and, in such
instances, must report the effective date (pursuant
to proposed Rule 6530(b)(2)(F)) unless the effective
date is the same as the Loan Modification date
(reported pursuant to 6530(b)(2)(D)).
55 As defined by proposed Rule 6510(d), ‘‘Data
Element’’ includes any item of information that a
Covered Person must report under SEA Rule 10c–
1a(c) and proposed Rule 6530(a)(2)(A) through (N)
and such modifiers and indicators required by
proposed Rule 6530(a)(2)(Y). Accordingly, a
modification to a Covered Securities Loan that
would require the addition or removal of a modifier
or indicator required to be reported pursuant to
proposed Rule 6530(a)(2)(Y) would require a
Covered Person to report a Loan Modification as set
forth in proposed Rule 6530(b).
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Loan Modification that occurs on a
given day as set forth in proposed Rule
6530(b). For example, if Lender A and
Borrower X agree at 10:00 a.m. ET to
modify the rebate rate for a previously
reported Covered Securities Loan from
0.15 percent to 0.20 percent, and then
decide at 3:00 p.m. ET to modify the
rate to 0.30 percent, the Covered Person
must report two Loan Modifications
pursuant to proposed Rule 6530(b)(2):
one with a Loan Modification time of
10:00 a.m. ET reflecting the change in
the rebate rate to 0.20 percent and a
second with a Loan Modification time of
3:00 p.m. ET to reflect the change in the
rebate rate to 0.30 percent. Because, in
this example, the Covered Securities
Loan was previously reported to SLATE,
the Loan Modification reports must also
include the unique identifier assigned
by FINRA to the loan.
If, however, the Covered Securities
Loan was not previously required to be
reported (e.g., because the Initial
Covered Securities Loan occurred prior
to the effectiveness of the FINRA rule),
the Covered Person must still report two
Loan Modifications. However, the Loan
Modification report reflecting the 10:00
a.m. ET change in the rebate rate to 0.20
percent must also include all of the
other Data Elements required by
proposed Rule 6530(a)(2) (i.e., the nonconfidential data elements) as well as
the internal identifier assigned to the
Covered Securities Loan by the Covered
Person, and, 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. The second
Loan Modification report reflecting the
3:00 p.m. ET change would not be
required to include all of the other Data
Elements required by proposed Rule
6530(a)(2); however, unless a unique
identifier has been assigned to the loan
by FINRA, the second Loan
Modification report must include the
internal identifier assigned to the
Covered Securities Loan by the Covered
Person, and, 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.56
A Loan Modification report is also
required where a Covered Securities
Loan is modified on the day upon
which it was effected, even if the
56 See
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modification occurred prior to the
submission of the Initial Covered
Securities Loan report to SLATE. Thus,
for example, Lender A and Borrower X
agree to an Initial Covered Securities
Loan at 10:00 a.m. ET with terms that
include a rebate rate of 0.15 percent. At
3:00 p.m. ET that same day, before the
Initial Covered Securities Loan was
reported to SLATE, Lender A and
Borrower X agree to change the
previously agreed upon rebate rate from
0.15 to 0.20 percent. Under the
proposed rule, the Initial Covered
Securities Loan must be reported
reflecting all of the Data Elements and
Confidential Data Elements 57 required
pursuant to proposed Rule 6530(a)(2),
including the date and time the loan
was effected of 10:00 a.m. ET as well as
the original rebate rate of 0.15 percent.
In addition to reporting the Initial
Covered Securities Loan, the Covered
Person also must separately report the
Loan Modification reflecting the
modification date and time of 3:00 p.m.
ET, the new rate of 0.20 percent, and the
internal identifier assigned to the
Covered Securities Loan by the Covered
Person, and, 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.
As discussed in the Adopting Release,
a change to any party to a Covered
Securities Loan would constitute the
termination of the prior Covered
Securities Loan and the initiation of a
new loan under proposed Rule 6530.58
Therefore, Covered Persons must submit
two reports to SLATE: (1) a termination
report with respect to the prior loan;
and (2) an Initial Covered Securities
Loan report reflecting all of the Data
Elements and Confidential Data
Elements required by proposed Rule
6530(a)(2) with respect to the new loan.
Thus, proposed Rule 6530.02 (Changes
to the Parties of a Covered Securities
Loan) provides 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: (a) 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
57 As defined by proposed Rule 6510(b),
‘‘Confidential Data Element’’ includes any item of
information that a Covered Person must report
under SEA Rule 10c–1a(e) and FINRA Rule
6530(a)(2)(O) through (X).
58 See 88 FR 75644, 75664.
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was added or removed and select the
terminated loan indicator; and (b) 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
excess margin securities pursuant to
SEA Rule 15c3–3(b)(3)).
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Compliance With Reporting Obligations
Similar to requirements that exist
with respect to reporting obligations
under other FINRA rules, FINRA is
proposing to adopt proposed Rule
6530(d) (Compliance with Reporting
Obligations) to implement provisions
regarding Covered Persons’ ongoing
reporting obligations and the use of
third parties in meeting SEA Rule 10c–
1a and FINRA 6500 Rule Series
obligations.59 Specifically, proposed
Rule 6530(d)(1) provides that Covered
Persons (other than Covered Persons
that engage a Reporting Agent) 60 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
SEA Rule 10c–1a, the primary
responsibility for the timely, accurate,
and complete reporting of loan
information to SLATE remains the nondelegable duty of the Covered Person
with the reporting obligation. Also,
similar to requirements that exist with
respect to reporting obligations under
other FINRA rules, proposed Rule
6530(d)(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 2010.61
FINRA also is proposing to adopt a
provision to specify that, even where a
member employs a Reporting Agent
consistent with SEA Rule 10c–1a(a)(2),
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
59 See e.g., Rule 6380A(h); Rule 6622(h); Rule
6730(a)(6).
60 Proposed Rule 6510(k) would define
‘‘Reporting Agent’’ by reference to SEA Rule 10c–
1a, which defines ‘‘reporting agent’’ in paragraph
(j)(4) as a broker, dealer, or registered clearing
agency that enters into a written agreement with a
covered person under paragraph (a)(2) of SEA Rule
10c–1a.
61 See e.g., Rule 6380A(a)(4); Rule 6622(a)(4); Rule
6623; Rule 6730(f).
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proposed FINRA Rule 6530 on its
behalf.62 As discussed above, SEA Rule
10c–1a(a)(2) specifies the applicable
requirements that permit a Covered
Person to rely on a Reporting Agent to
fulfill its reporting obligations under the
rule. These requirements include that
the Covered Person must enter into a
written agreement with a Reporting
Agent that agrees to report the requisite
information to FINRA on behalf of such
Covered Person in accordance with the
requirements of SEA Rule 10c–1a(b); 63
and provides the Reporting Agent with
timely access to the SEA Rule 10c–1a
information.64 In connection with these
provisions, proposed Rule 6530(d)(3)
would provide 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
SEA Rule 10c–1a and FINRA Rule 6530
on its behalf. In executing this
obligation, FINRA would expect, for
example, that the member review the
Covered Securities Loan reporting data
made available to it by the Reporting
Agent or through FINRA’s system to
evaluate the accuracy and timeliness of
the Covered Securities Loan reports
submitted on its behalf by the Reporting
Agent.
Finally, proposed Rule 6530(d)(4)
would provide that, if a Covered Person
makes a good faith determination that it
has a reporting obligation under SEA
Rule 10c–1a and this Rule 6500 Series,
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(d)(4) 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.
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 SEA Rule 10c–1a and proposed Rule
6530.
Participation in SLATE
Proposed Rule 6520 (Participation in
SLATE) would establish the
requirements applicable to Covered
Persons and Reporting Agents with
62 See
proposed Rule 6530(d)(3).
SEA Rule 10c–1a(a)(2)(i).
64 See SEA Rule 10c–1a(a)(2)(ii).
63 See
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respect to participation in SLATE. Rule
6510(h) 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 the SEA 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: (i) obtain an
MPID for reporting Covered Securities
Loans to SLATE; 65 (ii) execute and
comply with the SLATE Participant
application agreement and all
applicable rules and operating
procedures of FINRA 66 and the SEC; 67
and (iii) maintain the physical security
of the equipment located on the
premises of the SLATE Participant to
prevent unauthorized entry of
information into SLATE.68 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 these
mandatory participation requirements.
Proposed Rule 6520(b) (Reporting
Agents) would set forth the
participation requirements specific to
Reporting Agents.69 Consistent with
SEA Rule 10c–1a(b)(4), 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 changes
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.
Finally, proposed Rule 6520(c)
(SLATE Participant Obligations) would
65 See
proposed Rule 6520(a)(2)(A).
example, the proposed Rule 6500 Series
and, if a member, member conduct rules.
67 See proposed Rule 6520(a)(2)(B).
68 See proposed Rule 6520(a)(2)(C).
69 See supra n.60 (noting proposed Rule 6510(k)
would define ‘‘Reporting Agent’’ by reference to
SEA Rule 10c–1a).
66 For
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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)
would also 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.
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Dissemination of Loan Information
As required by SEA Rule 10c–1a(g),
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.
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).
T+1 Loan-Level Data Dissemination
Under proposed Rule 6540(a) (Next
Day Dissemination), 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) the unique identifier assigned by
FINRA to the Covered Securities Loan;
(2) the security identifier(s) specified in
Rule 6530(a)(2)(A) or (B) that FINRA
determines is appropriate to
disseminate; and (3) the requisite Data
Elements.
With respect to each Initial Covered
Securities Loan reported to SLATE,
proposed Rule 6540(a)(3)(A) would
specify that FINRA make publicly
available no later than the morning of
the next business day all other reported
Data Elements, except the amount of
Reportable Securities loaned (reported
pursuant to Rule 6530(a)(2)(G)) and any
modifier or indicator required by either
the Rule 6500 Series or the SLATE
Participant specification that FINRA
determines shall not be publicly
disseminated. Thus, for example, if a
Covered Person reports an Initial
Covered Securities Loan to SLATE on a
Tuesday before 8:00:00 p.m. ET, on
Wednesday morning, assuming
Wednesday is a business day, FINRA
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would disseminate the unique identifier
assigned by FINRA to the loan, the
security identifier, and all other
reported Data Elements, except the loan
amount and any modifier or indicator
required by either the Rule 6500 Series
or the SLATE Participant specification
that FINRA determines shall not be
publicly disseminated.
With respect to each Loan
Modification to a Covered Securities
Loan reported to SLATE on the same or
a prior business day, proposed Rule
6540(a)(3)(B) would specify that FINRA
make publicly available no later than
the morning of the next business day the
modified Data Elements reported to
SLATE, except the amount of
Reportable Securities loaned and any
modifier or indicator required by either
the Rule 6500 Series or the SLATE
Participant specification that FINRA
determines shall not be publicly
disseminated. For example, if a Covered
Person reports a Loan Modification to
SLATE on a Tuesday before 8:00:00
p.m. ET increasing the previously
reported loan amount from 500 shares to
700 shares and decreasing the
previously reported rebate rate from
0.25 percent to 0.15 percent, on
Wednesday morning, assuming
Wednesday is a business day, FINRA
would disseminate the unique identifier
assigned by FINRA to the loan, the
security identifier, and the modified
rebate rate, i.e., 0.15 percent, but would
not disseminate the modified loan
amount, which would be subject to
delayed dissemination (until 20
business days after the date of the
modification to the loan amount) under
proposed Rule 6540(b), as discussed
below.
Finally, in the case of a Loan
Modification to a Covered Securities
Loan that was not previously required to
be reported to SLATE (e.g., because the
Initial Covered Securities Loan occurred
prior to the effectiveness of the Rule
6500 Series), proposed Rule
6540(a)(3)(C) would specify that FINRA
make publicly available the unique loan
identifier assigned by FINRA to the
loan, the security identifier, and all
other reported Data Elements, except the
amount of Reportable Securities loaned
and any modifier or indicator required
by either the Rule 6500 Series or the
SLATE Participant specification that
FINRA determines shall not be publicly
disseminated.
T+20 Loan Amount Dissemination
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
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38211
Covered Securities Loan was effected or
the loan amount was modified, FINRA
would make publicly available: (1) the
unique identifier assigned by FINRA to
the Covered Securities Loan, (2) the
security identifier(s) specified in Rule
6530(a)(2)(A) or (B) that FINRA
determines is appropriate to
disseminate, and (3) the amount of
Reportable Securities loaned reported to
SLATE. 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). For example, where
a Covered Securities Loan is effected on
a Monday, the 1st of the month 70 and
is reported to SLATE before 8:00:00
p.m. ET that day, the 20-business day
period would start to run on the 2nd,
and FINRA would disseminate the
amount of securities loaned reported to
SLATE on the 29th day of the month (20
business days later), along with the
unique loan identifier assigned by
FINRA and the security identifier.
Where a Covered Securities Loan is
effected at 10:00 p.m. ET on the 1st of
the month and is reported to FINRA the
next business day as required by Rule
6530(a)(1)(B), the 20-business day
period would still start to run the 2nd
of the month (i.e., the next business day
after the loan was effected) and FINRA
would disseminate the amount of
securities loaned reported to SLATE on
the 29th day of the month. In either
scenario above, if a modification to the
loan amount is effected and reported to
SLATE prior to the end of the 20business day delay period, i.e., prior to
the 29th of the month, the modified loan
amount would be disseminated 20
business days after such Loan
Modification is effected.
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.71
Aggregate Loan Transaction Activity
Pursuant to paragraph (1) of proposed
Rule 6540(c) (Aggregate Loan
Transaction Activity), 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
70 For purposes of this example, the month is a
30-day month where each weekday is a business
day.
71 See proposed Rule 6540(c).
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of the next business day, aggregated
loan activity in the Reportable
Security 72 (along with the security
identifier specified in Rule 6530(a)(2)(A)
or (B) that FINRA determines is
appropriate to identify the relevant
Reportable Security).73 The aggregated
data would include, for each Reportable
Security, under proposed Rule
6540(c)(1)(A), the aggregate volume of
securities (both in total and broken
down by collateral type) subject to an
Initial Covered Securities Loan or
modification to the amount of
Reportable Securities loaned reported
on the prior business day, and, under
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. FINRA believes 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.74
Pursuant to Rule 6540(c)(1)(C), FINRA
would also disseminate the aggregate
volume of securities subject to an Initial
Covered Securities Loan or modification
to the amount of Reportable Securities
loaned subject to a term loan (i.e., a loan
with a specified term) and subject to an
open loan (i.e., a loan without a
specified term) reported on the prior
business day.75 FINRA believes that
these data would provide the public
with useful information concerning the
72 In addition to the items of information
specified in proposed paragraphs (A) through (E) of
proposed Rule 6540(c)(1), FINRA may, in its
discretion, publish or distribute additional metrics
regarding aggregate transaction activity free of
charge. See infra n.73 defining ‘‘aggregate loan
activity.’’ See also Adopting Release, 88 FR 75644,
75684.
73 In its Adopting Release, the Commission stated
that the term ‘‘aggregate transaction activity’’ refers
to information pertaining to the absolute value of
transactions such that net position changes should
not be discernable in the data, and is intended to
help ensure that only aggregate information about
net positions changes, rather than individualized
information, is provided to the public. See
Adopting Release, 88 FR 75644, 75684.
74 See proposed Rule 6540 Supplementary
Material .01 (De Minimis Loan Transaction
Activity), which would provide 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. For example, if a single Covered Securities
Loan was subject to 10 Loan Modifications reported
to SLATE on a given day, FINRA would omit from
the daily loan statistics volume information for that
Reportable Security because these events occurred
in a single Covered Securities Loan.
75 See supra n.73.
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nature of current lending activity.76
Pursuant to Rule 6540(c)(1)(D), FINRA
would also disseminate the aggregate
volume of securities subject to an Initial
Covered Securities Loan or modification
to the amount of Reportable Securities
loaned broken down by borrower type
(as specified in proposed Rule
6530(a)(2)(N)) on the prior business
day.77 These data may provide market
participants with information regarding
the degree to which loan activity is
retail or wholesale, which, in
combination with the other aggregate
data may provide insight into short
selling sentiment.78
Pursuant to proposed Rule
6540(c)(1)(E), FINRA would disseminate
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.
FINRA believes that these data would
provide the public with useful
information concerning current lending
activity.
Loan Rate Distributions
Pursuant to paragraph (2) of proposed
Rule 6540(c) (Loan Rate Distribution
Data), 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, as applicable,79 including:
the highest rebate rate, lowest rebate
rate, and volume weighted average of
the rebate rates reported to SLATE for
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, lowest lending fee,
and volume weighted average of the
lending fees reported for Initial Covered
Securities Loans not collateralized by
76 FINRA understands that most securities loans
are open-ended, allowing the security on loan to be
recalled by the lender. See Adopting Release, 88 FR
75644, 75673.
77 See supra n.73.
78 See Adopting Release, 88 FR 75644, 75725
n.1050.
79 In addition to the items of information
specified in proposed 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.
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cash and, separately, for Loan
Modifications not collateralized by cash
(where the Loan Modification involved
a change to the lending fee). 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.
Proposed Rule 6540(d) (Loan
Transaction Information Not
Disseminated) would specify the
information reported to FINRA that
would not be disseminated. As
prescribed by SEA Rule 10c–1a(g)(4),
proposed Rule 6540(d)(1) provides that
the Confidential Data Elements reported
to FINRA would not be disseminated. In
addition, proposed Rule 6540(d)(2)
would provide that FINRA may
determine not to publicly disseminate
any modifier or indicator required by
either the Rule 6500 Series or the
SLATE Participant specification. FINRA
may determine not to disseminate a
modifier or indicator where the use of
such information is intended for
regulatory purposes only or its public
disclosure may otherwise be
inappropriate (e.g., where it may result
in information leakage).
Finally, 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.80
Other Provisions
Consistent with FINRA’s rules
governing other reporting facilities that
it operates, proposed Rule 6550
(Emergency Authority) would provide
that, as market conditions may warrant,
FINRA, in consultation with the SEC,
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.81
The Commission’s release adopting
SEA Rule 10c–1a specified the
80 FINRA intends separately to file a proposed
rule change to establish SLATE reporting fees and
fees for fee-liable data products. Interested parties
may subscribe to these fee-liable data products.
Professionals would not be permitted to access the
SLATE data made available free of change on
FINRA’s website, which is provided for personal,
non-commercial purposes only.
81 See Rule 6770.
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applicable compliance dates.82 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. If the SEC extends the
compliance dates for SEA Rule 10c–1a’s
reporting or dissemination
requirements, FINRA’s proposed rules
addressing securities loan reporting and
data dissemination would become
effective consistent with the SEC’s
extended timeframe for reporting and
data dissemination, respectively.
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2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of section 15A(b)(6) of the Act, which
require that FINRA rules must be
designed to prevent fraudulent and
manipulative acts and practices, 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, in general, to protect investors and
the public interest and, among other
things, must not be designed to permit
unfair discrimination between
customers, issuers, brokers or dealers.83
FINRA also believes that the proposed
rule change is consistent with SEA Rule
10c–1a, which requires FINRA to
implement rules regarding the format
and manner of its collection of the
securities loan information described in
SEA Rule 10c–1a(c) through (e) and for
making publicly available such
information in accordance with rules
promulgated pursuant to section 19(b)
of the Exchange Act and Rule 19b–4
under the Exchange Act.84
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 Act, SEA Rule 10c–1a,
and section 984 of the Dodd-Frank
Act.85 The proposed rule change would
82 See
Adopting Release, 88 FR 75644, 75691.
U.S.C. 78o–3(b)(6).
84 See SEA Rule 10c–1a(f); see also Adopting
Release, 88 FR 75644, 75648.
85 As noted above, SEA Rule 10c–1a requires
FINRA, as the sole RNSA, to propose rules
consistent with the Commission’s mandate. See
SEA Rule 10c–1–a(f). section 984(a) of the DoddFrank Wall Street Reform and Consumer Protection
Act (‘‘Dodd-Frank Act’’) added section 10(c)(1) to
83 15
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do so by facilitating the collection of
specified securities loan information
from Covered Persons and Reporting
Agents, which include non-FINRA
members,86 and providing access to
such information to market participants,
the public, and regulators. As such,
these proposed changes are intended to
facilitate the objectives of the
Commission and Congress by providing
‘‘borrowers and lenders with better tools
to assess the terms of their securities
loans and enhance the ability of
regulators to oversee the securities
lending market,’’ and ‘‘result in the
public availability of new information
for investors and other market
participants to consider in the mix of
information about the securities lending
market and the securities markets
generally to better inform their
decisions,’’ which FINRA believes is
consistent with section 15A(b)(6) of the
Act, SEA Rule 10c–1a, and section 984
of the Dodd-Frank Act.87
FINRA’s proposed Rule 6500 Series
would also facilitate the availability to
regulators of information that may be
used to aid in assessing market events—
‘‘[f]or example, January 2021
information on market participants’
securities lending activity would have
provided FINRA and Commission staff
a more timely and comprehensive view
of who was entering into new loans and
who was no longer borrowing securities.
This would have facilitated a deeper
understanding of how the events were
or were not impacting market
participants. Such analyses can help
determine if further regulatory
intervention in markets is warranted
and can inform the nature of any
intervention.’’ 88
SEA Rule 10c–1a also expressly
permits FINRA to establish rules
regarding the format and manner of its
collection of securities loan information.
To that end, FINRA’s proposed rule
change would require that Covered
Persons report, in addition to the
specific data elements prescribed in
SEA Rule 10c–1a, specified loan
the Exchange Act to provide the Commission with
authority over securities lending. See 15 U.S.C.
78j(c)(1). Section 984(b) of the Dodd-Frank Act
mandates that the Commission increase the
transparency of information available to brokers,
dealers, and investors with respect to the loan or
borrowing of securities. See Public Law 111–203,
124 Stat. 1376 (2010). See also 15 U.S.C. 78o–
3(b)(6).
86 As defined in SEA Rule 10c–1a(j), ‘‘Covered
Persons’’ and ‘‘Reporting Agents’’ may include
non–FINRA members.
87 See Adopting Release, 88 FR 75644, 75648. See
also 15 U.S.C. 78o–3(b)(6); SEA Rule 10c–1a; and
15 U.S.C. 78j(c)(1).
88 See Adopting Release, 88 FR 75644, 75717.
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38213
identifiers 89 and specified indicators
and modifiers,90 as applicable. As noted
above, these additional items would
provide regulators and the public with
important information regarding
reported securities loans. For example,
because an affiliate relationship
between the borrower and lender (or
intermediary) can impact borrowing
costs, the affiliate loan indicator,
proposed in Rule 6530(c)(2), would help
to identify loans whose rates may not
reflect current market rates, to the
benefit of market participants, the
public, and regulators. Similarly,
because FINRA would disseminate
aggregate loan activity each day, the
unsettled loan indicator, proposed in
Rule 6530(c)(3), would allow FINRA to
filter unsettled loans, which is intended
to provide the public with more
granular insight into the day’s loan
activity.91 FINRA believes that the
securities loan reporting and data
dissemination requirements proposed in
the Rule 6500 Series, including the
proposed identifiers and indicators and
modifiers, are designed to promote
greater transparency in the securities
lending market, consistent with the
objectives of section 15A(b)(6) of the
Act, SEA Rule 10c–1a, and section 984
of the Dodd-Frank Act.92
As noted above, SEA Rule 10c–1a(g)
also mandates that FINRA publicly
disseminate specified securities loan
data reported to SLATE, along with
information pertaining to the aggregate
loan activity and distribution of loan
rates for each Reportable Security. To
that end, pursuant to proposed Rule
6540, FINRA would make SLATE data
available on FINRA’s website free of
charge for personal, non-commercial
purposes only. FINRA believes that
making securities loan information
available free of charge for personal,
89 Covered Persons would be required to report to
SLATE: (1) the unique internal identifier assigned
to the Covered Securities Loan by the Covered
Person responsible for reporting the Covered
Securities Loan to SLATE; and (2) 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. See proposed Rules 6530(a)(2)(W)–
(X) and (b)(2)(A)–(B).
90 Covered Persons would be required to append
the following modifiers and indicators, as
applicable, to all SLATE reports to identify: (1) a
loan pursuant to an exclusive arrangement; (2) a
loan to an affiliate; (3) a loan that did not settle on
the expected settlement date; (4) a loan that has
been terminated; (5) a loan with a rebate rate or
lending fee adjustment (e.g., to account for a billing
correction or the value of a distribution); and (6) a
loan that is part of a basket of securities loaned for
single agreed rate or fee. See proposed Rules
6530(c)(1)–(6).
91 See supra n.47.
92 See 15 U.S.C. 78o–3(b)(6); SEA Rule 10c–1a;
and 15 U.S.C. 78j(c)(1).
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non-commercial purposes would
promote transparency and reduce
information asymmetries in the
securities lending market for retail
investors. For other uses, FINRA would
offer SLATE data products at a fee that
would be filed with the SEC pursuant to
Rule 19b–4 under the Exchange Act.93
FINRA believes that this approach is
both reasonable and consistent with
existing FINRA rules governing other
transparency regimes, e.g., TRACE.94
Therefore, FINRA believes that
proposed FINRA Rule 6540 is designed
to protect investors and the public
interest and would not unfairly
discriminate between customers,
issuers, brokers, or dealers.95
Finally, the proposed rule change
would include provisions designed to
facilitate the timeliness, accuracy and
completeness of the information
reported to SLATE and provide
additional clarity to members regarding
their obligations under FINRA rules—
consistent with section 15A(b)(6) of the
Act, SEA Rule 10c–1a, and section 984
of the Dodd-Frank Act.96 Specifically,
while the proposed Rule 6500 Series
generally applies to Covered Persons
and, where engaged, Reporting
Agents,97 the language of proposed
Rules 6530(d)(2) and (d)(3), is limited to
the conduct of members. Specifically,
proposed Rule 6530(d)(2) would
provide 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.’’ In
addition, proposed Rule 6530(d)(3)
would provide that ‘‘[a] member relying
on a Reporting Agent to report Covered
Securities Loan information to SLATE
has an obligation under FINRA Rule
3110 to take reasonable steps to ensure
that the Reporting Agent is complying
with SEA Rule 10c–1a and FINRA Rule
93 Consistent with SEA Rule 10c–1a(i) and the
Commission Adopting Release, FINRA intends
separately to file a proposed rule change
establishing fees for SLATE data products, and
interested parties may subscribe to these fee-liable
data products. See Adopting Release 88 FR 75644,
75687. See also proposed Rule 6540.02 (‘‘Nothing
in this Rule shall prohibit FINRA from also
publishing or distributing SLATE data at a charge
for fees that have been filed with the SEC pursuant
to Rule 19b–4 under the Exchange Act.’’).
94 See generally, FINRA Rule 7730.
95 See 15 U.S.C. 78o–3(b)(6).
96 See Adopting Release, 88 FR 75644, 75648. See
also 15 U.S.C. 78o–3(b)(6); SEA Rule 10c–1a; and
15 U.S.C. 78j(c)(1).
97 The defined terms ‘‘Covered Person’’ and
‘‘Reporting Agent’’ include FINRA members and
non-members. The defined term ‘‘SLATE
Participant’’ would include both Covered Persons
and Reporting Agents. See proposed Rule 6510.
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6530 on its behalf.’’ While these
requirements are not explicitly provided
for in SEA Rule 10c–1a, they embody
standards that FINRA applies to its
members generally in the conduct of
their affairs—Rule 3110 (Supervision)
and Rule 2010 (Standards of
Commercial Honor and Principles of
Trade) are foundational provisions
applicable to members.98 FINRA has
previously provided similar clarification
regarding how these rules apply in the
context of other reporting regimes, such
as in the fixed income and equity trade
reporting rules.99 A member’s obligation
to report timely, accurately and
completely and to take reasonable steps
to ensure that it supervises agents
retained in connection with its reporting
obligations also applies in the securities
lending context. As such, proposed
FINRA Rules 6530(d)(2) and (d)(3) are
consistent with the objectives of section
15A(b)(6) of the Act, SEA Rule 10c–1a,
and section 984 of the Dodd-Frank Act
and would not unfairly discriminate
between customers, issuers, brokers, or
dealers.100
B. Self-Regulatory Organization’s
Statement on Burden on Competition
As stated in the Commission’s
Adopting Release, SEA Rule 10c–1a,
which the proposed rule change is
designed to implement, is expected to
reduce information asymmetries and to
‘‘increase competition between brokerdealers and between lending
programs.’’ 101 The Commission also
stated in its Adopting Release that ‘‘the
increased ability for broker-dealers to
monitor conditions in the lending
market may encourage new brokerdealers to enter the market, further
increasing competition for broker-dealer
services.’’ 102 Thus, FINRA does not
believe that the proposed rule change
will result in any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. In addition, FINRA
notes that the proposed rule change
would treat all similarly situated
98 FINRA Rule 2010 provides that ‘‘[a] member, in
the conduct of its business, shall observe high
standards of commercial honor and just and
equitable principles of trade.’’ FINRA Rule 3110
requires, inter alia, that FINRA members establish
and maintain an effective supervisory system,
which includes overseeing, supervising, and
monitoring the activities or functions performed by
third-party vendors, that is reasonably designed to
achieve compliance with applicable securities laws
and regulations and with applicable FINRA rules.
See also Regulatory Notice 21–29 (August 2021).
99 See e.g., FINRA Rule 6380A(a)(4); Rule
6622(a)(4); Rule 6623; Rule 6730(f).
100 See 15 U.S.C. 78o–3(b)(6); SEA Rule 10c–1a;
and 15 U.S.C. 78j(c)(1).
101 See Adopting Release, 88 FR 75644, 75723.
102 See Adopting Release, 88 FR 75644, 75723.
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members equally, and the provisions
that also address non-member
obligations pursuant to SEA Rule 10c–
1a likewise apply equally to similarly
situated Covered Persons, Reporting
Agents, and SLATE Participants, as
applicable.
Economic Impact Assessment
Based on the regulatory need
discussed above and summarized
below, FINRA has undertaken an
economic impact assessment, as set
forth below, to analyze the potential
economic impacts of the proposed rule
change, including potential costs,
benefits, and distributional and
competitive effects, relative to the
current baseline.
Regulatory Need
On October 13, 2023, the SEC adopted
SEA Rule 10c–1a, requiring Covered
Persons to report Covered Securities
Loan information to an RNSA, and the
RNSA to make publicly available
specified information regarding those
reported securities loans. In its
Adopting Release, the SEC stated,
among other things, that SEA Rule 10c–
1a was designed to increase the
transparency and efficiency of the
securities lending market.103
As required by SEA Rule 10c–1a(f),
FINRA, currently the only RNSA, is
proposing to establish rules specifying
the format and manner of its collection
of information on Covered Securities
Loans. As required by SEA Rule 10c–
1a(g), FINRA also is proposing rules to
make Covered Securities Loan
information publicly available. Below
FINRA discusses the potential economic
impacts of FINRA’s proposed changes
specifying the format and manner of
reporting for Covered Securities Loans
and the dissemination of aggregate
transaction activity and distribution of
loan rates for each Reportable Security.
Economic Baseline
In the Commission’s Adopting
Release, the SEC outlined the baseline
and considered the economic effects of
Rule 10c–1a and how its costs and
benefits impacted the economic
baseline.104
In its Adopting Release, the
Commission noted that various types of
entities participating in the securities
lending market will be impacted by SEA
Rule 10c–1a, including those that may
need to enter into contracts and develop
recording and reporting systems to
comply with the rule.105 Table 1 shows
103 See
Adopting Release, 88 FR 75644.
Adopting Release, 88 FR 75644, 75692,
75694–75723.
105 See Adopting Release, 88 FR 75644, 75717.
104 See
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the estimated number of entities that
will be affected by SEA Rule 10c–1a and
the breakdown by type according to the
estimates provided by the SEC.106 In the
Adopting Release, the SEC estimated
that a total of 609 Covered Persons and
Reporting Agents would be affected by
SEA Rule 10c–1a, of which 503 were
38215
Covered Persons and 106 were
Reporting Agents.107
TABLE 1—ESTIMATED NUMBER OF COVERED PERSONS AND REPORTING AGENTS AFFECTED BY SEA RULE 10c–1a
Providing Covered Persons .................................................................................................................................................................
—Persons that effect a covered securities loan as the lender when an intermediary is not used .............................................
—Broker-dealers borrowing fully paid or excess margin securities .............................................................................................
—Broker-dealer intermediaries .....................................................................................................................................................
Non-Providing Covered Persons .........................................................................................................................................................
—Persons that effect a covered securities loan as the lender when an intermediary is not used .............................................
—Non-broker-dealer intermediaries .............................................................................................................................................
Reporting Agents .................................................................................................................................................................................
—Broker-dealers ...........................................................................................................................................................................
—Clearing agencies .....................................................................................................................................................................
255
217
34
4
248
217
31
106
97
9
Total .......................................................................................................................................................................................
609
Economic Impacts
In the Adopting Release, the SEC
discussed its consideration of the
economic effects of SEA Rule 10c–1a.108
Below, FINRA considers the potential
costs, benefits, and competitive impact
of FINRA’s proposal specifying the
format and manner of reporting for
Covered Securities Loans not explicitly
prescribed in SEA Rule 10c–1a. On
balance, FINRA believes the costs are
appropriate in light of the anticipated
benefits to the SLATE reporting,
transparency, and regulatory framework.
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Reporting of Information to FINRA
Expected Settlement Date. The
proposed rule change requires
information regarding the expected
settlement date for an Initial Covered
Securities Loan or a modification to the
loan amount. This information would
enhance the quality of the audit trail
available to regulators for surveillance.
Covered Persons may incur a cost to
track and report this information.
Covered Person Party Type. The
proposed rule change requires SLATE
Participants to report whether the
Covered Person is the lender, borrower,
or intermediary. This information
would improve the utility of the data for
regulatory purposes, as it will provide
necessary information regarding the
identity of the Covered Person,
including in instances where a party
other than the Covered Person submits
a loan report to SLATE. Covered
Persons may incur a cost to track and
report this information.
Loan Identifiers. For Initial Covered
Securities Loans, the Covered Person
responsible for reporting the loan would
be required to report a unique internal
identifier assigned by the Covered
106 See
107 See
Adopting Release, 88 FR 75644, 75718.
Adopting Release, 88 FR 75644, 75717.
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Person for the loan. For Loan
Modifications, the Covered Person
would be required to report a unique
identifier assigned by FINRA to the
Initial Covered Securities Loan, or if
FINRA has not yet assigned an
identifier, the Covered Person must
provide a unique internal identifier
assigned by the Covered Person for the
loan. The internal identifier requirement
would allow linkage of loan reports
where a FINRA identifier has not yet
been assigned and improve the
completeness of audit trail data
available to regulators. For Covered
Securities Loans that are allocations of
omnibus loans, the Covered Person
would also be required to report a
unique internal identifier assigned by
the Covered Person for the associated
omnibus loan. The ability to link
allocations that are components of an
omnibus loan would improve the
completeness of the audit trail and
allow FINRA to provide additional
granularity in the loan activity statistics
disseminated to the public. FINRA
would include only the FINRA-assigned
identifier when disseminating loan
transaction data; FINRA will not
publicly disseminate the unique
internal identifier or unique omnibus
loan identifier reported by Covered
Persons. FINRA understands that some
Covered Persons already create and
maintain unique loan identifiers, which
should mitigate the cost associated with
the requirement to report this
information to FINRA.109
Modifiers/Indicators. The proposed
rule change would require the reporting
of six modifiers and indicators;
specifically: (1) Covered Securities
Loans with affiliates; (2) loans
associated with exclusive arrangements;
(3) loans with rate or fee adjustments;
108 See
109 See
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(4) basket loans; (5) unsettled loans; and
(6) terminated loans. As discussed
above, the pricing of some Covered
Securities Loans may not be indicative
of the current market rates available in
the securities lending market. Covered
Persons would incur costs for
establishing processes to identify when
the required modifiers must be
appended and reporting such modifiers
to SLATE. FINRA believes that these
proposed modifiers and indicators
would provide context to market
participants when assessing pricing and
other loan terms, helping to facilitate
the usefulness of the publicly
disseminated data. These proposed
modifiers and indicators also would
increase the usefulness of the audit trail
data available to regulators as well as
provide mechanisms for validating the
accuracy of the reported data.
Timing of End-of-Day Reporting. As
discussed above, the proposed rule
change would require that Covered
Securities Loans effected on a business
day at or after 12:00:00 a.m. ET through
7:45:00 p.m. ET be reported to SLATE
before 8:00:00 p.m. ET on the same day.
FINRA believes that this reporting
timeframe is reasonable because most
Covered Securities Loans entered into
on a given business day would have
settled before 8:00:00 p.m. ET, which
would provide time for Covered Persons
to review the reportable information to
facilitate accurate and complete
reporting. In addition, FINRA
understands that 8:00:00 p.m. ET is
generally consistent with the reporting
deadline used by commercial vendors to
which some Covered Persons currently
voluntarily submit securities lending
information. A similar reporting
deadline may help mitigate costs for
Covered Persons that may leverage
Adopting Release, 88 FR 75644, 75706–24.
Adopting Release, 88 FR 75644, 75685.
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existing systems or that submit
securities loan information to
commercial vendors.
Furthermore, permitting the reporting
of Initial Covered Securities Loans and
Loan Modifications effected on a
business day after 7:45:00 p.m. ET by no
later than next business day (T+1)
before 8:00:00 p.m. ET will provide
Covered Persons with time to review the
reportable information for end-of-day
loans to facilitate accurate and complete
reporting. FINRA believes that the
proposed reporting timeframes strike an
appropriate balance between providing
Covered Persons with sufficient time to
review and report the day’s loan activity
and providing FINRA with the time
necessary to process the reported
information for next-day dissemination.
SLATE Participation Obligations. The
proposed rule change would require
each Covered Person or Reporting Agent
to comply with SLATE participation
obligations, including execution and
compliance with the SLATE Participant
application agreement. The SLATE
participation requirements would help
ensure that Covered Persons and
Reporting Agents understand their
obligations with regard to SLATE
participation, including requiring
SLATE Participants to obtain an MPID
if they do not currently have one, and
use it when reporting Covered
Securities Loans to SLATE. The MPID
requirement would provide information
that would make it more efficient for
FINRA to validate SLATE reports,
contact firms as necessary, and
troubleshoot SLATE Participant-specific
technical issues. The Covered Person
and Reporting Agent would incur
upfront administrative costs in terms of
time and effort required to enter into the
SLATE Participant application
agreement and costs to comply with the
SLATE participation requirements on an
ongoing basis. For example, Covered
Persons and Reporting Agents that do
not currently have an MPID for SLATE
use must complete an MPID request
form and incur a cost to incorporate the
SLATE Participants’ and counterparties’
MPIDs into their systems.
Dissemination of Aggregated Loan
Activity
SEA Rule 10c–1a(g)(5) generally
requires that FINRA make publicly
available information pertaining to the
aggregate loan transaction activity and
the distribution of loan rates on a daily
basis. FINRA has proposed specific
aggregation buckets, as described in
detail above. The dissemination of these
data, which would be compiled from
the Data Elements required to be
reported to SLATE pursuant to SEA
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15:55 May 06, 2024
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Rule 10c–1a and proposed Rule 6530,
does not impact the reporting
requirements applicable to Covered
Persons and, therefore, does not
contribute to the direct costs of
reporting for Covered Persons. Further,
as FINRA would make these data
available on its website free of charge
for personal, non-commercial use, the
dissemination of this information will
similarly not contribute to any direct
costs for such use.
Among other things, FINRA proposes
to disseminate the aggregate volume of
securities (both in total and by collateral
type) subject to an Initial Covered
Securities Loan or modification to the
amount of Reportable Securities loaned
reported on the prior business day,
which would provide varied
perspectives on the loan activity for the
Reportable Security, including over
time. FINRA also proposes to
disseminate the aggregate volume of
securities (both in total and by collateral
type) subject to a rebate rate or fee
modification reported on the prior
business day, to provide insight into the
frequency of rate changes for a
Reportable Security. FINRA similarly
proposes to disseminate the aggregate
volume of securities subject to an Initial
Covered Securities Loan or modification
to the amount of Reportable Securities
loaned with a specified term and,
separately, without a specified term,
reported on the prior business day, as
well as 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. These
categorizations would permit analysis of
volume differences between loans that
do not have a defined end date and
those that have a defined term date, and
volume differences between the
wholesale versus end-customer market.
De Minimis Loan Transaction
Activity. To address concerns regarding
potential information leakage, FINRA
proposes to omit from the daily loan
statistics volume information for
Reportable Securities for which there
are three or fewer types of Initial
Covered Securities Loans and Loan
Modifications reported to SLATE in
total on a given day. However, the
proposed de minimis threshold may be
viewed by some as reducing the
transparency value of the disseminated
information. FINRA believes the
threshold of three or fewer Initial
Covered Securities Loans and Loan
Modifications appropriately balances
these considerations.
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Fmt 4703
Sfmt 4703
Alternatives Considered
In specifying the format and manner
of reporting for Covered Securities
Loans and the dissemination of
aggregate transaction activity and
distribution of loan rates for Reportable
Securities, FINRA considered various
alternatives and the potential costs and
benefits of those alternatives. On
balance, FINRA believes the
requirements in the proposed rule are
appropriate in light of the anticipated
benefits to the SLATE reporting,
transparency, and regulatory framework.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2024–007 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2024–007. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
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only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to File
Number SR–FINRA–2024–007 and
should be submitted on or before May
28, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.110
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–09847 Filed 5–6–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100044; File No. SR–
NYSEARCA–2024–23]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Withdrawal of a
Proposed Rule Change To Modify the
NYSE Arca Options Fee Schedule
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May 1, 2024.
On February 29, 2024, NYSE Arca,
Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change (File No. SR–
NYSEARCA–2024–23) to establish fees
relating to OTPs utilized by Floor
110 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Sep<11>2014
15:55 May 06, 2024
Jkt 262001
Market Makers.3 The proposed rule
change was immediately effective upon
filing with the Commission pursuant to
section 19(b)(3)(A) of the Act.4 The
proposed rule change was published for
comment in the Federal Register on
March 19, 2024.5 On April 26, 2024, the
Exchange withdrew the proposed rule
change (SR–NYSEARCA–2024–23).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–09846 Filed 5–6–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–563, OMB Control No.
3235–0656]
Proposed Collection; Comment
Request; Extension: Rule 17g–7
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 17g–7 (17 CFR
240.17g–7) under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.). The Commission plans to submit
this existing collection of information to
the Office of Management and Budget
for extension and approval.
Rule 17g–7 requires each nationally
recognized statistical rating organization
(‘‘NRSROs’’) to publish certain items,
including a form containing specified
information, when taking a rating action
with respect to a credit rating 1 and to
disclose rating histories for free on an
easily accessible portion of its corporate
internet website.2 There are currently 10
NRSROs registered with the
Commission, and it is estimated that
NRSROs will take collectively
approximately 1,908,530 rating actions
per year.
Based on staff experience, the
Commission estimates that the total
annual hour burden to comply with
Rule 17g–7 will be 641,673 hours. The
Commission further estimates that this
annual hour burden will result in a total
annual cost of $238,688,856, reflecting
the cost of preparing the form required
to be published by Rule 17g–7 and
standardizing and tailoring certain
required disclosures, as well as the cost
of maintaining a database of rating
histories to comply with Rule 17g–7.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information on respondents; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted by
July 8, 2024.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number. Please direct your
written comments to: Dave Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o John Pezzullo, 100 F St. NE,
Washington, DC 20549 or send an email
to: PRA_Mailbox@sec.gov.
Dated: May 1, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–09848 Filed 5–6–24; 8:45 am]
BILLING CODE 8011–01–P
TENNESSEE VALLEY AUTHORITY
Sunshine Act Meetings
3 See
Securities Exchange Act Release No. 99729
(Mar. 13, 2024), 89 FR 19613 (Mar. 19, 2024)
(‘‘Notice’’).
4 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
5 See Notice, supra note 3.
6 17 CFR 200.30–3(a)(12).
1 See 240.17g–7(a).
2 See 240.17g–7(b).
PO 00000
Frm 00200
Fmt 4703
Sfmt 4703
TIME AND DATE:
9:00 a.m. CT on May 9,
2024.
Lipscomb University’s George
Shinn Event Center, Nashville,
Tennessee.
STATUS: Open.
MATTERS TO BE CONSIDERED:
PLACE:
Meeting No. 24–02
The TVA Board of Directors will hold
a public meeting on May 9, at the
E:\FR\FM\07MYN1.SGM
07MYN1
]]>Agencies
[Federal Register Volume 89, Number 89 (Tuesday, May 7, 2024)]
[Notices]
[Pages 38203-38217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09847]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100046; File No. SR-FINRA-2024-007]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Adopt
the FINRA Rule 6500 Series (Securities Lending and Transparency Engine
(SLATETM))
May 1, 2024.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 1, 2024, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II,
[[Page 38204]]
and III below, which Items have been prepared by FINRA. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing, as required by Securities Exchange Act Rule
10c-1a, 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 text of the proposed rule change is available on FINRA's
website at https://www.finra.org, at the principal office of FINRA and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
(i) Background
On October 13, 2023, the Commission adopted new SEA Rule 10c-1a \3\
to require any ``covered person'' \4\ who agrees to a ``covered
securities loan'' \5\ to provide specified information to a Registered
National Securities Association (``RNSA'').\6\ The RNSA is then
required to make publicly available information regarding reported
securities loans, as described in SEA Rule 10c-1a.\7\ In its Adopting
Release, the Commission stated that SEA Rule 10c-1a would increase
transparency in the securities lending market, resulting in a reduction
of the information disadvantage faced by end borrowers and beneficial
owners, improved price discovery, increased competition among providers
of securities lending analytics services, reduced costs associated with
tracking market conditions for broker-dealers and lending programs, and
improved decision-making by investors, beneficial owners and other
market participants.\8\ The Commission stated its belief that the rule
would likely reduce the borrowing costs of some securities, improving
price discovery, liquidity, and capital formation in the underlying
security markets, and would benefit investors by increasing the ability
of regulators to surveil, study, and provide oversight of both the
securities lending market and individual market participants.\9\
---------------------------------------------------------------------------
\3\ See 17 CFR 240.10c-1a (``SEA Rule 10c-1a''); Securities
Exchange Act Release No. 98737 (October 13, 2023), 88 FR 75644
(November 3, 2023) (Reporting of Securities Loans) (``Adopting
Release'').
\4\ SEA Rule 10c-1a(j)(1) defines a ``covered person'' as (i)
any person that agrees to a covered securities loan on behalf of a
lender (``intermediary'') other than a clearing agency when
providing only the functions of a central counterparty pursuant to
Rule 17Ad-22(a)(2) of the Exchange Act or a central securities
depository pursuant to Rule 17Ad-22(a)(3) of the Exchange Act; or
(ii) any person that agrees to a covered securities loan as a lender
when an intermediary is not used unless paragraph (j)(1)(iii) of
this section applies; or (iii) a broker or dealer when borrowing
fully paid or excess margin securities pursuant to Rule 15c3-3(b)(3)
of the Exchange Act.
\5\ SEA Rule 10c-1a(j)(2) defines a ``covered securities loan''
as a transaction in which any person on behalf of itself or one or
more other persons, lends a reportable security to another person,
with exclusions for a position at a clearing agency that results
from central counterparty services pursuant to Rule 17Ad-22(a)(2) of
the Exchange Act or central securities depository services pursuant
to Rule 17Ad-22(a)(3) of the Exchange Act and the use of margin
securities, as defined in Rule 15c3-3(a)(4) of the Exchange Act, by
a broker or dealer. ``Reportable security'' is defined in SEA Rule
10c-1a(j)(3) as any security or class of an issuer's securities for
which information is reported or required to be reported to the
consolidated audit trail as required by Sec. 242.613 of the
Exchange Act and the CAT NMS Plan (``CAT''), the Financial Industry
Regulatory Authority's Trade Reporting and Compliance Engine
(``TRACE''), or the Municipal Securities Rulemaking Board's Real-
Time Transaction Reporting System (``RTRS''), or any reporting
system that replaces one of these systems.
\6\ SEA Rule 10c-1a(j)(5) defines an RNSA as an association of
brokers and dealers that is registered as a national securities
association pursuant to 15 U.S.C. 78o-3 of the Exchange Act. FINRA
currently is the only RNSA.
\7\ See SEA Rule 10c-1a(g).
\8\ See Adopting Release, 88 FR 75644, 75692.
\9\ See Adopting Release, 88 FR 75644, 75692-93.
---------------------------------------------------------------------------
Covered Person Reporting Requirements
SEA Rule 10c-1a prescribes the items of information that covered
persons must report to an RNSA regarding a covered securities loan.
These reportable data elements include both non-confidential items of
information that would be publicly disseminated (i.e., the items of
information specified in SEA Rule 10c-1a(c)(1) through (12)) as well as
confidential items of information that would not be publicly
disseminated (i.e., the items of information specified in SEA Rule 10c-
1a(e)(1) through (3)).
Specifically, SEA Rule 10c-1a(c) requires covered persons to report
the following non-confidential items of information to an RNSA, if
applicable, by the end of the day \10\ on which the covered securities
loan is effected:
---------------------------------------------------------------------------
\10\ SEA Rule 10c-1a permits the RNSA to define ``end of the
day'' for the purposes of the rule. See Adopting Release, 88 FR
75644, 75648 n.72.
---------------------------------------------------------------------------
(1) The legal name of the security issuer, and the Legal Entity
Identifier (``LEI'') of the issuer, if the issuer has a non-lapsed LEI;
(2) The ticker symbol, International Securities Identification
Number (``ISIN''), Committee on Uniform Securities Identification
Procedures (``CUSIP''), or Financial Instrument Global Identifier
(``FIGI'') of the security, or other security identifier;
(3) The date the covered securities loan was effected;
(4) The time the covered securities loan was effected;
(5) The name of the platform or venue where the covered securities
loan was effected;
(6) The amount, such as size, volume, or both, of the reportable
securities loaned;
(7) The type of collateral used to secure the covered securities
loan;
(8) For a covered securities loan collateralized by cash, the
rebate rate or any other fee or charges;
(9) For a covered securities loan not collateralized by cash, the
securities lending fee or rate, or any other fee or charges;
(10) The percentage of collateral to value of reportable securities
loaned required to secure such covered securities loan;
(11) The termination date of the covered securities loan; and
(12) Whether the borrower is a broker or dealer, a customer (if the
person lending securities is a broker or dealer), a clearing agency, a
bank, a custodian, or other person.
With respect to the confidential items of information, SEA Rule
10c-1a(e) requires covered persons to report the following items of
information to an RNSA, if applicable, by the end of the day on which
the covered securities loan is effected:
(1) If known, the legal name of each party to the covered
securities loan, other than the customer from whom a broker or dealer
borrows fully paid or excess margin securities pursuant to Rule 15c3-
3(b)(3) of the Exchange Act, Central Registration Depository (``CRD'')
or Investment Adviser Registration Depository (``IARD'') Number, market
[[Page 38205]]
participant identification (``MPID''), and the LEI of each party to the
covered securities loan, and whether such person is the lender, the
borrower, or an intermediary between the lender and the borrower;
(2) If the person lending securities is a broker or dealer and the
borrower is its customer, whether the security is loaned from a
broker's or dealer's securities inventory to a customer of such broker
or dealer; and
(3) If known, whether the covered securities loan is being used to
close out a fail to deliver pursuant to Rule 204 of Regulation SHO or
to close out a fail to deliver outside of Regulation SHO.
SEA Rule 10c-1a also requires covered persons to report specified
modifications to covered securities loans. Specifically, if a loan
modification occurs after the non-confidential data elements for the
covered securities loan were reported to an RNSA pursuant to SEA Rule
10c-1a(c), and results in a change to any of the non-confidential data
elements previously provided to an RNSA, SEA Rule 10c-1a(d)(1) requires
a covered person to provide to the RNSA: (1) the date and time of the
modification; (2) the specific modification and the specific non-
confidential data element being modified; and (3) the unique identifier
assigned by the RNSA to the original covered securities loan. With
respect to a modification to a covered securities loan for which
reporting under SEA Rule 10c-1a was not required on the date the loan
was agreed to or last modified that results in a change to any of the
non-confidential data elements required to be provided to an RNSA under
SEA Rule 10c-1a(c), SEA Rule 10c-1a(d)(2) requires that the covered
person report all of the non-confidential data elements to the RNSA as
of the date of the modification, as well as the date and time of the
modification.
RNSA Publication of Data
SEA Rule 10c-1a(g) (RNSA publication of data) sets forth the
requirements applicable to an RNSA regarding securities loan data
publication. Specifically, SEA Rule 10c-1a(g)(1) provides that,
following receipt of the non-confidential data elements discussed
above, as soon as practicable, and not later than the morning of the
business day after the covered securities loan is effected, the RNSA
must assign a unique identifier to the covered securities loan, and
make publicly available for each covered securities loan effected on
the previous business day: (1) the unique identifier assigned by the
RNSA; (2) the non-confidential data elements required to be reported
pursuant to SEA Rule 10c-1a(c), other than the loan amount; and (3) the
security identifier under SEA Rule 10c-1a(c)(1) or 10c-1a(c)(2) that
the RNSA determines is appropriate to identify the security (e.g., the
security's ticker symbol or CUSIP identifier).
SEA Rule 10c-1a(g)(2) provides that, following receipt of the non-
confidential data elements reported pursuant to SEA Rule 10c-1a(c), on
the twentieth business day after the covered securities loan is
effected, the RNSA must make publicly available the loan amount
reported to the RNSA pursuant to SEA Rule 10c-1a(c)(6) along with the
applicable loan and security identifying information.
With respect to modifications to covered securities loans
previously reported to the RNSA, SEA Rule 10c-1a(g)(3)(i) provides
that, following the receipt of information regarding a modification
(pursuant to SEA Rule 10c-1a(d)), the RNSA must assign a unique
identifier to the covered securities loan (if one has not already been
assigned), and as soon as practicable, and not later than the morning
of the business day after the covered securities loan is modified, make
publicly available information pertaining to any modification to the
non-confidential data elements required to be reported pursuant to SEA
Rule 10c-1a(c), other than the loan amount. With respect to covered
securities loans for which reporting was not required on the date the
loan was agreed to or last modified (i.e., a loan for which non-
confidential data elements are reported to an RNSA pursuant to
paragraph (d)(2) of SEA Rule 10c-1a), the RNSA must make publicly
available all of the non-confidential data elements required to be
reported pursuant to SEA Rule 10c-1a(c), other than the loan
amount.\11\
---------------------------------------------------------------------------
\11\ See SEA Rule 10c-1a(g)(3) and (3)(i).
---------------------------------------------------------------------------
With respect to loan amounts, SEA Rule 10c-1a(g)(3)(ii) provides
that, on the twentieth business day after the covered securities loan
is modified, the RNSA must make publicly available the loan amount
reported to the RNSA pursuant to SEA Rule 10c-1a(c)(6) along with the
applicable loan and security identifying information.
The RNSA is required to keep confidential and not disseminate the
confidential data elements reported pursuant to SEA Rule 10c-1a(e).\12\
---------------------------------------------------------------------------
\12\ See SEA Rule 10c-1a(g)(4). In addition to keeping the
information confidential, an RNSA is required to establish,
maintain, and enforce reasonably designed written policies and
procedures to maintain the security and confidentiality of the
confidential information. See SEA Rule 10c-1a(h)(4).
---------------------------------------------------------------------------
In addition, SEA Rule 10c-1a(g)(5) provides that, following the
receipt of information reported pursuant to SEA Rule 10c-1a(c) when a
covered securities loan is effected, or reported pursuant to SEA Rule
10c-1a(d) when a covered securities loan is modified, the RNSA must, as
soon as practicable and not later than the morning of the business day
after a covered securities loan is effected or modified, make publicly
available, on a daily basis, information pertaining to the aggregate
loan transaction activity and distribution of loan rates for each
reportable security and the security identifier(s) that an RNSA
determines is appropriate to identify the security (e.g., the
security's ticker symbol or CUSIP identifier).
Reporting Agents
SEA Rule 10c-1a(a)(2) permits a covered person to rely on a
reporting agent to fulfill its reporting obligations under Rule 10c-1a.
In order to use a reporting agent to fulfill its SEA Rule 10c-1a
information reporting obligations, a covered person must: (1) enter
into a written agreement with the reporting agent, and (2) provide the
reporting agent with timely access to the required SEA Rule 10c-1a
information.\13\ A reporting agent that assumes the reporting
obligation on behalf of a covered person (pursuant to paragraph (a)(2))
is then required to provide the SEA Rule 10c-1a information to an RNSA,
in the format and manner required by the applicable rule(s) of such
RNSA (and within the time periods specified in SEA Rule 10c-1a(c)
through (e)).\14\ A reporting agent is also required to enter into a
written agreement with an RNSA that permits the reporting agent to
provide SEA Rule 10c-1a information to an RNSA on behalf of a covered
person \15\ and to provide an RNSA with a list naming each covered
person on whose behalf the reporting agent is providing SEA Rule 10c-1a
information (and provide an RNSA with any updates to the list of such
persons by the end of the day such list changes).\16\
---------------------------------------------------------------------------
\13\ See SEA Rule 10c-1a(a)(2).
\14\ See SEA Rule 10c-1a(b)(1).
\15\ See SEA Rule 10c-1a(b)(3).
\16\ See SEA Rule 10c-1a(b)(4).
---------------------------------------------------------------------------
RNSA Rules, Fees and Data Retention Requirements
SEA Rule 10c-1a(f) requires an RNSA to implement rules regarding
the format and manner of its collection of information described in
paragraphs 10c-1a(c) through 10c-1a(e) and make publicly available such
information in
[[Page 38206]]
accordance with rules promulgated by the RNSA pursuant to section 19(b)
of the Exchange Act and Rule 19b-4 thereunder; SEA Rule 10c-1a(i) also
permits an RNSA to establish and collect reasonable fees pursuant to
rules established under section 19(b) of the Exchange Act and Rule 19b-
4 thereunder.\17\ SEA Rule 10c-1a(h) imposes data retention and
availability requirements on an RNSA related to its collection of SEA
Rule 10c-1a information. Specifically, an RNSA must retain the
information collected pursuant to paragraphs (c) through (e) of SEA
Rule 10c-1a in a convenient and usable standard electronic data format
that is machine readable and text searchable without any manual
intervention for a period of five years \18\ and make the non-
confidential information collected pursuant to paragraphs (c) and (d)
of SEA Rule 10c-1a available to the public (in the same manner it is
maintained) on an RNSA's website or similar means of electronic
distribution, without use restrictions, for a period of at least five
years.\19\ An RNSA must also make the information collected pursuant to
paragraphs (b)(4) and (c) through (e) of SEA Rule 10c-1a available to
the Commission; or other persons as the Commission may designate by
order upon a demonstrated regulatory need.\20\ With respect to the
confidential information collected by an RNSA pursuant to paragraph (e)
of SEA Rule 10c-1a, paragraph (h)(4) requires an RNSA to establish,
maintain, and enforce reasonably designed written policies and
procedures to maintain the security and confidentiality of such
confidential information.
---------------------------------------------------------------------------
\17\ See SEA Rule 10c-1a(f) and (i). FINRA does not have
regulatory authority over Covered Persons or Reporting Agents that
are non-FINRA members. As FINRA does today, FINRA would refer to the
SEC potential violations of the federal securities laws and rules by
non-members, including failures to comply with SEA Rule 10c-1a and
FINRA rules adopted pursuant to SEA Rule 10c-1a (e.g., potential
SLATE reporting violations or failures to pay when due any SLATE
reporting fees).
\18\ See SEA Rule 10c-1a(h)(1).
\19\ See SEA Rule 10c-1a(h)(3).
\20\ See SEA Rule 10c-1a(h)(2).
---------------------------------------------------------------------------
(ii) Proposed Rule Change
Consistent with SEA Rule 10c-1a, FINRA is proposing to adopt the
new FINRA Rule 6500 Series (Securities Lending and Transparency Engine
(SLATE)) \21\ 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.\22\ Among other things, 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, including prescribing required modifiers
and indicators. FINRA intends to file separately a proposed rule change
to establish covered securities loan reporting fees and securities loan
data products and associated fees.
---------------------------------------------------------------------------
\21\ SLATE is the automated system developed by FINRA that,
among other things, will accommodate reporting and dissemination of
loan reports where applicable in covered securities loans. See
proposed Rule 6510(g).
\22\ FINRA may validate and reject submissions to SLATE that
FINRA believes are noncompliant or otherwise inconsistent with SEA
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 may also block or reject any activity
to the extent such activity puts the normal functioning of the SLATE
system at risk.
---------------------------------------------------------------------------
Reporting Initial Covered Securities Loans
Proposed Rule 6530(a) would govern the reporting requirements
applicable to Covered Persons for reporting Initial Covered Securities
Loans.\23\ Proposed Rule 6510(e) 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 SEA Rule 10c-1a.\24\ 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, for Initial
Covered Securities Loans effected on a business day at or after
12:00:00 a.m. Eastern Time (``ET'') through 7:45:00 p.m. ET, the
required information must be reported the same day before 8:00:00 p.m.
ET.\25\ For Initial Covered Securities Loans effected on a business day
after 7:45:00 p.m. ET, the required information must be reported no
later than the next business day (T+1) before 8:00:00 p.m. ET; \26\ and
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 Eastern Time) must be
reported the next business day (T+1) before 8:00:00 p.m. ET.\27\
---------------------------------------------------------------------------
\23\ As discussed above, a Covered Person may engage a Reporting
Agent to comply with the reporting obligations on its behalf,
consistent with the conditions of SEC Rule 10c-1a. See proposed Rule
6510(k) (defining ``Reporting Agent''); see also infra n.60.
\24\ See proposed Rule 6510(k) (among other things, defining
``Covered Person'' and ``Covered Securities Loan'' by reference to
SEA Rule 10c-1a, which defines ``covered person'' and ``covered
securities loan'' in paragraphs (j)(1) and (2), respectively); see
also supra notes 4-5.
\25\ See proposed Rule 6530(a)(1)(A).
\26\ See proposed Rule 6530(a)(1)(B).
\27\ See proposed Rule 6530(a)(1)(C).
---------------------------------------------------------------------------
Proposed Rule 6530(a)(2) (Loan Information To Be Reported) would
specify the items of information that must be reported to FINRA.
Specifically, proposed Rule 6530(a)(2)(A) through (N) would require
that Initial Covered Securities Loan reports must contain the below
non-confidential data elements:
(1) The legal name of the security issuer and the LEI of the issuer
(if the issuer has a non-lapsed LEI);
(2) Security symbol, CUSIP, ISIN, or FIGI, if any;
(3) The date the Covered Securities Loan was effected;
(4) The time the Covered Securities Loan was effected;
(5) The expected settlement date of the Covered Securities Loan;
(6) The platform or venue where the Covered Securities Loan was
effected; \28\
---------------------------------------------------------------------------
\28\ FINRA 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.
---------------------------------------------------------------------------
(7) The amount of the Reportable Securities loaned; \29\
---------------------------------------------------------------------------
\29\ Proposed Rule 6530(a)(3) specifies that when reporting the
loan amount pursuant to 6530(a)(2)(G), 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 TRACE or the MSRB's RTRS, a Covered Person must report
the total par value of the securities loaned.
---------------------------------------------------------------------------
(8) The type of collateral used to secure the Covered Securities
Loan;
(9) For a Covered Securities Loan collateralized by cash, the
rebate rate;
(10) For a Covered Securities Loan not collateralized by cash, the
securities lending fee;
(11) Any other fees or charges; \30\
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\30\ When reporting a rebate rate or lending fee pursuant to
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.
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(12) The percentage of collateral to value of Reportable Securities
loaned required to secure such Covered Securities Loan;
(13) For a Covered Securities Loan with a specified term, the
termination date of the Covered Securities Loan; \31\ and
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\31\ This field would remain blank if reporting a Covered
Securities Loan without a specified term (i.e., an open-ended loan).
However, upon the termination of an open-ended loan, as is the case
with a term loan, a Covered Person would be required to submit a
Loan Modification appending the terminated loan indicator pursuant
to proposed Rule 6530(c)(4). See infra n.48 and accompanying text.
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[[Page 38207]]
(14) Whether the borrower is a Broker \32\ or Dealer,\33\ a
customer (if the person lending securities is a Broker or Dealer), a
Clearing Agency,\34\ a Bank,\35\ a Custodian,\36\ or other person.
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\32\ Proposed Rule 6510(j) would define ``Broker'' by reference
to Exchange Act section 3(a). Exchange Act section 3(a)(4)(A)
defines a ``broker'' as any person engaged in the business of
effecting transactions in securities for the account of others, with
exceptions for certain bank activities specified in Exchange Act
section 3(a)(4)(B).
\33\ Proposed Rule 6510(j) would define ``Dealer'' by reference
to Exchange Act section 3(a). Exchange Act section 3(a)(5)(A)
defines a ``dealer'' as any person engaged in the business of buying
and selling securities (not including security-based swaps, other
than security-based swaps with or for persons that are not eligible
contract participants) for such person's own account through a
broker or otherwise, with exceptions for persons not engaged in the
business of dealing (Exchange Act section 3(a)(5)(B)) and for
certain bank activities specified in Exchange Act section
3(a)(5)(C).
\34\ Proposed Rule 6510(j) would define ``Clearing Agency'' by
reference to Exchange Act section 3(a). Exchange Act section
3(a)(23)(A) defines a ``clearing agency'' as any person who acts as
an intermediary in making payments or deliveries or both in
connection with transactions in securities or who provides
facilities for comparison of data respecting the terms of settlement
of securities transactions, to reduce the number of settlements of
securities transactions, or for the allocation of securities
settlement responsibilities. Such term also means any person, such
as a securities depository, who (i) acts as a custodian of
securities in connection with a system for the central handling of
securities whereby all securities of a particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred, loaned, or pledged by bookkeeping entry without
physical delivery of securities certificates, or (ii) otherwise
permits or facilitates the settlement of securities transactions or
the hypothecation or lending of securities without physical delivery
of securities certificates. Exchange Act section 3(a)(23)(B)
provides exceptions to the definition of a ``clearing agency.''
\35\ Proposed Rule 6510(j) would define ``Bank'' by reference to
Exchange Act section 3(a). Exchange Act section 3(a)(6) defines a
``bank'' as (A) a banking institution organized under the laws of
the United States or a Federal savings association, as defined in
section 1462(5)of title 12, (B) a member bank of the Federal Reserve
System, (C) any other banking institution or savings association, as
defined in section 1462(4)of title 12, whether incorporated or not,
doing business under the laws of any State or of the United States,
a substantial portion of the business of which consists of receiving
deposits or exercising fiduciary powers similar to those permitted
to national banks under the authority of the Comptroller of the
Currency pursuant to section 92a of title 12, and which is
supervised and examined by State or Federal authority having
supervision over banks or savings associations, and which is not
operated for the purpose of evading the provisions of this chapter,
and (D) a receiver, conservator, or other liquidating agent of any
institution or firm included in clauses (A), (B), or (C).
\36\ Proposed Rule 6510(c) would define ``Custodian'' by
reference to Exchange Act section 3(a)(4)(B)(viii) as a broker or
bank that is providing safekeeping or custody services as described
in Exchange Act section 3(a)(4)(B)(viii)(I)(aa) or (bb) in
connection with the Covered Securities Loan.
---------------------------------------------------------------------------
Consistent with SEA Rule 10c-1a(e), proposed Rule 6530(a)(2)(O)
through (U) would also require that Initial Covered Securities Loan
reports contain the below confidential data elements:
(1) If known, the legal name of each party to the Covered
Securities Loan (other than the customer from whom a Broker or Dealer
borrows fully paid or excess margin securities pursuant to SEA Rule
15c3-3(b)(3));
(2) If known, the CRD Number or IARD Number of each party to the
Covered Securities Loan, if applicable;
(3) If known, the MPID of each party to the Covered Securities
Loan;
(4) If known, the LEI of each party to the Covered Securities Loan;
(5) If known, whether each party to the Covered Securities Loan is
the lender, the borrower, or an intermediary between the lender and the
borrower;
(6) 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 the customer of such
Broker or Dealer; and
(7) 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.
Additionally, proposed Rule 6530(a)(2)(V) through (Y) would require
a Covered Person to report:
(1) Whether the Covered Person is the lender, borrower or
intermediary;
(2) The unique internal identifier assigned to the Covered
Securities Loan by the Covered Person responsible for reporting the
loan to SLATE;
(3) 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; \37\ and
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\37\ Individual participants in agency lending programs
generally authorize an agent lender, pursuant to agency lending
agreements, to lend their securities on their behalf. As discussed
in the Adopting Release, reporting obligations under SEA Rule 10c-1a
can depend 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). See generally Adopting Release, 88 FR 75644,
75664. If the Initial Covered Securities Loan is an allocation of an
omnibus loan effected pursuant to an agency lending agreement,
proposed Rule 6530(a)(2)(W) and (X) would require that the SLATE
report include both the Covered Person's unique internal identifier
for the Covered Securities Loan (i.e., the report of the allocation)
and the Covered Person's unique internal identifier for the
associated omnibus loan.
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(4) Such modifiers and indicators as required by either the Rule
6500 Series or the SLATE Participant specification.
FINRA intends to use the information required by proposed Rule
6530(a)(2)(V) (requiring Covered Persons to identify whether the
Covered Person is the lender, borrower or intermediary), proposed Rule
6530(a)(2)(W) (requiring Covered Persons to report the unique internal
identifier it has assigned for the loan), and proposed Rule
6530(a)(2)(X) (requiring, for a loan that is an allocation of an
omnibus loan, that Covered Persons report the unique internal
identifier it has assigned for the associated omnibus loan) for data
validation and regulatory purposes. For example, the Covered Person
party type (i.e., lender, borrower or intermediary) would provide
necessary information regarding the identity of the Covered Person
under the Rule, including in instances where a party other than the
Covered Person submits the report to SLATE. The Covered Person's
internal identifier for the loan would allow for the identification of
a Covered Securities Loan in the audit trail prior to the assignment of
a loan identifier by FINRA. For example, the internal identifier
assigned by a Covered Person would be used to associate an Initial
Covered Securities Loan with a Loan Modification submitted on the same
day, prior to the assignment of a loan identifier by FINRA. The Covered
Person's unique internal omnibus loan identifier would be used to
identify allocations and reallocations of Covered Securities Loans that
are associated with an omnibus-level loan arranged by an agent lender.
Obtaining this identifier would allow FINRA, for example, to provide
the public with more granular insight into the day's loan activity in
its disseminated data.\38\ FINRA believes that requiring Covered
Persons to report unique internal identifiers--in whatever alphanumeric
format preferred by the firm--strikes an appropriate balance by
ensuring that FINRA receives important information for use in
identifying and linking associated reports without requiring firms to
assign an identifier using a prescribed format or convention.
---------------------------------------------------------------------------
\38\ As required by SEA Rule 10c-1a(g)(5), FINRA would make
publicly available, on a daily basis, information pertaining to the
aggregate loan transaction activity for each Reportable Security
based on the prior business day's activity. The omnibus loan
identifier would allow FINRA to identify allocations of an omnibus
loan arranged by an agent lender and determine when an Initial
Covered Securities Loan reported to SLATE is actually a reallocation
of some portion of a preexisting omnibus loan. This would allow
FINRA to filter the amounts of any such loan reallocations from the
aggregate loan volumes that FINRA proposes to disseminate for each
Reportable Security on a given day, as specified in proposed FINRA
Rule 6540(c)(1).
---------------------------------------------------------------------------
The modifiers and indicators--set forth in proposed Rule 6530(c)
(Modifiers and Indicators)--apply to specific scenarios where
additional
[[Page 38208]]
detail is appropriate to clarify the information required to be
reported pursuant to proposed Rule 6530(a)(2) and (b)(2).\39\ FINRA
intends to use these modifiers and indicators to provide regulators and
the public with important information regarding the reported securities
loan. Specifically, proposed Rule 6530(c)(1) (Exclusive Arrangement)
would require a Covered Person to append an indicator to identify a
loan made pursuant to an exclusive arrangement with the borrower or
intermediary. An exclusive arrangement is one in which a borrower or
intermediary has exclusive access to a lender's portfolio. Because
exclusive access to a lender's portfolio can impact the loan rate,\40\
the exclusive loan indicator would help to identify loans whose rates
may not reflect current market rates.
---------------------------------------------------------------------------
\39\ SEA Rule 10c-1a prescribes generally the loan information
that parties must report to FINRA (i.e., the data elements listed in
SEA Rule 10c-1a(c), loan modifications identified in SEA Rule 10c-
1a(d), and confidential data elements listed in SEA Rule 10c-1a(e)),
and requires that FINRA establish rules regarding the format and
manner of its collection of such information. See SEA Rule 10c-
1a(f); see also Adopting Release, 88 FR 75644, 75667 n.365
(explaining that the Commission is not specifying the details as to
the format of the required data, the manner in which rates would be
presented, or other detailed information requested, to give an RNSA
the discretion to structure its systems and processes as it sees fit
and propose rules accordingly, provided they are consistent with the
final rule as adopted as well as other requirements of the Exchange
Act applicable to an RNSA).
\40\ See Adopting Release, 88 FR 75644, 75695 n.732.
---------------------------------------------------------------------------
Proposed Rule 6530(c)(2) (Loan to Affiliate) would require a
Covered Person to append an indicator to identify a loan made to an
Affiliate of the lender or intermediary. For purposes of this
provision, ``Affiliate'' would be defined as ``an entity that controls,
is controlled by or is under common control with a Covered Person.''
\41\ Because an affiliate relationship between the borrower and lender
or intermediary can impact borrowing costs,\42\ the affiliate loan
indicator would likewise help to identify loans whose rates may not
reflect current market rates.\43\
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\41\ See proposed Rule 6710(a). For the purposes of the
definition of ``Affiliate,'' ``control,'' along with any derivative
thereof, means legal, beneficial, or equitable ownership, directly
or indirectly, of 25 percent or more of the capital stock (or other
ownership interest, if not a corporation) of any entity ordinarily
having voting rights. See proposed Rule 6510(a). The term ``common
control'' means the same natural person or entity controls two or
more entities. See proposed Rule 6510(a).
\42\ See Adopting Release, 88 FR 75644, 75661 n.278 and
accompanying text.
\43\ See Adopting Release, 88 FR 75644, 75661 n.279 (stating
that ``[t]o reduce any potential confusion and misinterpretation of
the data, an RNSA could determine to, if it is able, develop
methodologies to separate or identify [affiliate] loans'').
---------------------------------------------------------------------------
Proposed Rule 6530(c)(3) (Unsettled Loan) would require a Covered
Person to append an indicator to identify an Initial Covered Securities
Loan or modification to the amount of Reportable Securities loaned that
did not settle by the close of SLATE System Hours \44\ on the expected
settlement date reported to SLATE.\45\ Loans may be agreed upon but
ultimately not settle for a variety of reasons (e.g., the lender is
unable to deliver the securities; the loan fails due to mismatched
instructions).\46\ The unsettled loan indicator would provide clarity
that the amount of Reportable Securities loaned reported to SLATE was
not transferred to the borrower, which may provide useful insight into
the day's loan activity.\47\
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\44\ Proposed Rule 6510(i) would define ``SLATE System Hours''
as ``the hours SLATE is open, which are 6:00:00 a.m. Eastern Time
through 7:59:59 p.m. Eastern Time on a business day, unless
otherwise announced by FINRA.''
\45\ The unsettled loan indicator would generally not be
applicable to Loan Modifications involving a decrease to the loan
amount due to the return of securities to the lender. See infra
n.54.
\46\ To the extent an Initial Covered Securities Loan or Loan
Modification that was originally reported with the unsettled loan
indicator subsequently settled, a Covered Person would be required
to report a Loan Modification to remove the unsettled loan indicator
to reflect that the previously reported Initial Covered Securities
Loan or Loan Modification had settled.
\47\ FINRA expects to use the unsettled loan indicator to filter
the aggregate data that it would disseminate pursuant to SEA Rule
10c-1a(g)(5), and the indicator would be publicly disseminated with
the loan-level data that FINRA would disseminate pursuant to SEA
Rule 10c-1a(g)(1) through (3).
---------------------------------------------------------------------------
Proposed Rule 6530(c)(4) (Terminated Loan) would require a Covered
Person to indicate when a Covered Securities Loan has been terminated.
The terminated loan indicator would therefore be required to be
appended on reports of: (1) an Initial Covered Securities Loan that did
not and will not settle; and (2) Loan Modifications reporting the
termination of a Covered Securities Loan (whether an open-ended or a
term loan).\48\
---------------------------------------------------------------------------
\48\ See proposed Rule 6530(c)(4).
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Proposed Rule 6530(c)(5) (Rate or Fee Adjustment) would require a
Covered Person to report the appropriate modifier if a loan rebate rate
or lending fee accounts for: (1) a billing adjustment or correction to
amounts previously rebated or charged; or (2) the value of a
distribution or other economic benefit associated with the Reportable
Security, e.g., a corporate action. Similarly, proposed Rule 6530(c)(6)
(Basket Loan) would require a Covered Person to report the appropriate
modifier if a loan rebate rate or lending fee reflects a rate or fee
involving a basket of at least 10 unique Reportable Securities for a
single agreed rate or fee for the entire basket. In each of these
scenarios, the modifier would help to identify loans where the rate or
fee may not reflect the current market. In addition to enhancing the
disseminated data and its value to market participants, FINRA plans to
use these modifiers for data validation (e.g., in instances where
FINRA's data validation logic identifies the reported rate as
potentially erroneous).
Reporting Securities Loan Modifications
Proposed Rule 6530(b) would govern the reporting requirements
applicable to Covered Persons for reporting Loan Modifications.\49\
Proposed Rule 6510(f) 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 and modifiers reported pursuant to proposed
Rule 6530(a)(2).\50\ 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, for Loan Modifications
effected on a business day at or after 12:00:00 a.m. ET through 7:45:00
p.m. ET, the required information must be reported the same day before
8:00:00 p.m. ET.\51\ For Loan Modifications effected on a business day
after 7:45:00 p.m. ET, the required information must be reported no
later than the next business day (T+1) before 8:00:00 p.m. ET; \52\ and
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 Eastern Time) must be reported the
next business day (T+1) before 8:00:00 p.m. ET.\53\
---------------------------------------------------------------------------
\49\ As discussed above, a Covered Person may engage a Reporting
Agent to comply with the reporting obligations on its behalf,
consistent with the conditions of SEC Rule 10c-1a. See proposed Rule
6510(k) (defining ``Reporting Agent''); see also infra n.60.
\50\ See proposed Rule 6510(d).
\51\ See proposed Rule 6530(b)(1)(A).
\52\ See proposed Rule 6530(b)(1)(B).
\53\ See proposed Rule 6530(b)(1)(C).
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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, proposed Rule 6530(b)(2)(A) through (I) would
require that each Loan Modification report contain the information
below:
[[Page 38209]]
(1) 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;
(2) 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;
(3) The MPID of the Covered Person;
(4) The date of the Loan Modification;
(5) The time of the Loan Modification;
(6) 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); \54\
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\54\ Covered Persons must report a decrease to the loan amount
resulting from a return of securities only once the securities have
been delivered because returns are not considered ``effected'' until
the securities are actually returned. However, Covered Persons must
report all other Loan Modifications on the date that the Loan
Modification was agreed upon and, in such instances, must report the
effective date (pursuant to proposed Rule 6530(b)(2)(F)) unless the
effective date is the same as the Loan Modification date (reported
pursuant to 6530(b)(2)(D)).
---------------------------------------------------------------------------
(7) Whether the Covered Person is the lender, borrower or
intermediary;
(8) The 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; \55\ and
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\55\ As defined by proposed Rule 6510(d), ``Data Element''
includes any item of information that a Covered Person must report
under SEA Rule 10c-1a(c) and proposed Rule 6530(a)(2)(A) through (N)
and such modifiers and indicators required by proposed Rule
6530(a)(2)(Y). Accordingly, a modification to a Covered Securities
Loan that would require the addition or removal of a modifier or
indicator required to be reported pursuant to proposed Rule
6530(a)(2)(Y) would require a Covered Person to report a Loan
Modification as set forth in proposed Rule 6530(b).
---------------------------------------------------------------------------
(9) Such modifiers and indicators as required by either the Rule
6500 Series or the SLATE Participant specification.
Proposed Rule 6530.01 (Intraday Loan Modifications) addresses 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) is modified multiple
times throughout the day, a Covered Person must report each Loan
Modification that occurs on a given day as set forth in proposed Rule
6530(b). For example, if Lender A and Borrower X agree at 10:00 a.m. ET
to modify the rebate rate for a previously reported Covered Securities
Loan from 0.15 percent to 0.20 percent, and then decide at 3:00 p.m. ET
to modify the rate to 0.30 percent, the Covered Person must report two
Loan Modifications pursuant to proposed Rule 6530(b)(2): one with a
Loan Modification time of 10:00 a.m. ET reflecting the change in the
rebate rate to 0.20 percent and a second with a Loan Modification time
of 3:00 p.m. ET to reflect the change in the rebate rate to 0.30
percent. Because, in this example, the Covered Securities Loan was
previously reported to SLATE, the Loan Modification reports must also
include the unique identifier assigned by FINRA to the loan.
If, however, the Covered Securities Loan was not previously
required to be reported (e.g., because the Initial Covered Securities
Loan occurred prior to the effectiveness of the FINRA rule), the
Covered Person must still report two Loan Modifications. However, the
Loan Modification report reflecting the 10:00 a.m. ET change in the
rebate rate to 0.20 percent must also include all of the other Data
Elements required by proposed Rule 6530(a)(2) (i.e., the non-
confidential data elements) as well as the internal identifier assigned
to the Covered Securities Loan by the Covered Person, and, 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. The
second Loan Modification report reflecting the 3:00 p.m. ET change
would not be required to include all of the other Data Elements
required by proposed Rule 6530(a)(2); however, unless a unique
identifier has been assigned to the loan by FINRA, the second Loan
Modification report must include the internal identifier assigned to
the Covered Securities Loan by the Covered Person, and, 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.\56\
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\56\ See proposed Rule 6530(b)(2)(A) and (B).
---------------------------------------------------------------------------
A Loan Modification report is also required where a Covered
Securities Loan is modified on the day upon which it was effected, even
if the modification occurred prior to the submission of the Initial
Covered Securities Loan report to SLATE. Thus, for example, Lender A
and Borrower X agree to an Initial Covered Securities Loan at 10:00
a.m. ET with terms that include a rebate rate of 0.15 percent. At 3:00
p.m. ET that same day, before the Initial Covered Securities Loan was
reported to SLATE, Lender A and Borrower X agree to change the
previously agreed upon rebate rate from 0.15 to 0.20 percent. Under the
proposed rule, the Initial Covered Securities Loan must be reported
reflecting all of the Data Elements and Confidential Data Elements \57\
required pursuant to proposed Rule 6530(a)(2), including the date and
time the loan was effected of 10:00 a.m. ET as well as the original
rebate rate of 0.15 percent. In addition to reporting the Initial
Covered Securities Loan, the Covered Person also must separately report
the Loan Modification reflecting the modification date and time of 3:00
p.m. ET, the new rate of 0.20 percent, and the internal identifier
assigned to the Covered Securities Loan by the Covered Person, and, 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.
---------------------------------------------------------------------------
\57\ As defined by proposed Rule 6510(b), ``Confidential Data
Element'' includes any item of information that a Covered Person
must report under SEA Rule 10c-1a(e) and FINRA Rule 6530(a)(2)(O)
through (X).
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As discussed in the Adopting Release, a change to any party to a
Covered Securities Loan would constitute the termination of the prior
Covered Securities Loan and the initiation of a new loan under proposed
Rule 6530.\58\ Therefore, Covered Persons must submit two reports to
SLATE: (1) a termination report with respect to the prior loan; and (2)
an Initial Covered Securities Loan report reflecting all of the Data
Elements and Confidential Data Elements required by proposed Rule
6530(a)(2) with respect to the new loan. Thus, proposed Rule 6530.02
(Changes to the Parties of a Covered Securities Loan) provides 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: (a) 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
[[Page 38210]]
was added or removed and select the terminated loan indicator; and (b)
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 excess margin
securities pursuant to SEA Rule 15c3-3(b)(3)).
---------------------------------------------------------------------------
\58\ See 88 FR 75644, 75664.
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Compliance With Reporting Obligations
Similar to requirements that exist with respect to reporting
obligations under other FINRA rules, FINRA is proposing to adopt
proposed Rule 6530(d) (Compliance with Reporting Obligations) to
implement provisions regarding Covered Persons' ongoing reporting
obligations and the use of third parties in meeting SEA Rule 10c-1a and
FINRA 6500 Rule Series obligations.\59\ Specifically, proposed Rule
6530(d)(1) provides that Covered Persons (other than Covered Persons
that engage a Reporting Agent) \60\ 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 SEA 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. Also, similar to requirements that exist with
respect to reporting obligations under other FINRA rules, proposed Rule
6530(d)(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.\61\
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\59\ See e.g., Rule 6380A(h); Rule 6622(h); Rule 6730(a)(6).
\60\ Proposed Rule 6510(k) would define ``Reporting Agent'' by
reference to SEA Rule 10c-1a, which defines ``reporting agent'' in
paragraph (j)(4) as a broker, dealer, or registered clearing agency
that enters into a written agreement with a covered person under
paragraph (a)(2) of SEA Rule 10c-1a.
\61\ See e.g., Rule 6380A(a)(4); Rule 6622(a)(4); Rule 6623;
Rule 6730(f).
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FINRA also is proposing to adopt a provision to specify that, even
where a member employs a Reporting Agent consistent with SEA Rule 10c-
1a(a)(2), 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.\62\ As discussed above, SEA Rule 10c-1a(a)(2)
specifies the applicable requirements that permit a Covered Person to
rely on a Reporting Agent to fulfill its reporting obligations under
the rule. These requirements include that the Covered Person must enter
into a written agreement with a Reporting Agent that agrees to report
the requisite information to FINRA on behalf of such Covered Person in
accordance with the requirements of SEA Rule 10c-1a(b); \63\ and
provides the Reporting Agent with timely access to the SEA Rule 10c-1a
information.\64\ In connection with these provisions, proposed Rule
6530(d)(3) would provide 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 SEA Rule
10c-1a and FINRA Rule 6530 on its behalf. In executing this obligation,
FINRA would expect, for example, that the member review the Covered
Securities Loan reporting data made available to it by the Reporting
Agent or through FINRA's system to evaluate the accuracy and timeliness
of the Covered Securities Loan reports submitted on its behalf by the
Reporting Agent.
---------------------------------------------------------------------------
\62\ See proposed Rule 6530(d)(3).
\63\ See SEA Rule 10c-1a(a)(2)(i).
\64\ See SEA Rule 10c-1a(a)(2)(ii).
---------------------------------------------------------------------------
Finally, proposed Rule 6530(d)(4) would provide that, if a Covered
Person makes a good faith determination that it has a reporting
obligation under SEA Rule 10c-1a and this Rule 6500 Series, 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(d)(4)
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.
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 SEA Rule 10c-1a and proposed Rule 6530.
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(h) 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 the SEA 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: (i) obtain an MPID for reporting Covered Securities
Loans to SLATE; \65\ (ii) execute and comply with the SLATE Participant
application agreement and all applicable rules and operating procedures
of FINRA \66\ and the SEC; \67\ and (iii) maintain the physical
security of the equipment located on the premises of the SLATE
Participant to prevent unauthorized entry of information into
SLATE.\68\ 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 these mandatory participation requirements.
---------------------------------------------------------------------------
\65\ See proposed Rule 6520(a)(2)(A).
\66\ For example, the proposed Rule 6500 Series and, if a
member, member conduct rules.
\67\ See proposed Rule 6520(a)(2)(B).
\68\ See proposed Rule 6520(a)(2)(C).
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Proposed Rule 6520(b) (Reporting Agents) would set forth the
participation requirements specific to Reporting Agents.\69\ Consistent
with SEA Rule 10c-1a(b)(4), 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 changes 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.
---------------------------------------------------------------------------
\69\ See supra n.60 (noting proposed Rule 6510(k) would define
``Reporting Agent'' by reference to SEA Rule 10c-1a).
---------------------------------------------------------------------------
Finally, proposed Rule 6520(c) (SLATE Participant Obligations)
would
[[Page 38211]]
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) would also 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.
Dissemination of Loan Information
As required by SEA Rule 10c-1a(g), 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. 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).
T+1 Loan-Level Data Dissemination
Under proposed Rule 6540(a) (Next Day Dissemination), 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) the unique identifier
assigned by FINRA to the Covered Securities Loan; (2) the security
identifier(s) specified in Rule 6530(a)(2)(A) or (B) that FINRA
determines is appropriate to disseminate; and (3) the requisite Data
Elements.
With respect to each Initial Covered Securities Loan reported to
SLATE, proposed Rule 6540(a)(3)(A) would specify that FINRA make
publicly available no later than the morning of the next business day
all other reported Data Elements, except the amount of Reportable
Securities loaned (reported pursuant to Rule 6530(a)(2)(G)) and any
modifier or indicator required by either the Rule 6500 Series or the
SLATE Participant specification that FINRA determines shall not be
publicly disseminated. Thus, for example, if a Covered Person reports
an Initial Covered Securities Loan to SLATE on a Tuesday before 8:00:00
p.m. ET, on Wednesday morning, assuming Wednesday is a business day,
FINRA would disseminate the unique identifier assigned by FINRA to the
loan, the security identifier, and all other reported Data Elements,
except the loan amount and any modifier or indicator required by either
the Rule 6500 Series or the SLATE Participant specification that FINRA
determines shall not be publicly disseminated.
With respect to each Loan Modification to a Covered Securities Loan
reported to SLATE on the same or a prior business day, proposed Rule
6540(a)(3)(B) would specify that FINRA make publicly available no later
than the morning of the next business day the modified Data Elements
reported to SLATE, except the amount of Reportable Securities loaned
and any modifier or indicator required by either the Rule 6500 Series
or the SLATE Participant specification that FINRA determines shall not
be publicly disseminated. For example, if a Covered Person reports a
Loan Modification to SLATE on a Tuesday before 8:00:00 p.m. ET
increasing the previously reported loan amount from 500 shares to 700
shares and decreasing the previously reported rebate rate from 0.25
percent to 0.15 percent, on Wednesday morning, assuming Wednesday is a
business day, FINRA would disseminate the unique identifier assigned by
FINRA to the loan, the security identifier, and the modified rebate
rate, i.e., 0.15 percent, but would not disseminate the modified loan
amount, which would be subject to delayed dissemination (until 20
business days after the date of the modification to the loan amount)
under proposed Rule 6540(b), as discussed below.
Finally, in the case of a Loan Modification to a Covered Securities
Loan that was not previously required to be reported to SLATE (e.g.,
because the Initial Covered Securities Loan occurred prior to the
effectiveness of the Rule 6500 Series), proposed Rule 6540(a)(3)(C)
would specify that FINRA make publicly available the unique loan
identifier assigned by FINRA to the loan, the security identifier, and
all other reported Data Elements, except the amount of Reportable
Securities loaned and any modifier or indicator required by either the
Rule 6500 Series or the SLATE Participant specification that FINRA
determines shall not be publicly disseminated.
T+20 Loan Amount Dissemination
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) the unique identifier assigned by FINRA to the
Covered Securities Loan, (2) the security identifier(s) specified in
Rule 6530(a)(2)(A) or (B) that FINRA determines is appropriate to
disseminate, and (3) the amount of Reportable Securities loaned
reported to SLATE. 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). For example, where a
Covered Securities Loan is effected on a Monday, the 1st of the month
\70\ and is reported to SLATE before 8:00:00 p.m. ET that day, the 20-
business day period would start to run on the 2nd, and FINRA would
disseminate the amount of securities loaned reported to SLATE on the
29th day of the month (20 business days later), along with the unique
loan identifier assigned by FINRA and the security identifier. Where a
Covered Securities Loan is effected at 10:00 p.m. ET on the 1st of the
month and is reported to FINRA the next business day as required by
Rule 6530(a)(1)(B), the 20-business day period would still start to run
the 2nd of the month (i.e., the next business day after the loan was
effected) and FINRA would disseminate the amount of securities loaned
reported to SLATE on the 29th day of the month. In either scenario
above, if a modification to the loan amount is effected and reported to
SLATE prior to the end of the 20-business day delay period, i.e., prior
to the 29th of the month, the modified loan amount would be
disseminated 20 business days after such Loan Modification is effected.
---------------------------------------------------------------------------
\70\ For purposes of this example, the month is a 30-day month
where each weekday is a business day.
---------------------------------------------------------------------------
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.\71\
---------------------------------------------------------------------------
\71\ See proposed Rule 6540(c).
---------------------------------------------------------------------------
Aggregate Loan Transaction Activity
Pursuant to paragraph (1) of proposed Rule 6540(c) (Aggregate Loan
Transaction Activity), 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
[[Page 38212]]
of the next business day, aggregated loan activity in the Reportable
Security \72\ (along with the security identifier specified in Rule
6530(a)(2)(A) or (B) that FINRA determines is appropriate to identify
the relevant Reportable Security).\73\ The aggregated data would
include, for each Reportable Security, under proposed Rule
6540(c)(1)(A), the aggregate volume of securities (both in total and
broken down by collateral type) subject to an Initial Covered
Securities Loan or modification to the amount of Reportable Securities
loaned reported on the prior business day, and, under 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. FINRA believes 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.\74\
---------------------------------------------------------------------------
\72\ In addition to the items of information specified in
proposed paragraphs (A) through (E) of proposed Rule 6540(c)(1),
FINRA may, in its discretion, publish or distribute additional
metrics regarding aggregate transaction activity free of charge. See
infra n.73 defining ``aggregate loan activity.'' See also Adopting
Release, 88 FR 75644, 75684.
\73\ In its Adopting Release, the Commission stated that the
term ``aggregate transaction activity'' refers to information
pertaining to the absolute value of transactions such that net
position changes should not be discernable in the data, and is
intended to help ensure that only aggregate information about net
positions changes, rather than individualized information, is
provided to the public. See Adopting Release, 88 FR 75644, 75684.
\74\ See proposed Rule 6540 Supplementary Material .01 (De
Minimis Loan Transaction Activity), which would provide 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. For example,
if a single Covered Securities Loan was subject to 10 Loan
Modifications reported to SLATE on a given day, FINRA would omit
from the daily loan statistics volume information for that
Reportable Security because these events occurred in a single
Covered Securities Loan.
---------------------------------------------------------------------------
Pursuant to Rule 6540(c)(1)(C), FINRA would also disseminate the
aggregate volume of securities subject to an Initial Covered Securities
Loan or modification to the amount of Reportable Securities loaned
subject to a term loan (i.e., a loan with a specified term) and subject
to an open loan (i.e., a loan without a specified term) reported on the
prior business day.\75\ FINRA believes that these data would provide
the public with useful information concerning the nature of current
lending activity.\76\ Pursuant to Rule 6540(c)(1)(D), FINRA would also
disseminate the aggregate volume of securities subject to an Initial
Covered Securities Loan or modification to the amount of Reportable
Securities loaned broken down by borrower type (as specified in
proposed Rule 6530(a)(2)(N)) on the prior business day.\77\ These data
may provide market participants with information regarding the degree
to which loan activity is retail or wholesale, which, in combination
with the other aggregate data may provide insight into short selling
sentiment.\78\
---------------------------------------------------------------------------
\75\ See supra n.73.
\76\ FINRA understands that most securities loans are open-
ended, allowing the security on loan to be recalled by the lender.
See Adopting Release, 88 FR 75644, 75673.
\77\ See supra n.73.
\78\ See Adopting Release, 88 FR 75644, 75725 n.1050.
---------------------------------------------------------------------------
Pursuant to proposed Rule 6540(c)(1)(E), FINRA would disseminate
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. FINRA believes that these
data would provide the public with useful information concerning
current lending activity.
Loan Rate Distributions
Pursuant to paragraph (2) of proposed Rule 6540(c) (Loan Rate
Distribution Data), 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, as applicable,\79\
including: the highest rebate rate, lowest rebate rate, and volume
weighted average of the rebate rates reported to SLATE for 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, lowest lending fee, and volume weighted average of
the lending fees 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). 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.
---------------------------------------------------------------------------
\79\ In addition to the items of information specified in
proposed 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.
---------------------------------------------------------------------------
Proposed Rule 6540(d) (Loan Transaction Information Not
Disseminated) would specify the information reported to FINRA that
would not be disseminated. As prescribed by SEA Rule 10c-1a(g)(4),
proposed Rule 6540(d)(1) provides that the Confidential Data Elements
reported to FINRA would not be disseminated. In addition, proposed Rule
6540(d)(2) would provide that FINRA may determine not to publicly
disseminate any modifier or indicator required by either the Rule 6500
Series or the SLATE Participant specification. FINRA may determine not
to disseminate a modifier or indicator where the use of such
information is intended for regulatory purposes only or its public
disclosure may otherwise be inappropriate (e.g., where it may result in
information leakage).
Finally, 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.\80\
---------------------------------------------------------------------------
\80\ FINRA intends separately to file a proposed rule change to
establish SLATE reporting fees and fees for fee-liable data
products. Interested parties may subscribe to these fee-liable data
products. Professionals would not be permitted to access the SLATE
data made available free of change on FINRA's website, which is
provided for personal, non-commercial purposes only.
---------------------------------------------------------------------------
Other Provisions
Consistent with FINRA's rules governing other reporting facilities
that it operates, proposed Rule 6550 (Emergency Authority) would
provide that, as market conditions may warrant, FINRA, in consultation
with the SEC, 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.\81\
---------------------------------------------------------------------------
\81\ See Rule 6770.
---------------------------------------------------------------------------
The Commission's release adopting SEA Rule 10c-1a specified the
[[Page 38213]]
applicable compliance dates.\82\ 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. If the SEC extends
the compliance dates for SEA Rule 10c-1a's reporting or dissemination
requirements, FINRA's proposed rules addressing securities loan
reporting and data dissemination would become effective consistent with
the SEC's extended timeframe for reporting and data dissemination,
respectively.
---------------------------------------------------------------------------
\82\ See Adopting Release, 88 FR 75644, 75691.
---------------------------------------------------------------------------
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of section 15A(b)(6) of the Act, which require that FINRA
rules must be designed to prevent fraudulent and manipulative acts and
practices, 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, in general, to
protect investors and the public interest and, among other things, must
not be designed to permit unfair discrimination between customers,
issuers, brokers or dealers.\83\ FINRA also believes that the proposed
rule change is consistent with SEA Rule 10c-1a, which requires FINRA to
implement rules regarding the format and manner of its collection of
the securities loan information described in SEA Rule 10c-1a(c) through
(e) and for making publicly available such information in accordance
with rules promulgated pursuant to section 19(b) of the Exchange Act
and Rule 19b-4 under the Exchange Act.\84\
---------------------------------------------------------------------------
\83\ 15 U.S.C. 78o-3(b)(6).
\84\ See SEA Rule 10c-1a(f); see also Adopting Release, 88 FR
75644, 75648.
---------------------------------------------------------------------------
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 Act, SEA Rule 10c-1a, and section 984 of the
Dodd-Frank Act.\85\ The proposed rule change would do so by
facilitating the collection of specified securities loan information
from Covered Persons and Reporting Agents, which include non-FINRA
members,\86\ and providing access to such information to market
participants, the public, and regulators. As such, these proposed
changes are intended to facilitate the objectives of the Commission and
Congress by providing ``borrowers and lenders with better tools to
assess the terms of their securities loans and enhance the ability of
regulators to oversee the securities lending market,'' and ``result in
the public availability of new information for investors and other
market participants to consider in the mix of information about the
securities lending market and the securities markets generally to
better inform their decisions,'' which FINRA believes is consistent
with section 15A(b)(6) of the Act, SEA Rule 10c-1a, and section 984 of
the Dodd-Frank Act.\87\
---------------------------------------------------------------------------
\85\ As noted above, SEA Rule 10c-1a requires FINRA, as the sole
RNSA, to propose rules consistent with the Commission's mandate. See
SEA Rule 10c-1-a(f). section 984(a) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (``Dodd-Frank Act'') added
section 10(c)(1) to the Exchange Act to provide the Commission with
authority over securities lending. See 15 U.S.C. 78j(c)(1). Section
984(b) of the Dodd-Frank Act mandates that the Commission increase
the transparency of information available to brokers, dealers, and
investors with respect to the loan or borrowing of securities. See
Public Law 111-203, 124 Stat. 1376 (2010). See also 15 U.S.C. 78o-
3(b)(6).
\86\ As defined in SEA Rule 10c-1a(j), ``Covered Persons'' and
``Reporting Agents'' may include non-FINRA members.
\87\ See Adopting Release, 88 FR 75644, 75648. See also 15
U.S.C. 78o-3(b)(6); SEA Rule 10c-1a; and 15 U.S.C. 78j(c)(1).
---------------------------------------------------------------------------
FINRA's proposed Rule 6500 Series would also facilitate the
availability to regulators of information that may be used to aid in
assessing market events--``[f]or example, January 2021 information on
market participants' securities lending activity would have provided
FINRA and Commission staff a more timely and comprehensive view of who
was entering into new loans and who was no longer borrowing securities.
This would have facilitated a deeper understanding of how the events
were or were not impacting market participants. Such analyses can help
determine if further regulatory intervention in markets is warranted
and can inform the nature of any intervention.'' \88\
---------------------------------------------------------------------------
\88\ See Adopting Release, 88 FR 75644, 75717.
---------------------------------------------------------------------------
SEA Rule 10c-1a also expressly permits FINRA to establish rules
regarding the format and manner of its collection of securities loan
information. To that end, FINRA's proposed rule change would require
that Covered Persons report, in addition to the specific data elements
prescribed in SEA Rule 10c-1a, specified loan identifiers \89\ and
specified indicators and modifiers,\90\ as applicable. As noted above,
these additional items would provide regulators and the public with
important information regarding reported securities loans. For example,
because an affiliate relationship between the borrower and lender (or
intermediary) can impact borrowing costs, the affiliate loan indicator,
proposed in Rule 6530(c)(2), would help to identify loans whose rates
may not reflect current market rates, to the benefit of market
participants, the public, and regulators. Similarly, because FINRA
would disseminate aggregate loan activity each day, the unsettled loan
indicator, proposed in Rule 6530(c)(3), would allow FINRA to filter
unsettled loans, which is intended to provide the public with more
granular insight into the day's loan activity.\91\ FINRA believes that
the securities loan reporting and data dissemination requirements
proposed in the Rule 6500 Series, including the proposed identifiers
and indicators and modifiers, are designed to promote greater
transparency in the securities lending market, consistent with the
objectives of section 15A(b)(6) of the Act, SEA Rule 10c-1a, and
section 984 of the Dodd-Frank Act.\92\
---------------------------------------------------------------------------
\89\ Covered Persons would be required to report to SLATE: (1)
the unique internal identifier assigned to the Covered Securities
Loan by the Covered Person responsible for reporting the Covered
Securities Loan to SLATE; and (2) 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. See proposed Rules 6530(a)(2)(W)-(X) and (b)(2)(A)-
(B).
\90\ Covered Persons would be required to append the following
modifiers and indicators, as applicable, to all SLATE reports to
identify: (1) a loan pursuant to an exclusive arrangement; (2) a
loan to an affiliate; (3) a loan that did not settle on the expected
settlement date; (4) a loan that has been terminated; (5) a loan
with a rebate rate or lending fee adjustment (e.g., to account for a
billing correction or the value of a distribution); and (6) a loan
that is part of a basket of securities loaned for single agreed rate
or fee. See proposed Rules 6530(c)(1)-(6).
\91\ See supra n.47.
\92\ See 15 U.S.C. 78o-3(b)(6); SEA Rule 10c-1a; and 15 U.S.C.
78j(c)(1).
---------------------------------------------------------------------------
As noted above, SEA Rule 10c-1a(g) also mandates that FINRA
publicly disseminate specified securities loan data reported to SLATE,
along with information pertaining to the aggregate loan activity and
distribution of loan rates for each Reportable Security. To that end,
pursuant to proposed Rule 6540, FINRA would make SLATE data available
on FINRA's website free of charge for personal, non-commercial purposes
only. FINRA believes that making securities loan information available
free of charge for personal,
[[Page 38214]]
non-commercial purposes would promote transparency and reduce
information asymmetries in the securities lending market for retail
investors. For other uses, FINRA would offer SLATE data products at a
fee that would be filed with the SEC pursuant to Rule 19b-4 under the
Exchange Act.\93\ FINRA believes that this approach is both reasonable
and consistent with existing FINRA rules governing other transparency
regimes, e.g., TRACE.\94\ Therefore, FINRA believes that proposed FINRA
Rule 6540 is designed to protect investors and the public interest and
would not unfairly discriminate between customers, issuers, brokers, or
dealers.\95\
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\93\ Consistent with SEA Rule 10c-1a(i) and the Commission
Adopting Release, FINRA intends separately to file a proposed rule
change establishing fees for SLATE data products, and interested
parties may subscribe to these fee-liable data products. See
Adopting Release 88 FR 75644, 75687. See also proposed Rule 6540.02
(``Nothing in this Rule shall prohibit FINRA from also publishing or
distributing SLATE data at a charge for fees that have been filed
with the SEC pursuant to Rule 19b-4 under the Exchange Act.'').
\94\ See generally, FINRA Rule 7730.
\95\ See 15 U.S.C. 78o-3(b)(6).
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Finally, the proposed rule change would include provisions designed
to facilitate the timeliness, accuracy and completeness of the
information reported to SLATE and provide additional clarity to members
regarding their obligations under FINRA rules--consistent with section
15A(b)(6) of the Act, SEA Rule 10c-1a, and section 984 of the Dodd-
Frank Act.\96\ Specifically, while the proposed Rule 6500 Series
generally applies to Covered Persons and, where engaged, Reporting
Agents,\97\ the language of proposed Rules 6530(d)(2) and (d)(3), is
limited to the conduct of members. Specifically, proposed Rule
6530(d)(2) would provide 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.''
In addition, proposed Rule 6530(d)(3) would provide that ``[a] member
relying on a Reporting Agent to report Covered Securities Loan
information to SLATE has an obligation under FINRA Rule 3110 to take
reasonable steps to ensure that the Reporting Agent is complying with
SEA Rule 10c-1a and FINRA Rule 6530 on its behalf.'' While these
requirements are not explicitly provided for in SEA Rule 10c-1a, they
embody standards that FINRA applies to its members generally in the
conduct of their affairs--Rule 3110 (Supervision) and Rule 2010
(Standards of Commercial Honor and Principles of Trade) are
foundational provisions applicable to members.\98\ FINRA has previously
provided similar clarification regarding how these rules apply in the
context of other reporting regimes, such as in the fixed income and
equity trade reporting rules.\99\ A member's obligation to report
timely, accurately and completely and to take reasonable steps to
ensure that it supervises agents retained in connection with its
reporting obligations also applies in the securities lending context.
As such, proposed FINRA Rules 6530(d)(2) and (d)(3) are consistent with
the objectives of section 15A(b)(6) of the Act, SEA Rule 10c-1a, and
section 984 of the Dodd-Frank Act and would not unfairly discriminate
between customers, issuers, brokers, or dealers.\100\
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\96\ See Adopting Release, 88 FR 75644, 75648. See also 15
U.S.C. 78o-3(b)(6); SEA Rule 10c-1a; and 15 U.S.C. 78j(c)(1).
\97\ The defined terms ``Covered Person'' and ``Reporting
Agent'' include FINRA members and non-members. The defined term
``SLATE Participant'' would include both Covered Persons and
Reporting Agents. See proposed Rule 6510.
\98\ FINRA Rule 2010 provides that ``[a] member, in the conduct
of its business, shall observe high standards of commercial honor
and just and equitable principles of trade.'' FINRA Rule 3110
requires, inter alia, that FINRA members establish and maintain an
effective supervisory system, which includes overseeing,
supervising, and monitoring the activities or functions performed by
third-party vendors, that is reasonably designed to achieve
compliance with applicable securities laws and regulations and with
applicable FINRA rules. See also Regulatory Notice 21-29 (August
2021).
\99\ See e.g., FINRA Rule 6380A(a)(4); Rule 6622(a)(4); Rule
6623; Rule 6730(f).
\100\ See 15 U.S.C. 78o-3(b)(6); SEA Rule 10c-1a; and 15 U.S.C.
78j(c)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
As stated in the Commission's Adopting Release, SEA Rule 10c-1a,
which the proposed rule change is designed to implement, is expected to
reduce information asymmetries and to ``increase competition between
broker-dealers and between lending programs.'' \101\ The Commission
also stated in its Adopting Release that ``the increased ability for
broker-dealers to monitor conditions in the lending market may
encourage new broker-dealers to enter the market, further increasing
competition for broker-dealer services.'' \102\ Thus, FINRA does not
believe that the proposed rule change will result in any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. In addition, FINRA notes that the proposed rule
change would treat all similarly situated members equally, and the
provisions that also address non-member obligations pursuant to SEA
Rule 10c-1a likewise apply equally to similarly situated Covered
Persons, Reporting Agents, and SLATE Participants, as applicable.
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\101\ See Adopting Release, 88 FR 75644, 75723.
\102\ See Adopting Release, 88 FR 75644, 75723.
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Economic Impact Assessment
Based on the regulatory need discussed above and summarized below,
FINRA has undertaken an economic impact assessment, as set forth below,
to analyze the potential economic impacts of the proposed rule change,
including potential costs, benefits, and distributional and competitive
effects, relative to the current baseline.
Regulatory Need
On October 13, 2023, the SEC adopted SEA Rule 10c-1a, requiring
Covered Persons to report Covered Securities Loan information to an
RNSA, and the RNSA to make publicly available specified information
regarding those reported securities loans. In its Adopting Release, the
SEC stated, among other things, that SEA Rule 10c-1a was designed to
increase the transparency and efficiency of the securities lending
market.\103\
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\103\ See Adopting Release, 88 FR 75644.
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As required by SEA Rule 10c-1a(f), FINRA, currently the only RNSA,
is proposing to establish rules specifying the format and manner of its
collection of information on Covered Securities Loans. As required by
SEA Rule 10c-1a(g), FINRA also is proposing rules to make Covered
Securities Loan information publicly available. Below FINRA discusses
the potential economic impacts of FINRA's proposed changes specifying
the format and manner of reporting for Covered Securities Loans and the
dissemination of aggregate transaction activity and distribution of
loan rates for each Reportable Security.
Economic Baseline
In the Commission's Adopting Release, the SEC outlined the baseline
and considered the economic effects of Rule 10c-1a and how its costs
and benefits impacted the economic baseline.\104\
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\104\ See Adopting Release, 88 FR 75644, 75692, 75694-75723.
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In its Adopting Release, the Commission noted that various types of
entities participating in the securities lending market will be
impacted by SEA Rule 10c-1a, including those that may need to enter
into contracts and develop recording and reporting systems to comply
with the rule.\105\ Table 1 shows
[[Page 38215]]
the estimated number of entities that will be affected by SEA Rule 10c-
1a and the breakdown by type according to the estimates provided by the
SEC.\106\ In the Adopting Release, the SEC estimated that a total of
609 Covered Persons and Reporting Agents would be affected by SEA Rule
10c-1a, of which 503 were Covered Persons and 106 were Reporting
Agents.\107\
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\105\ See Adopting Release, 88 FR 75644, 75717.
\106\ See Adopting Release, 88 FR 75644, 75718.
\107\ See Adopting Release, 88 FR 75644, 75717.
Table 1--Estimated Number of Covered Persons and Reporting Agents
Affected by SEA Rule 10c-1a
------------------------------------------------------------------------
------------------------------------------------------------------------
Providing Covered Persons............................... 255
--Persons that effect a covered securities loan as 217
the lender when an intermediary is not used........
--Broker-dealers borrowing fully paid or excess 34
margin securities..................................
--Broker-dealer intermediaries...................... 4
Non-Providing Covered Persons........................... 248
--Persons that effect a covered securities loan as 217
the lender when an intermediary is not used........
--Non-broker-dealer intermediaries.................. 31
Reporting Agents........................................ 106
--Broker-dealers.................................... 97
--Clearing agencies................................. 9
---------------
Total........................................... 609
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Economic Impacts
In the Adopting Release, the SEC discussed its consideration of the
economic effects of SEA Rule 10c-1a.\108\ Below, FINRA considers the
potential costs, benefits, and competitive impact of FINRA's proposal
specifying the format and manner of reporting for Covered Securities
Loans not explicitly prescribed in SEA Rule 10c-1a. On balance, FINRA
believes the costs are appropriate in light of the anticipated benefits
to the SLATE reporting, transparency, and regulatory framework.
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\108\ See Adopting Release, 88 FR 75644, 75706-24.
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Reporting of Information to FINRA
Expected Settlement Date. The proposed rule change requires
information regarding the expected settlement date for an Initial
Covered Securities Loan or a modification to the loan amount. This
information would enhance the quality of the audit trail available to
regulators for surveillance. Covered Persons may incur a cost to track
and report this information.
Covered Person Party Type. The proposed rule change requires SLATE
Participants to report whether the Covered Person is the lender,
borrower, or intermediary. This information would improve the utility
of the data for regulatory purposes, as it will provide necessary
information regarding the identity of the Covered Person, including in
instances where a party other than the Covered Person submits a loan
report to SLATE. Covered Persons may incur a cost to track and report
this information.
Loan Identifiers. For Initial Covered Securities Loans, the Covered
Person responsible for reporting the loan would be required to report a
unique internal identifier assigned by the Covered Person for the loan.
For Loan Modifications, the Covered Person would be required to report
a unique identifier assigned by FINRA to the Initial Covered Securities
Loan, or if FINRA has not yet assigned an identifier, the Covered
Person must provide a unique internal identifier assigned by the
Covered Person for the loan. The internal identifier requirement would
allow linkage of loan reports where a FINRA identifier has not yet been
assigned and improve the completeness of audit trail data available to
regulators. For Covered Securities Loans that are allocations of
omnibus loans, the Covered Person would also be required to report a
unique internal identifier assigned by the Covered Person for the
associated omnibus loan. The ability to link allocations that are
components of an omnibus loan would improve the completeness of the
audit trail and allow FINRA to provide additional granularity in the
loan activity statistics disseminated to the public. FINRA would
include only the FINRA-assigned identifier when disseminating loan
transaction data; FINRA will not publicly disseminate the unique
internal identifier or unique omnibus loan identifier reported by
Covered Persons. FINRA understands that some Covered Persons already
create and maintain unique loan identifiers, which should mitigate the
cost associated with the requirement to report this information to
FINRA.\109\
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\109\ See Adopting Release, 88 FR 75644, 75685.
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Modifiers/Indicators. The proposed rule change would require the
reporting of six modifiers and indicators; specifically: (1) Covered
Securities Loans with affiliates; (2) loans associated with exclusive
arrangements; (3) loans with rate or fee adjustments; (4) basket loans;
(5) unsettled loans; and (6) terminated loans. As discussed above, the
pricing of some Covered Securities Loans may not be indicative of the
current market rates available in the securities lending market.
Covered Persons would incur costs for establishing processes to
identify when the required modifiers must be appended and reporting
such modifiers to SLATE. FINRA believes that these proposed modifiers
and indicators would provide context to market participants when
assessing pricing and other loan terms, helping to facilitate the
usefulness of the publicly disseminated data. These proposed modifiers
and indicators also would increase the usefulness of the audit trail
data available to regulators as well as provide mechanisms for
validating the accuracy of the reported data.
Timing of End-of-Day Reporting. As discussed above, the proposed
rule change would require that Covered Securities Loans effected on a
business day at or after 12:00:00 a.m. ET through 7:45:00 p.m. ET be
reported to SLATE before 8:00:00 p.m. ET on the same day. FINRA
believes that this reporting timeframe is reasonable because most
Covered Securities Loans entered into on a given business day would
have settled before 8:00:00 p.m. ET, which would provide time for
Covered Persons to review the reportable information to facilitate
accurate and complete reporting. In addition, FINRA understands that
8:00:00 p.m. ET is generally consistent with the reporting deadline
used by commercial vendors to which some Covered Persons currently
voluntarily submit securities lending information. A similar reporting
deadline may help mitigate costs for Covered Persons that may leverage
[[Page 38216]]
existing systems or that submit securities loan information to
commercial vendors.
Furthermore, permitting the reporting of Initial Covered Securities
Loans and Loan Modifications effected on a business day after 7:45:00
p.m. ET by no later than next business day (T+1) before 8:00:00 p.m. ET
will provide Covered Persons with time to review the reportable
information for end-of-day loans to facilitate accurate and complete
reporting. FINRA believes that the proposed reporting timeframes strike
an appropriate balance between providing Covered Persons with
sufficient time to review and report the day's loan activity and
providing FINRA with the time necessary to process the reported
information for next-day dissemination.
SLATE Participation Obligations. The proposed rule change would
require each Covered Person or Reporting Agent to comply with SLATE
participation obligations, including execution and compliance with the
SLATE Participant application agreement. The SLATE participation
requirements would help ensure that Covered Persons and Reporting
Agents understand their obligations with regard to SLATE participation,
including requiring SLATE Participants to obtain an MPID if they do not
currently have one, and use it when reporting Covered Securities Loans
to SLATE. The MPID requirement would provide information that would
make it more efficient for FINRA to validate SLATE reports, contact
firms as necessary, and troubleshoot SLATE Participant-specific
technical issues. The Covered Person and Reporting Agent would incur
upfront administrative costs in terms of time and effort required to
enter into the SLATE Participant application agreement and costs to
comply with the SLATE participation requirements on an ongoing basis.
For example, Covered Persons and Reporting Agents that do not currently
have an MPID for SLATE use must complete an MPID request form and incur
a cost to incorporate the SLATE Participants' and counterparties' MPIDs
into their systems.
Dissemination of Aggregated Loan Activity
SEA Rule 10c-1a(g)(5) generally requires that FINRA make publicly
available information pertaining to the aggregate loan transaction
activity and the distribution of loan rates on a daily basis. FINRA has
proposed specific aggregation buckets, as described in detail above.
The dissemination of these data, which would be compiled from the Data
Elements required to be reported to SLATE pursuant to SEA Rule 10c-1a
and proposed Rule 6530, does not impact the reporting requirements
applicable to Covered Persons and, therefore, does not contribute to
the direct costs of reporting for Covered Persons. Further, as FINRA
would make these data available on its website free of charge for
personal, non-commercial use, the dissemination of this information
will similarly not contribute to any direct costs for such use.
Among other things, FINRA proposes to disseminate the aggregate
volume of securities (both in total and by collateral type) subject to
an Initial Covered Securities Loan or modification to the amount of
Reportable Securities loaned reported on the prior business day, which
would provide varied perspectives on the loan activity for the
Reportable Security, including over time. FINRA also proposes to
disseminate the aggregate volume of securities (both in total and by
collateral type) subject to a rebate rate or fee modification reported
on the prior business day, to provide insight into the frequency of
rate changes for a Reportable Security. FINRA similarly proposes to
disseminate the aggregate volume of securities subject to an Initial
Covered Securities Loan or modification to the amount of Reportable
Securities loaned with a specified term and, separately, without a
specified term, reported on the prior business day, as well as 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. These categorizations would permit analysis of
volume differences between loans that do not have a defined end date
and those that have a defined term date, and volume differences between
the wholesale versus end-customer market.
De Minimis Loan Transaction Activity. To address concerns regarding
potential information leakage, FINRA proposes to omit from the daily
loan statistics volume information for Reportable Securities for which
there are three or fewer types of Initial Covered Securities Loans and
Loan Modifications reported to SLATE in total on a given day. However,
the proposed de minimis threshold may be viewed by some as reducing the
transparency value of the disseminated information. FINRA believes the
threshold of three or fewer Initial Covered Securities Loans and Loan
Modifications appropriately balances these considerations.
Alternatives Considered
In specifying the format and manner of reporting for Covered
Securities Loans and the dissemination of aggregate transaction
activity and distribution of loan rates for Reportable Securities,
FINRA considered various alternatives and the potential costs and
benefits of those alternatives. On balance, FINRA believes the
requirements in the proposed rule are appropriate in light of the
anticipated benefits to the SLATE reporting, transparency, and
regulatory framework.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2024-007 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2024-007. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use
[[Page 38217]]
only one method. The Commission will post all comments on the
Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of FINRA. Do not include personal
identifiable information in submissions; you should submit only
information that you wish to make available publicly. We may redact in
part or withhold entirely from publication submitted material that is
obscene or subject to copyright protection. All submissions should
refer to File Number SR-FINRA-2024-007 and should be submitted on or
before May 28, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\110\
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\110\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-09847 Filed 5-6-24; 8:45 am]
BILLING CODE 8011-01-P
