In an effort to bring added transparency to the securities lending market, the SEC has proposed a rule to require securities lenders to disclose certain material information.
Under the rule proposed Thursday, securities lenders would have to report data to a registered national securities association, such as the Financial Industry Regulatory Authority. Any person who loans a security on behalf of itself or another person would be a "lender" under the proposed rule, including banks, insurance companies and pension plans, the SEC said in a fact sheet.
The information required includes the legal name of the issuer borrowing the securities; the time and date of the loan; the rates, fees, charges and rebates for the loan as applicable; and the type of collateral provided for the loan and the percentage of the collateral provided to the value of the loaned securities.
Once the registered national securities association receives the required information, it will then make the information public. To track the securities-lending transaction, the proposed rule would require the registered national securities association to assign each securities-lending transaction with a unique transaction identifier, the SEC said.
"Securities lending and borrowing is an important part of our market structure," Chairman Gary Gensler said in a news release. "Currently, though, the securities lending market is opaque. In today's fast-moving financial markets, it's important that market participants have access to fair, accurate, and timely information. I believe this proposal would bring securities lending out of the dark."
The proposal will have a 30-day comment period upon publication in the Federal Register.
