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SEC Adopts Rules to Increase Transparency in Securities Lending and Short Sales

Oct. 23, 2023

The Securities and Exchange Commission has adopted a pair of rules to bring greater transparency to two important areas of the markets.

During an open meeting on Oct. 13, 2023, the Commission voted to adopt new Rule 10c-1a, which is intended to increase the transparency and efficiency of the securities lending market.

It’s important for the Commission and the public to know more about short sale activity in the equity markets, especially in times of stress or volatility.

SEC Chair Gary Gensler on a new short sale disclosure rule adopted on Oct. 13, 2023

The rule will require certain persons to report information about securities loans to a registered national securities association (RNSA), and require RNSAs to make publicly available certain information that they receive regarding those lending transactions.

The Commission then voted to adopt new Rule 13f-2 to provide greater transparency to investors and other market participants by increasing the public availability of short sale related data.

Congress directed the SEC in Section 929X of the Dodd-Frank Act of 2010 to promulgate rules to make certain short sale data publicly available. 

The Commission also adopted an amendment to the National Market System Plan governing the consolidated audit trail (CAT) that will require each CAT reporting firm that is reporting short sales to indicate when it is asserting use of the bona fide market making exception in Rule 203(b)(2)(iii) of Regulation SHO.

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