On January 6, 2021, the Committee submitted a comment letter to the Securities and Exchange Commission (the “SEC”) regarding its proposed rule on the reporting of securities loans. If adopted, the proposed rule would (i) require the reporting of certain terms of securities lending transactions to designated registered national securities associations (“RNSAs”), and (ii) require public disclosure of certain transaction-level and aggregate information regarding securities lending. The Committee expresses its concern that the proposed rule would harm U.S. capital markets by reducing overall short selling activity with negative effects for market liquidity and pricing efficiency.
Consequently, the Committee recommends that the SEC revise the proposed rule so that (i) securities lending activity is disclosed in the aggregate for all transactions in a specific security on an end-of-day basis at the earliest and (ii) the public disclosure of securities lending arrangements is limited to the “wholesale” market and does not cover short selling activity in the “retail” market. This would better enable short sellers to establish short positions and reduce the likelihood that the proposed rule would have a negative impact on overall short selling activity and U.S. capital markets.
The full letter is available here.