Outstanding Questions & SEC Comment Letter Considerations

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• Outstanding Questions & SEC Comment Letter Considerations

Outstanding Questions & SEC Comment Letter Considerations

Outstanding Questions:

Status: TO BE REVIEWED Last Updated: 14 Apr 2025

• See SEC Approved Rules 2.1.2 here 41 posed questions that were originally raised as “Outstanding” from both the original FINRA Proposed Rules including the Partial Amendment #1 changes

• Post various meetings see the status column “G” that covers the following statuses:

  • Amended

  • Clarified

  • NA

  • Outstanding

  • Remained

  • Revoked

• Source:

  • ISLA SEC 10c-1a OS Questions – FAQ – Best Practices v0.4

SEC Comment Letter Considerations:

See below a few additional ideas to share if ever future letters or ongoing conversations are anticipated within ISLA Americas and the SEC.

1.  support of the goal to remove non-essential data elements, we would also suggest the following revisions to the rule:

   1. Eliminate the need to report 4 different client identifiers (if known) for lender, borrower and intermediary. A single client identifier should be sufficient to identify a client. We would therefore suggest this data element be structured more comparable to the security identifier.

      1. Covered Persons should specify which of the identifiers they will be reporting (legal name, LEI, MPID, IARD or CRD) and report the data for that identifier, thereby significantly simplifying the process of collecting client identifiers.

      2. Under the current rule, the data elements are only reportable “if known” and FINRA only requires one of the identifiers in their technical specifications; however, common industry practice in trade reporting is to make the effort to become aware of any relevant data elements if these exist. Accordingly, the rule should be amended to eliminate this potential ambiguity to be more prescriptive and specifically require only 1 of the data elements.

   2. Eliminate the need to report “fail to delivers” (if known, whether the securities loan is being used to close out a fail to deliver either pursuant to 17 CFR 242.204 (“Rule 204”) of Regulation SHO or outside of Regulation SHO). Notably, this information seems duplicative since the SEC already collects FTD data through NSCC, DTCC and reg SHO.

   3. Eliminate the requirement to report the “Source of loan” (if the person lending securities is a broker or dealer and the borrower is its customer, to report whether the security is loaned from a broker’s or dealer’s securities inventory to a customer of such broker or dealer). Notably, this data seems duplicative since this information must already be documented (locate and its source) under Reg SHO.

2. Requesting clarity on the cross-border scope of the rule will be essential to the industry. Many covered persons will be effecting/accepting securities loans on reportable securities outside the US  with non-US clients/counterparties; therefore, clarity on this interpretive scope is imperative to have a better understanding of what activity within the US is encompassed within the definition of effecting/accepting. Furthermore, the concept of “facilitating” in the context of business within the US should be further defined to determine which scenarios would be in scope for 10c-1a (see examples below). 

   1. Example: Would a bilateral securities loan on a reportable security between two counterparties that are effecting/accepting/facilitating the loan from outside the US be considered out of scope?

   2. What activity is included within the definition of “facilitating”? Is it solely actions that bind the counterparties to the loan or would DTCC’s facilitating of the settlement of the loan also be in-scope?

3. Given the rule’s objective to bring additional transparency to the market, we would recommend only publishing aggregate data (per borrower type), which should be sufficient in meeting this objective. This approach would remove many of the industry concerns regarding the public dissemination of securities loan data.  The rule should not mistakenly divulge confidential and proprietary information as a general policy matter. 

4. We would also appreciate clarification on the following points in the Comment Letter:

   1. The recommendation to move towards position reporting as opposed to incremental activity reporting. Would this mean that covered persons would no longer need to report:

      1. New loans or modifications that fail to settle and are subsequently cancelled?

      2. Incremental intraday activity because this data would be replaced with an end of day snapshot of the outstanding loan?

         1. Example: a loan that is initially lent and returned on the same day, would not require any reporting?

   2. Do you have additional context regarding the recommendation to increase “market priced data subscriber fees”?

      1. The concern is that this approach could be contrary to the objective of the rule to increase the transparency of securities lending data because this data would inherently need to be consumed at a higher cost based on this approach.