Fails Curing

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• SEC Approved FINRA Rules: 2nd January 2025


• Fails Curing

Fails Curing

Notes and Examples:

Status: TO BE REVIEWED Last Updated: 04 Jun 2025

International Central Securities Depository (ICSD’s) financial market infrastructures provide what’s known as an auto borrow or settlement fails curing services to its clients. 

This particular type of loan (fails curing SFT) aims at improving settlement efficiency intraday and often results in loans being opened and closed within the same day (i.e. the temporary settlement fails) however some loans can go over overnight.

Can we have clarity confirming if these types of transactions are in scope of 10c-1a regulatory reporting?

Answer:

1. Rules state no exclusion for any loans on purpose and duration. see below:

   1. From 17 CFR Part 240 (Final Rule) Page 75663 in the federal register – emphasis underlined: If the final rule only applied to securities loans agreed to for compensation, a fee, or for the purpose of earning a return, securities loans made to affiliates could be structured to fall outside the final rule’s reporting requirement (i.e., made without an expectation of return or for no fee), while a loan still would have occurred, and the affiliate would still benefit from possession of the loaned securities. Further, the final rule does not exclude securities loans based on the purpose or duration of the loan, such as for “short-term financing,” in order to capture a wide variety of loans regardless of purpose or duration. Finally, the final rule provides that a covered securities loan is a transaction in which a person lends a reportable security, which distinguishes covered securities loans from other agreements.

2. Where trades are purely cleared by a CCP this is considered exempt, as an example:

   1. The only exception (75647): However, in a change from the proposed rule, as discussed below, in Part VII.A, the final rule excludes from the definition of the term ‘‘covered person’’ a clearing agency when providing only the functions of a central counterparty as defined pursuant to 17 CFR 240.17Ad–22(a)(3) (‘‘Rule 17Ad– 22(a)(2)’’) of the Exchange Act or a central securities depository as defined pursuant to 17 CFR 240.17Ad–22(a)(3) (‘‘Rule 17Ad–22(a)(3)’’) of the Exchange Act. Thus, a clearing agency is not required to report Rule 10c–1a information to an RNSA for a covered securities loan when acting in the capacity or engaged in activities as a central counterparty or a central securities depository in connection with a covered securities loan.