Déjà Vu? SEC Rule 10c-1a Echoes SFTR’s Reporting Mandate

A change within the landscape of U.S Securities Lending is underway, bringing increased transparency to a traditionally opaque part of the market. SEC Rule 10c-1a, adopted in October 2023, mandates that equities and fixed income securities must be reported to a Registered National Securities Association (RNSA), such as FINRA, who will then make the aggregated data publicly available. The Final Rule is primarily aimed at reducing information asymmetry and enhancing market oversight within the U.S. financial system, while utilising the new Securities Lending and Transparency Engine (SLATE) for submission and reporting.

Key Aspects of Rule 10c-1 include:

• Comprehensive Reporting: “Covered persons” must report detailed information about securities loans by the end of the day that the loan is affected or modified (T). This includes the type of security, the amount loaned, the loan rate, and additional terms such as collateral and loan termination details. Covered persons include non-broker intermediaries, lenders without intermediaries, clearing agencies, and broker-dealers borrowing fully paid or excess margin securities.
• Data Publications: FINRA will publish aggregated loan data the following business day (T+1) and detailed loan information 20 days after the transaction. This is intended to improve market transparency and allow market participants to better understand market dynamics through increased transparency.
• Compliance Timeline: Firms must start complying with these requirements by January 2, 2024, providing time for the new regulations to be understood and existing systems and reporting processes to be updated.

Key Differences from European SFTR:

Understanding the Impact

As we dig deeper into the specifics of SEC10c-1, it is important to consider how it stands in contrast to other international regulatory frameworks, particularly the Securities Financing Transactions Regulation (SFTR) in Europe. While both regulations aim to enhance market transparency and oversight, they do so in a different way as reflected in their respective jurisdictions.

For firms already compliant with SFTR, these new changes offer an opportunity to leverage existing reporting infrastructure to meet SEC 10c-1 requirements, providing a solid foundation for a smoother, cost-effective transition.

Insights and Compliance Considerations

SEC Rule 10c-1 brings additional transparency to U.S securities lending, closely mirroring the objectives of SFTR but with distinct differences in scope and reporting requirements. The use of client trade ID’s as unique keys rather than UTI and the JSON format over the globally harmonization of XML ISO20022 show further divergences from other global regimes. This new rule underscores a broader global trend towards increased regulatory oversight. Firms must adapt to these new requirements, ensuring compliance while capitalising on the advantages of improved market insight.

What can First Derivative deliver with you?

• Go live readiness for January 2026
• Expert consultants ranging from quality assurance, business analysts, developers and project managers
• Tactical and strategic expertise in providing solutions to support complex changes
• Managed service tailored to meet the unique needs of your business
• Oversight for pre and post release change requirements