In January, the Securities and Exchange Commission (SEC) approved the FINRA rule 6500 series requiring securities lending reporting. SEC rule 10c-1a, which mandates greater transparency in the securities lending market was adopted in October 2023 and requires market participants to report securities lending transactions to FINRA, and for FINRA to establish a system to facilitate this reporting, as well as publicly disseminate key loan information.
FINRA is now tasked with operationalizing the reporting system, Securities Lending and Transparency Engine (SLATE™), with January 2, 2026, initially set as the deadline for firms to begin reporting securities lending transactions.
To meet this timeline, FINRA must undertake several steps, including issuing a Regulatory Notice to announce SEC approval, providing technical specifications for reporting, and building and testing the reporting system.
The development of Rule 6500 began in the context of broader concerns around financial stability and market transparency, which were exacerbated by the global financial crisis of 2007-2008. The crisis highlighted several weaknesses in the financial markets, particularly in the shadow banking sector, where securities lending and repos played a significant role in the liquidity and collateralization of assets. Regulators in both the U.S. and Europe responded with initiatives aimed at improving transparency and ensuring that financial firms had the necessary reporting and risk management tools in place.
The SEC proposed new rules to regulate securities lending transactions, including mandatory disclosures on the terms and risks associated with such transactions, a move that aligned with international trends, including the European Union’s Securities Financing Transactions Regulation (SFTR) and post-Brexit UK’s Securities Financing Transactions Regulation (UK SFTR).
The approval of FINRA Rule 6500 is a direct response to these proposals and represents a step toward harmonizing U.S. regulations with global standards. This alignment is particularly important as it helps address the concerns of international investors and firms who seek consistency across regions, particularly as they navigate complex cross-border securities lending transactions.
Comments and Concerns
There was general support for the proposed new rules during the 2024 comment period, which introduces the Securities Lending and Transparency Engine (SLATE™) and its goal of enhancing transparency in the securities lending market. Many stakeholders agree that improving data visibility into securities lending transactions will help regulators and market participants better understand risks, pricing, and market dynamics. However, several commenters expressed concerns about the potential negative impact on liquidity, particularly if the transparency requirements lead to more rigid reporting or limit flexibility in transactions.
Operational challenges and costs were also significant points of contention, particularly from smaller institutions. These participants warned that the SLATE™ system might impose a disproportionate burden on firms without the necessary technological infrastructure, leading to higher compliance costs. There were also concerns about data privacy, with some commenters requesting more clarity on how sensitive transaction data would be handled in compliance with privacy regulations.
Additionally, stakeholders raised questions about the technological feasibility of SLATE™, emphasizing the potential challenges of integrating the system with existing market infrastructure. While many supported the initiative, they recommended a phased implementation approach to allow for smoother adoption and to mitigate potential disruptions. Overall, the comments suggest that while the intent behind SLATE™ is broadly welcomed, market participants are seeking more detailed guidance, flexibility, and time to comply with the proposed rule.
Deadline Extension
SEC’s Rule 10c-1a, adopted in October 2023, requires market participants to report securities lending transactions to FINRA, and for FINRA to establish a system to facilitate this reporting, as well as publicly disseminate key loan information. In a recent statement, FINRA President and CEO Robert Cook noted that FINRA is now tasked with operationalizing the reporting system, with January 2026 (originally), set as the deadline for firms to begin reporting securities lending transactions. To meet this timeline, FINRA must undertake several steps, including issuing a Regulatory Notice to announce SEC approval, providing technical specifications for reporting, and building and testing the reporting system. However, Cook has requested that the SEC consider granting an extension to the deadline, citing potential risks associated with launching such a significant reporting system at the start of the year, when firms typically implement IT “freezes” and staffing challenges arise due to the holiday season.
Additionally, Cook noted that certain operational issues and technical challenges have emerged during the rule’s development. Some of these issues were addressed in the FINRA rulemaking process in collaboration with the SEC, but other concerns—particularly those linked to SEC requirements under Rule 10c-1a—could not be fully resolved. One area of concern involves the timeline for public dissemination of reported information, which is currently set to occur within 90 days of transaction reporting. Cook suggested that more time would be needed to review the data before releasing it publicly, to ensure that the dissemination does not lead to unintended consequences.
Finally, Cook highlighted some technical considerations, such as whether securities lending agents should be allowed to report loans at the omnibus loan level rather than at the sub-allocations level, which could reduce operational complexity and better reflect the economic terms between the parties involved. He emphasized that these operational and interpretive issues warrant further review to ensure that the reporting process is as efficient as possible while still fulfilling the SEC’s transparency goals. “FINRA looks forward to further engagement with the SEC, member firms, trade associations, and other market participants in preparing requests for further guidance from the SEC regarding Rule 10c-1a,” he says.
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