proposed rule, as well as the final rule, this benchmark type of
pricing, as described by the commenter, will be captured by the final
rule text language ``the rebate rate or any other fee or charges.''
\406\ For the aforementioned reasons, negotiated or agreed-to pricing
data, including as a spread to an identified benchmark or reference
rate, is required to be reported to an RNSA pursuant to the rule as
adopted.\407\ This requirement should generally help to address
commenters' concerns that may stem from an overly narrow application of
the pricing data element in paragraph (b)(9) of the

proposed rule.\408\ However, because there are various pricing terms or
arrangements that can be negotiated or agreed to by parties to a
securities loan, the final rule does not specify or endorse one
particular pricing method over another and, thus, is adopting the
sufficiently broad pricing data element rule text for purposes of the
final rule without modification from the proposed rule text.\409\ An
RNSA, nevertheless, could address in its rules details regarding the
manner in which pricing data must be reported, such as further
clarifying how lending cost information is to be reported. As such, an
RNSA has the necessary flexibility and discretion to structure its
systems and processes as it determines, consistent with its obligations
under the final rule as well as other applicable provisions of the
Exchange Act.
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    \405\ See proposed Rule 10c-1(b)(9).
    \406\ See final Rule 10c-1a(c)(8).
    \407\ See final Rule 10c-1a(c)(8).
    \408\ See supra note 385 (citing commenters who requested that
the Commission clarify, where applicable, that pricing data may be
reported as a spread to a benchmark rate).
    \409\ See supra note 385 and accompanying text (commenters
requesting the Commission to clarify, where applicable, that pricing
data may be reported as a spread to a benchmark rate, and that such
pricing does not need to be updated for changes in the value of the
benchmark rate).
---------------------------------------------------------------------------

2. Loan Modification Data Elements--Rule 10c-1a(d)
Proposed Rule
    Subject to terms agreed to by the parties, covered securities loans
may be modified after they are made. To ensure that the loan data
elements reported pursuant to proposed Rule 10c-1(b) would accurately
reflect currently outstanding covered securities loans and to prevent
evasion, proposed Rule 10c-1(c) required that certain loan modification
data elements be provided to an RNSA within 15 minutes after each loan
is modified if the modification resulted in a change to information
required to be provided to an RNSA under paragraph (b) of the proposed
rule (and then for an RNSA to make such information available to the
public as soon as practicable).\410\ More specifically, the proposed
loan modification data elements in paragraphs (c)(1) through (c)(3) of
the proposed rule required the following data elements to be provided
to an RNSA: (1) the date and time of the modification; (2) a
description of the modification; and (3) the unique transaction
identifier of the original loan.\411\
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    \410\ See proposed Rule 10c-1(c).
    \411\ Proposed Rule 10c-1(c).
---------------------------------------------------------------------------

    In the Proposing Release, the Commission explained that it
preliminarily believed the proposed loan modification data elements in
proposed paragraph (c) are necessary to allow an RNSA to identify which
loan was being modified, categorize the type of modification, and make
information about the modification publicly available.\412\ In
addition, as proposed, the requirement to provide the loan modification
information to an RNSA was conditioned on the modification resulting in
a change to the Rule 10c-1 information required to be provided to an
RNSA under paragraph (b) of the proposed rule.\413\
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    \412\ See Proposing Release, 86 FR 69815.
    \413\ See Proposing Release, 86 FR 69815. Consistent with the
Proposing Release, an example of a modification that will trigger a
reporting requirement under paragraph (d) of the final rule
includes: the termination of an open-ended loan that results in a
reduction of the quantity of the securities initially provided to an
RNSA for that loan under paragraph (c)(6)'s data element--i.e.,
amount of the security loaned. See also Proposing Release, 86 FR
69815. An example of a modification that will not trigger the loan
modification data element reporting requirement in paragraph (d) of
the final rule is if a borrower posts additional collateral in
response to an increase in the value of the loaned securities. Id.
Under such circumstance, information about this change will not be
required to be reported under paragraph (d) because, while paragraph
(c)(11) requires the covered person to provide the percentage of
collateral to value of loaned securities required to secure such
loan, it does not require information about the value of collateral
posted in dollar terms. See also id. at n.96.
---------------------------------------------------------------------------

Final Rule
    The Commission is adopting the loan modification data elements
substantially as proposed.\414\ However, the final rule includes a
change to the loan modification data elements requirement in response
to commenters.\415\ Other commenters sought clarification as to when
loan modifications should be reported, which is discussed below. In
addition, the final rule has been modified to address comments
regarding loans that pre-exist the reporting date.
---------------------------------------------------------------------------

    \414\ See 17 CFR 240.10c-1a(d)(1)(i) (``final Rule 10c-
1a(d)(1)(i)''); 17 CFR 240.10c-1a(d)(1)(ii) (``final Rule 10c-
1a(d)(1)(ii)''); 17 CFR 240.10c-1a(d)(1)(iii) (``final Rule 10c-
1a(d)(1)(iii)'').
    \415\ The Commission also received comments that relate to the
two loan modification data elements in paragraphs (d)(1)(i) and
(d)(1)(iii) of the final rule. These comments are addressed
separately below, in Parts VII.G.2 and VII.J, with respect to the
timing modifications to paragraph (d) in the proposed rule, and
regarding an RNSA's obligations with respect to assigning the unique
identifiers in compliance with the final rule.
---------------------------------------------------------------------------

    Paragraphs (d)(1)(i) through (iii) of the final rule set forth the
data elements that a covered person must report by the end of the day
on which a covered securities loan is modified. Paragraph (d)(1)(i)
requires covered persons to report ``[t]he date and time of the
modification;'' paragraph (d)(1)(ii) requires covered persons to report
``[t]he specific modification and the specific data element in
paragraph (c) of this section being modified; and paragraph (d)(1)(iii)
requires the covered person to report ``[t]he unique identifier
assigned to the original covered securities loan under paragraphs
(g)(1) or (g)(3) of this section.'' \416\
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    \416\ See final Rules 10c-1a(d)(1)(i) and (d)(1)(iii).
---------------------------------------------------------------------------

    With respect to paragraph (d)(1)(ii), to help ensure the provision
of relevant and useful loan modification reports to an RNSA, the
Commission has revised this loan modification data element from the
proposed requirement by removing the phrase ``[a] description of'' and,
instead, adding both ``the specific modification'' as well as ``and
specific data element in paragraph (c) being modified'' (i.e., with
respect to the loan modification data element being reported to an
RNSA). The revised language ``the specific modification'' makes
explicit that the actual modification must be reported (e.g., the
amount of the security loaned increased by 200 shares), not a vague
description of the modification (e.g., the amount of the security
loaned was increased). The Commission is making this change because it
will result in the collection of more accurate and useful information
concerning the modification being reported. The Commission is also
modifying paragraph (d)(1)(iii) to require the reporting of a
previously assigned unique identifier whether assigned at the time of
execution of the loan, or, with respect to a pre-existing securities
loan as discussed below in this section, at the time of the
modification. As a result, the Commission is adopting paragraph
(d)(1)(iii) of the final rule, with a slight modification from the
proposal such that the rule text of (d)(1)(iii) will require the unique
identifier assigned to the original covered securities loan under
paragraphs (g)(1) or (g)(3) of this section.'' \417\
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    \417\ See final Rules 10c-1a(d)(1)(i) and (d)(1)(iii).
---------------------------------------------------------------------------

    The Commission also received comment seeking clarity regarding how
to report various modifications to a loan.\418\ Other commenters who
discussed the loan modification data elements discussed the different
types of modifications that can occur frequently throughout the
day,\419\ or

sought further information on what types of modifications would likely
trigger a loan modification reporting obligation under the final
rule.\420\ One commenter stated that, in the context of cash
collateralized loans, the rebate will fluctuate daily as the reference
rate value changes, but suggested that loans where the selected
reference rate and spread to that reference rate do not change should
be deemed out of scope of the required loan modification
reporting.\421\ As an example, this commenter stated that, where a loan
is collateralized by cash and the negotiated pricing data element is a
spread to a benchmark rate, such pricing does not need to be updated
for changes in the value of the benchmark rate (i.e., not a reportable
loan modification for purposes of the final rule).\422\ The same
commenter stated more generally that certain modifications to loan
information that has already been provided to an RNSA pursuant to
proposed Rule 10c-1 should not be required to be provided to an RNSA,
claiming that could make data that was already made public potentially
misleading.\423\ As discussed above, in Part VII.F.1, the pricing data
elements required to be reported by paragraph (c)(8) include benchmark
pricing, such as a reference to the OBFR in a manner determined by an
RNSA. Paragraph (d) of the final rule, requiring reporting of
modifications to a paragraph (c) data element, including pricing in
paragraph (c)(8), will also capture benchmark pricing. The extent to
which the commenter's concern is realized will be determined by how an
RNSA chooses to structure the reporting of this variable. For instance,
if an RNSA chooses to allow market participants to report a spread and
a benchmark, then no modifications will be required to be reported from
day to day unless there were a change in the negotiated spread or
benchmark. However, if an RNSA chooses to require market participants
to report the total fee, then market participants will be required to
report changes to the fee if the benchmark changes, which can require
daily revisions.\424\ However, the Commission does not expect that this
will cause confusion. The Commission understands that market
participants know that rebates can change regularly and, thus,
revisions would not be unexpected. Further, gathering loan modification
data is important to facilitate the accurate computation of statistics
regarding the cost to borrow by an RNSA and other market participants.
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    \418\ See FIX Trading Letter, at 3. The commenter provided
hypotheticals, including: (1) as a result of a corporate action, a
loan is closed and two or more loans are created; (2) a
consolidation of multiple loans with the same counterparty and for
the same security into one loan; and (3) the splitting of a single
loan into multiple loans where the lender requires the return of
some of the shares.
    \419\ Comments received by the Commission that focus primarily
on the proposed 15-minute timing requirement for reporting required
loan modification information--including commenters' recommendations
with respect to the final rule's timing requirement--are discussed
separately, below, in Part VII.G.1.
    \420\ See, e.g., Pirum Letter, at 2 (discussing that for
modifications to previously reported loan transactions, a
significant number of these will typically happen in ``batch''
processes at specific times throughout the day, stating one of the
most common modifications is the daily marked-to-market exercise
whereby the price of the loan (loan value and required collateral
value) and potentially the associated collateral amounts are
adjusted to reflect market value changes in the underlying security
on loan).
    \421\ See BlackRock Letter, at 2.
    \422\ See BlackRock Letter, at 2.
    \423\ See BlackRock Letter, at 7. According to this commenter,
open loans are commonly marked-to-market to the closing price of the
relevant security from the previous business day, plus margin and
rounding. See id. As a result, the actual modification of open loans
tends to happen across all positions the next day and at relatively
common times across the market. See id. The Commission recognizes
that, subject to terms agreed to by the parties, covered securities
loans may be modified after they are made or are often not finalized
until the end of the day. The end-of-day timing modifications to the
final rule, as discussed below, in Part VII.G, will help to reduce
these concerns raised by the commenters.
    \424\ See infra Part IX.C.1 (discussing an RNSA's discretion
with respect to benchmark pricing).
---------------------------------------------------------------------------

    One commenter suggested that the termination of a loan should be
reported based on the return of securities by the borrower.\425\ Under
the final rule, if a borrower returns a portion of loaned shares, the
reduction in the amount of shares remaining on loan will be reported as
a modification.\426\ Similarly, under the final rule, a termination of
a covered securities loan is a modification for which information,
including the termination date and the reduction of the loaned shares
(if any), is required to be reported to an RNSA.\427\
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    \425\ See FIF Letter, at 10 (stating ``termination of a
securities loan should be reported based on the return of securities
by the borrower against the return of the collateral by the lender.
The same approach as proposed for reporting new loans and loan
terminations should apply for reporting loan modifications.'').
    \426\ Under the final rule, a reduction (or increase) in the
loan amount is required to be reported to an RNSA under paragraph
(d) of the final rule as a modification to the loan amount in
paragraph (c)(6). If the parties to the covered securities loan
regard/treat the reduction as termination of the covered securities
loan, that is also required to be reported to an RNSA under
paragraph (d) of the final rule as a modification to the termination
date of the covered securities loan in 17 CFR 240.10c-1a(c)(11)
(``final Rule 10c-1a(c)(11)''). Moreover, if the parties to the
covered securities loan terminate their loan and such termination
involves a reduction in the loan size, this would qualify as a
reportable modification under paragraph (d) of the final rule as a
modification resulting in a change to the amount or size data
element in paragraph (c)(6).
    \427\ See also Proposing Release, 86 FR 69815 (stating ``a
termination of a loan would be a modification for which information
would need to be provided to an RNSA . . . because the termination
would result in a reduction of the quantity of securities initially
provided to an RNSA for that loan under paragraph (b)(6)'').
---------------------------------------------------------------------------

    Events such as consolidations and splitting of loans are required
to be reported. A consolidation would be reported as the termination
(and therefore modification) of existing loans and entry into a new
loan, including the reporting of all required data elements for those
modifications and for the new loan. Similarly, the splitting of an
existing loan into separate loans could be reported as a modification
and termination of the original loan and entry into multiple separate
loans.\428\ However, that there may be certain life-cycle events in the
course of an open-ended loan that some market participants may view as
a modification to an existing loan that other market participants might
view as a termination of an existing loan and the entry into a new
loan. For example, when all outstanding loaned securities are returned
to the lender and additional (or the same) shares are subsequently lent
under an open-ended loan, one lender may view that event as a
termination (and therefore a modification) of an existing loan and a
creation of a new loan, whereas another lender may view a similar
transaction as two modifications (the return of, and subsequent loan
of, securities under the same open-ended loan). In such cases, the
lender (or lending agent or reporting agent) may elect to report the
required information as either a modification (and termination), or as
two modifications to an open-ended loan.
---------------------------------------------------------------------------

    \428\ In addition, to help reduce concerns about potential
confusion and misinterpretation of the data, an RNSA could determine
to develop methodologies to identify events as a consolidation or
the splitting of existing covered securities loans.
---------------------------------------------------------------------------

Reporting of Data Elements for Pre-Existing Securities Loans
    The Commission also received comment seeking clarification on what
some commenters called day-one loans, or loans that are agreed to prior
to the reporting date of the final rule.\429\ One commenter described
the day-one problem and stated, ``we suggest the Commission find a
solution to ensure these loans do not go unreported under a new
reporting regime.'' \430\ Other commenters stated that the Commission

should consider ways to report and identify such loans.\431\
---------------------------------------------------------------------------

    \429\ See BlackRock Letter, at 3, 9; AIMA Letter 1, at 5; ICI
Letter 1, at 13 n.45 (stating that, given the difficulties the EU
faced with ``day one'' issue regarding implementation of SFTR, ICI
recommends that the SEC or FINRA provide clarity regarding
applicability of any final rule to securities loans that are
outstanding on the rule's implementation date); FIX Trading Letter,
at 3 (stating ``It is not clear how the rule handles loans created
prior to the rule coming into effect but modified after the rule
comes into effect . . . . We recommend some wording be added to the
rule to clarify a) whether loans already in existence prior to the
rule coming into effect need to be reported, b) how modifications
should be handled for such loans.'').
    \430\ AIMA Letter 1, at 5.
    \431\ See, e.g., Letter from JD Cumpson (Mar. 14, 2022), at 1
(stating ``[t]his should be required to be back-dated for all
current lending; no hidden `legacy' deals that are underreported'');
BlackRock Letter, at 3 (stating ``the Commission should consider
ways to report and identify open securities loans initiated before
the first day any new requirements are effective; this is the `day-
one problem' . . . either the Commission or the designated RNSA will
need to devise a solution for appropriately incorporating them into
the data set'').
---------------------------------------------------------------------------

    Certain commenters stated that many loans are open-ended and
continuously modified,\432\ and sought clarity regarding the treatment
of loans in existence prior to the final rule's reporting date for
covered persons that are subsequently modified, which commenters
characterized as the day-one problem.\433\ For example, one commenter
stated that the proposal does not consider a key implementation
question regarding the day-one problem for reporting existing loans,
specifically, that ``most loans are open-ended without a set
termination date. Accordingly, loans are continually resized and
rerated until either the lender or the borrower recalls or returns all
shares, respectively. Given the longevity of the average loan, there
will be a substantial number of loans that exist prior to the
implementation date of the reporting requirements, and such loans will
likely continue to be modified as long as they remain outstanding.''
\434\ This commenter provided three possible paths for handling such
day-one loans: ``(1) report each loan the first time it is modified
after the implementation date as if it were a new loan, (2) provide all
existing loans with an identifier on the day of implementation, or (3)
exclude all existing loans from all reporting obligations, including
reporting of modifications made to those loans after implementation
date.'' \435\
---------------------------------------------------------------------------

    \432\ See, e.g., BlackRock Letter, at 9; AIMA Letter 1, at 5.
    \433\ See, e.g., BlackRock Letter, at 9; AIMA Letter 1, at 5;
ICI Letter 1, at 13.
    \434\ BlackRock Letter, at 9.
    \435\ BlackRock Letter, at 9.
---------------------------------------------------------------------------

    The commenter's first alternative for reporting each ``day-one''
loan the first time it is modified provides an appropriate means of on-
boarding data for such loans, as discussed below.\436\ As discussed
below, in Part IX.C.1, the lack of information about these loans would
harm data quality because it would render the data less complete and
would thus limit market participants' ability to determine conditions
in the lending market. Accordingly, paragraph (d)(2) of the final rule
provides that if a modification is made to a covered securities loan
for which reporting under paragraph (a) of the final rule was not
required on the date the loan was agreed to or last modified (a ``pre-
existing covered securities loan'') and results in a change to any of
the data elements in paragraph (c) of the final rule, there is an
obligation to report each of the data elements in paragraph (c) of the
final rule as of the date of the modification.\437\ Paragraph (d)(2)
will provide a snap shot of a pre-existing covered securities loan the
first time it is modified on or after the reporting date. If, for
example, under the final rule, a pre-existing covered securities loan
is first modified two months after the reporting date and the
modification results in a change to a data element in paragraph (c) of
the final rule, the covered person must provide each of the data
elements under paragraph (c) to an RNSA, including the date and time
the pre-existing covered securities loan was effected pursuant to 17
CFR 240.10c-1a(c)(3) (``final Rule 10c-1a(c)(3)'') and 17 CFR 240.10c-
1a(c)(4) (``final Rule 10c-1a(c)(4)''), which will indicate that this
is a pre-existing covered securities loan. Reporting of the date and
time that the pre-existing covered securities loan was originally
effected will provide market participants and regulators with a more
complete picture as to the duration of the outstanding loan that is
being modified.
---------------------------------------------------------------------------

    \436\ See infra note 974 (stating that the Commission does not
expect significant additional costs to result from this requirement
as it is not expected to impact the need for reporting agents to
develop and maintain systems for reporting securities lending
information but will simply require the inclusion of some additional
data transfers that occur largely around the reporting date. Since
the cost of individual transmissions are expected to be small, this
aspect of the final rule is expected to have a small impact on the
compliance costs of the final rule). See also infra note 1029 (The
requirement to report information once a loan modification occurs
after that loan qualifies for reporting will further support the
benefits of the final rule, including reduced information
asymmetries and enhanced price competition, by helping to ensure a
level playing field during the earlier phases of implementation.
This provision will prevent lenders, that have a higher number of
long-term loans that did not initially qualify for final Rule 10c-1a
reporting, from gaining a competitive advantage by being able to see
the loans of other market participants without disclosing the terms
of their own loans).
    \437\ See final Rule 10c-1a(d)(2). This approach also responds
to the various requests from commenters, including ICI and
BlackRock, requesting that the SEC or FINRA provide clarity
regarding the applicability of the final rule to day-one loans
(i.e., securities loans that are outstanding on implementation
data).
---------------------------------------------------------------------------

    In addition to the date and time that the pre-existing covered
securities loan was effected (i.e., information in paragraphs (c)(3)
and (c)(4)), the covered person must also provide information in
paragraphs (c)(1), (c)(2), and (c)(5) through 17 CFR 240.10c-1a(c)(12)
(``final Rule 10c-1a(c)(12)'') as of the date of the modification. The
date and time of the modification will provide market participants with
specificity and context regarding the terms of the modifications,
including the rates available for modification at that date and time
(which may be different than rates available for new loans). Including
the date and time will be important because it will indicate if a
report of a modification is not filed in a timely fashion.
    If, for example, a pre-existing covered securities loan is first
modified, either on or after the reporting date, and it is a
modification to the loan amount, the covered person will be required to
report the number of shares as modified under paragraph (c)(6) of the
final rule to an RNSA, as well as each of the other data elements in
paragraph (c), including the date and time the pre-existing covered
securities loan was effected, by the end of the day on which such loan
was modified. In that same example, the date and time of the
modification will be required to be reported. Recognizing that a unique
identifier will not yet exist for the loan and no data about the loan
was previously reported or made publicly available under the final
rule, the data elements in (d)(1)(ii) and (d)(1)(iii) will not be
required to be reported for such pre-existing covered securities
loans.\438\ However, any subsequent modifications going forward will be
subject to the modification reporting requirements under paragraph
(d)(1) of the final rule such that only the information in paragraphs
(d)(1)(i) through (iii) of paragraph (d) will be required to be
reported to an RNSA. Pre-existing covered securities loans that do not
have a modification to a data element in paragraph (c) will not be
subject to the reporting obligation under paragraph (d)(2) of the final
rule.\439\
---------------------------------------------------------------------------

    \438\ See final Rule 10c-1a(d)(2).
    \439\ See final Rule 10c-1a(d)(2).
---------------------------------------------------------------------------

    The Commission is not adopting the commenter's alternative of
requiring reporting of all pre-existing covered securities loans on the
first reporting date. Such an alternative would result in costs and
burdens for an RNSA to build out the capacity to handle a much larger
number of reports on the first reporting date. The Commission is also
not adopting the commenter's alternative of omitting all pre-existing
covered securities loans, as the data regarding such loans will be
useful to investors as well as regulators and the on-boarding of data
for such loans when modified will help reduce information

asymmetries.\440\ These modifications to the final rule address the
concerns of other commenters seeking certainty regarding such day one
loans.
---------------------------------------------------------------------------

    \440\ See supra note 436 (discussing costs that result from the
requirement to report information once a loan modification occurs
after the loan qualifies for reporting).
---------------------------------------------------------------------------

    The commenter also recommended ``provid[ing] all existing loans
with an identifier on the day of implementation.'' \441\ However,
simply providing an identifier to a pre-existing loan without data
about the loan would not provide transparency about the terms of the
loan. Instead, the final rule requires that an RNSA assign a unique
identifier to the pre-existing covered securities loan when it is
reported to an RNSA.
---------------------------------------------------------------------------

    \441\ BlackRock Letter, at 9.
---------------------------------------------------------------------------

    Specifically, 17 CFR 240.10c-1a(g)(3) (``final Rule 10c-1a(g)(3)'')
requires that an RNSA assign a unique identifier to a pre-existing
covered securities loan that is reported to it pursuant to paragraph
(d)(2). Consistent with covered securities loans, an RNSA is also
required to make publicly available the data elements in paragraphs (c)
and (d)(1)(i) reported to it, other than loan amount data element in
paragraph (c)(6), not later than the morning of the business day after
the covered securities loan is modified.\442\ In addition, an RNSA is
required to make the loan amount publicly available on the twentieth
business day after the pre-existing covered securities loan is
modified.\443\ These requirements for pre-existing covered securities
loans that are modified after the reporting date are necessary so that
the data reported regarding these modified loans are also made publicly
available in a manner similar to loans that are covered securities
loans under paragraph (g) of the final rule.
---------------------------------------------------------------------------

    \442\ See final Rule 10c-1a(g)(3)(i).
    \443\ See final Rule 10c-1a(g)(3)(ii).
---------------------------------------------------------------------------

3. Confidential Data Elements--Rule 10c-1a(e)
Proposed Rule
    The Commission also proposed certain material transaction data
elements to be provided to, and retained by, an RNSA, but not made
public (``confidential data elements''). As proposed, the confidential
data elements provision of the rule is designed to have certain data
information used solely by regulators to better understand securities
lending, including interest in short selling and price discovery for
securities lending, yet without identifying market participants or
revealing sensitive information about their internal operations to the
rest of the market. Paragraph (d) of the proposed rule also required
the confidential data elements to be provided to an RNSA within 15
minutes after each securities loan was effected (and then an RNSA would
be required to keep such information confidential, subject to the
provisions of applicable law).
    As proposed, the confidential data elements included:
    (i) The legal name of each party to the securities loan; where
applicable, CRD or IARD Number, MPID, and the LEI of each party to the
transaction, and whether such person is the lender/borrower/
intermediary between the lender and the borrower (if known); \444\
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    \444\ In proposed Rule 10c-1(d)(1), the Commission stated its
preliminary belief that provision of this first data element to an
RNSA would allow regulators to understand buildups in risk at market
participants. It would also provide an RNSA with information that
would be required to administer the collection of all data elements
provided to it under paragraphs (b) and (d) of proposed Rule 10c-1,
such as ensuring the completeness of submissions, contacting persons
that have errors in their provided data, and troubleshooting person-
specific technical issues. See Proposing Release, 86 FR 69815.
---------------------------------------------------------------------------

    (ii) 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; \445\ and
---------------------------------------------------------------------------

    \445\ In proposed Rule 10c-1(d)(2), the Commission stated its
preliminary belief that this second data element would provide
regulators with information on the strategies that broker-dealers
use to source securities that are lent to their customers. The
Commission also explained that this data element would not apply to
lenders that are not broker-dealers. The Commission also stated that
it preliminarily believed that making this information available to
the public would be detrimental because it may reveal confidential
information about the internal operations of a broker-dealer. See
Proposing Release, 86 FR 69815-16.
---------------------------------------------------------------------------

    (iii) 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.
Final Rule
    The Commission sought and received comment regarding the proposed
provision that would require lenders or their agents \446\ to provide
the confidential data items to an RNSA within 15 minutes after each
loan is effected.\447\ Commenters stated that the Commission should
impose explicit confidentiality obligations on FINRA so as to protect
the confidential securities lending information that would be
reported.\448\ Paragraph (h)(4) of the final rule requires that an RNSA
establish, maintain, and enforce reasonably designed written policies
and procedures to maintain the security and confidentiality of the
collected information, which should enhance protection of the
confidential data that it collects under the final rule.
---------------------------------------------------------------------------

    \446\ The term ``lenders or their agents'' in proposed Rule 10c-
1 is replaced in the final rule by the term ``covered person'' (as
defined in final Rule 10c-1a(j)). See also discussion of ``covered
person'' above, in Part VII.A.
    \447\ See proposed Rule 10c-1(d).
    \448\ ICI Letter 1, at 11 (stating that, ``to protect the
confidential securities lending information that would be reported
to FINRA under proposed rule 10c-1, the SEC should impose explicit
confidentiality obligations on FINRA . . . [and] should also ensure
that FINRA implements adequate data security measures, given that
FINRA will serve as a repository of a large amount of sensitive and
non-public securities lending data.''). See also Federated Hermes
Letter, at 2 (stating that it fully endorses and supports the ICI's
comments, particularly ICI's proposal to protect confidential data,
which, as described includes imposing explicit confidentiality
obligations on FINRA and ensuring that FINRA implements adequate
data security measures, given that FINRA will serve as a repository
of a large amount of sensitive and non-public securities lending
data); ISLA Letter, at 2 (expressing concern that if there is too
much disclosure of information it could lead to less securities
lending activity, particularly if the required data are
disproportional or considered unreasonable); MFA Letter 3, at 8
(recommending ``that the Commission exercise its regulatory
oversight of FINRA to ensure that FINRA implements adequate data
security measures''). See, e.g., IIB Letter, at 3 (recommending that
the final rule require RNSAs to adopt certain data security
measures, including masking or encryption); Charles Schwab Letter,
at 2.
---------------------------------------------------------------------------

    One commenter suggested that the final rule include masking or
further additional redactions to better protect an individual's
personal non-public information.\449\ Another commenter stated that a
retail client has increased confidentiality concerns compared to an
institutional client.\450\ These concerns appear to arise primarily
from the potential identification of a broker or dealer's individual
fully paid customers. Paragraph (e)(1) of the final rule specifies that
a broker or dealer is not required to provide the legal name of (or
otherwise make identifiable) the customer when reporting loans of fully
paid excess margin securities pursuant to Rule 15c3-3(b)(3). Thus, a
broker or dealer may redact or mask such information prior to
submitting the information to an RNSA.
---------------------------------------------------------------------------

    \449\ See Charles Schwab Letter, at 2; see also FIF Letter, at
7.
    \450\ See Charles Schwab Letter, at 2.
---------------------------------------------------------------------------

    Another commenter supported the Commission's proposed requirement
that lenders provide to an RNSA the identities of borrowers of
securities loans (although they would not be publicly disclosed),
explaining that this information is essential for effective market
oversight, and failure to collect this information would materially

weaken the efficacy of the rule.\451\ Under the final rule, the names
and identities of lenders (other than customers in a fully paid lending
arrangement) will be required to be reported to an RNSA. This data will
be fully captured by the final rule requiring a broker or dealer (as
the ``borrower'' under the ``fully paid'' exception) to report such
loans. With regard to fully paid arrangements, the final rule requires
the broker or dealer to report such loans as the borrower. Although
brokers or dealers will not be required to report the customer names to
an RNSA, the brokers or dealers will be required to retain such
information and make it available to the Commission and its
representatives \452\ and will be required to retain per RNSA
rules.\453\
---------------------------------------------------------------------------

    \451\ See, e.g., HMA Letter; NYSE Letter 1, at 2 (supporting the
proposed confidential treatment of the proposed confidential data
elements, particularly the parties to each transaction and further
stating that ``[p]roposed Rule 10c-1(c)(3) guards against this
concern by providing that all identifying information about lending
agents, reporting agents, and other persons using reporting agents,
will not be made publicly available and the RNSA will be required to
keep such information confidential. Thus, the investment strategies
of market participants will be appropriately protected through
reporting and dissemination of securities lending transactions on an
unattributed basis.'').
    \452\ See, e.g., 15 U.S.C. 78q (section 17(b) of the Exchange
Act; see also 17 CFR 240.17a-4(j) (``Rule 17a-4(j)'') (requiring a
broker-dealer to furnish records promptly to the Commission); Rule
15c3-3(b)(3) (requiring a broker-dealer to enter into a written
agreement with each fully paid lending customer); 17 CFR 240.17a-
4(b)(7) (``Rule 17a-4(b)(7)'') (requiring the broker-dealer to
retain written agreements relating to its business as broker-
dealer).
    \453\ See, e.g., FINRA Rule 4511 (regarding preservation of
records), available at https://www.finra.org/rules-guidance/key-topics/books-records.
---------------------------------------------------------------------------

    Another commenter suggested that, to make the rule more useful to
investors, in addition to loan characteristics, there should also be a
requirement to publicly disclose the legal names of the parties to the
loan (in contrast to keeping that information confidential).\454\ In
fact, multiple retail investor commenters stated that real reform for
securities lending must include notifying the public about who is
borrowing and lending shares (not just which company's shares are being
borrowed or lent).\455\ One commenter stated that there is no reason
for any of the information that is proposed to be provided to an RNSA
to be restricted from public view and, thus, it should be made
public.\456\ However, making this information available to the public
could be detrimental because it could identify specific market
participants or reveal confidential information about the internal
operations or investment decisions of specific market
participants.\457\
---------------------------------------------------------------------------

    \454\ See Morningstar Letter, at 3. However, if the Commission
decides not to require public disclosure of legal names to the
public, this commenter suggested, as an alternative, the Commission
require detailed information about the fund type and borrower type
be provided to the public by an RNSA. See Morningstar Letter, at 3.
    \455\ See, e.g., Letter from Susanne Trimbath, STP Advisory
Services (Dec. 3, 2021) (whose remarks/comments have been
extensively quoted/paraphrased by a multitude of commenters on the
Proposing Release, i.e., Form A Letters and Form B Letters)
(``Trimbath Letter'').
    \456\ See Letter from Jimit Raithatha (Oct. 11, 2022).
    \457\ See Proposing Release, 86 FR 69815.
---------------------------------------------------------------------------

    Others commented more generally on the importance of the securities
lending disclosure requirements not adversely impacting the market
(e.g., by revealing investors' short selling strategies). To avoid such
adverse impacts, these commenters stated that there should be more
prescriptive measures (than requiring policies and procedures, for
instance) to prevent an RNSA, or the reporting agent, from releasing
any of the confidential transaction data that are provided, under the
final rule.\458\ Paragraph (h)(4) of the final rule sets forth a multi-
part requirement that mandates: (1) written policies and procedures;
(2) that such policies and procedures must be reasonably designed; and
(3) that an RNSA establishes, maintains, and enforces such policies and
procedures. This approach is intended to provide flexibility to an RNSA
to tailor policies and procedures that will appropriately maintain the
security and confidentiality of the confidential information required
by paragraph (e) of the final rule, based on its experience with the
multiple types of sensitive and confidential trading data that it
routinely handles as an RNSA. Policies and procedures generally are
regularly monitored, tested, reviewed, and, if needed, updated to
ensure that they remain continuously effective and, thus, should be
particularly useful in helping to ensure that an RNSA adjusts to ever-
changing technologies intended to circumvent data safeguards. Further,
an RNSA's policies and procedures are subject to Commission
oversight.\459\
---------------------------------------------------------------------------

    \458\ See, e.g., Letter from Managed Funds Association (Jan. 7,
2022) (``MFA Letter 1''), at 4 (suggesting the Commission explicitly
require an RNSA to maintain strict confidentiality and information
security standards. While the commenter applauded the Commission's
efforts to ensure that FINRA has policies and procedures in place to
protect the confidentiality of information that is submitted to it,
the commenter believes that the Commission should require, among
other things, more prescriptive measures similar to Rule 613 of
Regulation NMS (consolidated audit trail) to ensure the security and
confidentiality of information, as well as information barriers,
information security systems, user confirmation, and access
audits.); MFA Letter 3, at 3. Given the confidential and proprietary
nature of some of the information that an RNSA will be collecting,
this commenter stated it is imperative that the Commission
ultimately ensure that FINRA adopt more prescriptive confidentiality
and information security in connection with any final rule. As
discussed above, the requirements of paragraph (h)(4) of the final
rule provide an appropriate level of flexibility to an RNSA
regarding specific prescriptive measures to use to maintain the
security and confidentiality of the confidential information
required by paragraph (e) of the final rule while, at the same time,
placing strict requirements around such choices.
    \459\ See also ICI Letter 1, at 11 (suggesting a proposal to
protect confidential data to include imposing explicit
confidentiality obligations on FINRA and ensuring that FINRA
implements adequate data security measures, given that FINRA will
serve as a repository of a large amount of sensitive and non-public
securities lending data); ISLA Letter, at 2 (expressing concern that
if there is too much disclosure of information it could lead to less
securities lending activity, particularly if the required data are
disproportional or considered unreasonable).
---------------------------------------------------------------------------

    Some commenters expressed concerns about reporting agents
maintaining confidential data received from covered persons.\460\
Consistent with the proposed rule, a covered person has the option of
whether or not to entrust its confidential information with a reporting
agent or to report such information directly to an RNSA. Further,
paragraph (a)(2)(i) of the final rule requires that a covered person
who relies on a reporting agent to fulfill its reporting obligations
under the final rule must enter into a written agreement with such
reporting agent. Such agreement could be used by the covered person and
reporting agent to memorialize any measures that they agree to
regarding the protection of the covered person's Rule 10c-1a
information. Further, registered brokers and dealers and registered
clearing agencies are subject to provisions such as section 15(g) of
the Exchange Act and thus, have experience with implementing,
maintaining, and enforcing policies and procedures and other means of
protecting and preventing the misuse of information.\461\
---------------------------------------------------------------------------

    \460\ See S3 Partners Letter, at 12; IHS Markit Letter, at 4;
Pirum Letter, at 5; BlackRock Letter, at 9.
    \461\ See 15 U.S.C. 78o.
---------------------------------------------------------------------------

    One commenter recommended that the proposed rule be modified to
permit an RNSA to confidentially provide regulatory-related information
to SROs that are not RNSAs, such as NYSE Regulation, without first
obtaining a Commission order.\462\ Under the final

rule, an RNSA is required to establish, maintain, and enforce policies
and procedures specifically tailored to protect the confidential
information enumerated in the final rule. To address commenters'
concerns regarding the potential market impact of loan information
required to be provided to an RNSA by the final rule, the Commission
may designate by order upon a demonstrated regulatory need,
dissemination to persons other than an RNSA. Thus, as discussed further
below, in Part VII.K, it is appropriate to provide such information to
persons (other than the Commission) by order, on a case-by-case basis,
upon a demonstrated regulatory need. Such case-by-case determination
strikes the proper balance between protecting confidential information
and facilitating the regulatory function, such as those of an SRO.
Another commenter requested that the Commission clarify whether the
``if known'' parenthetical, included at the end of paragraph (d)(1) of
the proposed rule, was meant to apply to each of the confidential data
elements (i.e., CRD, IARD, MPID) in that paragraph.\463\ In reviewing
this provision, the Commission recognizes that the proposed rule text,
by locating the ``if known'' language at the end of paragraph (d)(1) in
the proposed rule (rather than at the beginning as was done with other
``if known'' language that was used for the confidential data elements
in paragraph (d)(3) of the proposed rule), the scope of this ``if
known'' language with respect to the individual confidential data
elements in paragraph (d)(1) was not entirely clear. Thus, the
placement of the ``if known'' language similarly at the beginning of
the paragraph (e)(1) of the final rule clarifies that each piece of
information enumerated in that paragraph (i.e., following the ``if
known'' language) is required to be reported only to the extent that
piece of information is known by the covered person. To clarify this
intent, it is appropriate to modify proposed paragraph (d)(1) by moving
the placement of the ``if known'' language that is currently proposed
at the end of paragraph (d)(1) (in the proposed rule), and relocating
it to the beginning of paragraph (e)(1) in the final rule, consistent
with the same ``if known'' language at the beginning of 17 CFR 240.10c-
1a(e)(3) (``final Rule 10c-1a(e)(3)'').
---------------------------------------------------------------------------

    \462\ See, e.g., NYSE Letter 2, at 1-3; Nasdaq Letter, at 3-4
(supporting regulators having access to information that is not
publicly available and advocating for the SEC to make non-public
information available to other regulators). See also paragraph
(h)(2) of final Rule 10c-1a regarding an RNSA making certain
information available to the Commission; or other persons as the
Commission may designate by order upon a demonstrated regulatory
need.
    \463\ See OCC Letter, at 9.
---------------------------------------------------------------------------

    To the extent the data elements of final Rule 10c-1a(e)(1) are
known, providing these data elements to an RNSA will allow regulators
to understand buildups in risk at market participants and may otherwise
assist an RNSA in monitoring and surveilling the security markets. The
data elements will also provide an RNSA with the necessary information
to administer the collection of all the other data elements provided to
it under final Rules 10c-1a(c) and (d), such as ensuring the
completeness of submissions, contacting persons that have errors in
their provided data, and troubleshooting person-specific technical
issues.\464\
---------------------------------------------------------------------------

    \464\ See, e.g., Proposing Release, 86 FR 69815 (regarding
information collected pursuant to paragraphs (c) through (e) of the
final rule available to the Commission; or other persons as the
Commission may designate by order upon a demonstrated regulatory
need).
---------------------------------------------------------------------------

    The Commission also proposed requiring that information be reported
(but not publicly disclosed) on whether the securities loan is being
used to close out a fail to deliver pursuant to Rule 204 of Regulation
SHO \465\ or to close out a fail to deliver outside of Regulation SHO.
Rule 204 of Regulation SHO generally requires closing a firm's fail to
deliver position in equity securities at a registered clearing agency
by purchasing or borrowing securities of like kind and quantity.
Accordingly, under the final rule, this data element will provide
regulators with information both about the loans used by brokers or
dealers to close out fails to deliver as required by Regulation SHO, as
well as additional insight into the use of loans, particularly the
extent that loans are used to cover account-level fail to deliver
positions in reportable securities.
---------------------------------------------------------------------------

    \465\ 17 CFR 242.204.
---------------------------------------------------------------------------

    Several commenters were supportive of this confidential data
element, as proposed, with one commenter noting the benefits of such
data for regulatory oversight,\466\ and yet other commenters requested
that this data element be required to be publicly reported.\467\ Final
Rule 10c-1a(e)(3), adopts this data element as proposed. The Commission
has elected to adopt without modification (i.e., not requiring public
dissemination) this specific data element in paragraph (d)(3) of the
proposed rule because, as a commenter stated,\468\ such information
could be abused and is designed to be primarily useful for regulatory
purposes.\469\ As the Commission has stated, fails to deliver may
result from long sales as well as short sales, and may be closed out by
either purchasing or borrowing shares. Fails to deliver can occur for
various reasons, such as ``human or mechanical errors or processing
delays can result from transferring securities in custodial or other
form rather than book-entry form, thereby causing a fail to deliver on
a long sale.'' \470\ Such data will be useful to regulators in
determining both the extent of the use of securities loans for fails to
deliver, as well as how and when fails to deliver are being addressed
by securities loans. However, the Commission agrees with the commenter
that such information, if made public, could be abused. For example,
market participants that become aware of fails to deliver may seek to
short squeeze the security knowing that the person failing to deliver
has a time-sensitive need to cover its short position.
---------------------------------------------------------------------------

    \466\ See FINRA Letter, at 2 n.4 (stating that fail to deliver
data in particular ``would significantly enhance FINRA's Regulation
SHO surveillance programs''). This commenter stated that it agrees
that the proposed rule will provide the Commission, FINRA, and other
regulators with data that could be used for important regulatory
functions, including facilitating and improving FINRA's in-depth
monitoring of members' activity and surveillance of the securities
markets in stating, ``this additional data would facilitate better
surveillance by FINRA for regulatory compliance by its members'' and
improve FINRA's ability to enforce relevant regulations. See id. at
1-2. More specifically, ``the additional data, including in
particular the identification of whether a loan will be used to
close out a fail to deliver, would significantly enhance FINRA's
Regulation SHO surveillance programs.'' Id. at 4.
    \467\ See, e.g., Hindley Letter (``In my opinion, this data not
being made publicly available is wrong.''); Errick R. Letter (``I
believe the terms . . . should also be made public.'').
    \468\ See Citadel Letter, at 11.
    \469\ See FINRA Letter, at 1-2.
    \470\ Amendments to Regulation SHO, Release No. 34-60388 (July
17, 2009); 74 FR 38266, 38271 (July 31, 2009) (Adopting Release).
---------------------------------------------------------------------------

    Another commenter stated that, in addition to the data elements in
paragraph (d)(1) of the proposed rule, it will not have knowledge of
whether the loan was used to cover a fail to deliver at the time of
providing the confidential report to an RNSA, as would be required by
paragraph (d)(3) of the proposed rule.\471\ The final rule adopts as
proposed the requirement that such information must be reported if
known.\472\
---------------------------------------------------------------------------

    \471\ See OCC Letter, at 9 (stating that OCC does not know the
CFT, IARD, MPID, or LEI of the lending or borrowing clearing members
or whether the lending or borrowing clearing members are acting as
intermediaries--and does not know if the loan is being used to close
out a fail to deliver pursuant to SEC Regulation SHO or otherwise).
See also BlackRock Letter, at 5.
    \472\ See final Rules 10c-1a(e)(1) and (e)(3).
---------------------------------------------------------------------------

    As non-substantive changes to the rule, the Commission is replacing
the word ``person'' with the defined term ``covered person'' as
discussed above, in Part VII.A. Thus, as adopted, paragraph (e) of
final Rule 10c-1a requires, consistent with the Proposing Release, that
``[i]f required by paragraph (a) of this section, a covered person
directly,

or indirectly using a reporting agent shall provide the following
information to an RNSA, if applicable, by the end of the day on which a
covered securities loan is effected.'' \473\ As non-substantive changes
to the rule, the Commission is replacing the word ``person'' with the
defined term ``covered person'' as discussed above, in Part VII.A.
Thus, as adopted, paragraph (e) of final Rule 10c-1a requires,
consistent with the Proposing Release, that ``[a] covered person shall
provide the following information to an RNSA, if applicable, by the end
of the day on which a covered securities loan is effected.'' \474\
---------------------------------------------------------------------------

    \473\ See final Rule 10c-1a(e) (referring to ``Confidential data
elements'' in paragraphs (e)(1) through (3)).
    \474\ See final Rule 10c-1a(e) (referring to ``Confidential data
elements'' in paragraphs (e)(1) through (3)).
---------------------------------------------------------------------------

4. Removal of Securities Available to Loan Data Element
Proposed Rule
    Among the securities lending data elements required to be reported
to an RNSA, the Commission included in the proposed rule a requirement
to report the total amount of each security that is not subject to
legal or other restrictions that prevent it from being lent
(``available to lend'').\475\ The Commission also required that certain
identifying information, including the legal name of the security, and
the ticker symbol or other identifier, be reported with the available
to lend data.\476\ The Commission stated in the Proposing Release that
it designed the securities available to loan data elements to allow for
the calculation of a ``utilization rate'' for each security.\477\ The
utilization rate, which could be calculated by dividing the total
number of shares on loan by the total number of shares available for
loan, could then be used by market participants to evaluate whether the
security will be difficult or costly to borrow.\478\
---------------------------------------------------------------------------

    \475\ See proposed Rule 10c-1(e)(1)(iii).
    \476\ See proposed Rules 10c-1(e)(1)(i) and (ii).
    \477\ See Proposing Release, 86 FR 69817.
    \478\ See Proposing Release, 86 FR 69817.
---------------------------------------------------------------------------

Final Rule
    The Commission received numerous comments regarding the ``available
to lend'' data element \479\ of the proposed rule. Certain commenters
expressed concern that such data could be inaccurate,\480\ with some
highlighting a variety of limitations on securities lending that could
make the data unreliable.\481\ Commenters expressed concern that the
available to lend data could be underreported if it omitted data from
persons that were not required to provide information to an RNSA or
that did not have an open securities loan.\482\ One commenter stated
that ``data would be particularly misleading for large international
banking organizations with substantial operations outside of the United
States.'' \483\ Other commenters expressed general concern that the
proposed ``available to lend'' data element could discourage securities
lending.\484\ Two commenters recommended replacing the ``available to
lend'' metric for the calculation of a utilization rate with publicly
available information on the issuer's total share float.\485\ However,
other commenters supported the reporting of ``available to lend''
data.\486\
---------------------------------------------------------------------------

    \479\ The term ``available to lend data'' refers to both the
``total amount of each security that is not subject to legal or
other restrictions that prevent it from being lent'' information
proposed to be reported by a lending agent under proposed Rule 10c-
1(e)(1)(iii), and the ``total amount of each specific security that
is owned by the person and available to lend'' information proposed
to be reported by persons that do not use a lending agent under
proposed Rule 10c-1(e)(2)(iii).
    \480\ See RMA Letter, at 11; IIB Letter, at 8; SIFMA Letter 1,
at 15; ICI Letter 1, at 8-9; SIFMA AMG Letter, at 8; State Street
Letter, at 4-5; Fidelity Letter, at 4; ABA Letter, at 4; CASLA
Letter, at 2; Federated Hermes Letter, at 2; S3 Partners Letter, at
11-12; Sharegain Letter, at 3; Linklaters Letter, at 5; MFA Letter
3, at 6-7; EBF Letter, at 2 (expressing general support for comments
from SIFMA and IIB addressing the reporting of ``available to lend''
data).
    \481\ See, e.g., State Street Letter, at 4 (``Although clients
who participate in securities lending programs generally agree to
lend all portfolio assets, or categories of assets, securities
lending authorization agreements typically place limits on both
portfolio and counterparty exposure. Furthermore, the actual supply
of available securities may be impacted by additional client
instruction resulting from various idiosyncratic or market events,
as well as discretionary transfers in and out of investment
portfolios.''). See also IIB Letter, at 8 (``Portfolio limits,
concentration limits and simple lending preferences and strategies
may substantially limit both the individual securities that a party
may be willing to lend and the amount of lending that they are
willing to provide on aggregate.''); ICI Letter 1, at 2 n.8 (``A
fund may not have on loan at any time securities representing more
than one-third of the fund's total value.'' Further stating that
``[t]his restriction stems from section 18 of the Investment Company
Act.''); SBAI Letter, at 2 (``However, funds managed under 1940 Act
regulations have restrictions on their approach to securities
lending (e.g., limit on lending: A fund may not have on loan at any
time securities representing more than one-third of the fund's total
value), thereby not allowing an accurate calculation of `securities
available to lend' on an individual security basis.''); RMA Letter,
at 12 (``. . . securities lending in a portfolio provided to a
Lending Agent by a beneficial owner may be limited by (i) negotiated
or legal portfolio limits that impact the amounts and types of
securities that may be lent, (ii) ad hoc or periodic beneficial
owner instructions to limit lending in particular ways based on
idiosyncratic preferences . . . or external factors and (iii)
discretionary transfers in and out of custody accounts unrelated to
securities lending interest, and other factors.''); Linklaters
Letter, at 5; James J. Angel Letter, at 4.
    \482\ See, e.g., IIB Letter, at 8. See also RMA Letter, at 11.
    \483\ See IIB Letter, at 8.
    \484\ See, e.g., State Street Letter, at 5 (stating that ``[i]n
our experience, the prospect of being obligated to disclose, even in
aggregate form, all portfolio holdings may be enough to drive
certain clients out of the securities lending market, with important
implications for liquidity''). See also ICI Letter 1, at 8; IIB
Letter, at 8-9; RMA Letter, at 13; IHS Markit Letter, at 11 (stating
that ``[b]eneficial owners, especially sovereign wealth funds and
other sensitive investors, may have policies that could force them
to withdraw from securities lending if they are required to submit
available to lend data to a broker-dealer'').
    \485\ See State Street Letter, at 4; IHS Markit Letter, at 7, 9
(responding to Questions 25 and 49).
    \486\ See HMA Letter, at 7 (stating that such information ``is
essential to building a comprehensive view of the markets''); FINRA
Letter, at 2 (stating that ``the information subject to reporting
under the Proposal regarding the aggregate quantity of shares . . .
available to loan would provide useful information in monitoring the
levels of short selling activity occurring in a security and
determining when a security is hard to borrow''); ASA Letter, at 3.
---------------------------------------------------------------------------

    One of the Commission's goals in proposing the ``available to
lend'' data requirements was ``to allow for the calculation of a
`utilization rate' for each particular security,'' which in turn
``could be used by market participants to evaluate whether the security
will be difficult or costly to borrow.'' \487\ The Commission stated in
the Proposing Release that ``the information provided under paragraph
(e) [of the proposed rule] should allow market participants to
calculate a utilization rate that is likely to be reliable.'' \488\
However, many commenters expressed concerns that there may be
significant challenges to the accurate reporting of ``available to
lend'' data.\489\ One commenter stated, before highlighting barriers to
obtaining accurate ``available to lend'' data, that the ``[c]alculation
of the utilization rate requires an accurate measure of the `securities
available to lend' for all market participants.'' \490\
---------------------------------------------------------------------------

    \487\ See Proposing Release, 86 FR 69817 (stating that the
utilization rate ``would be calculated by dividing the total number
of shares on loan by the total number of shares available for
loan'').
    \488\ See Proposing Release, 86 FR 69817 n.113.
    \489\ See, e.g., ICI Letter 1, at 8-9; Federated Hermes Letter,
at 2; ABA Letter, at 4; RMA Letter, at 11; State Street Letter, at
4-5; IIB Letter, at 8; SBAI Letter, at 2; Sharegain Letter, at 3.
    \490\ See SBAI Letter, at 2 (stating that ``funds managed under
1940 Act regulations have restrictions on their approach to
securities lending . . . thereby not allowing an accurate
calculation of `securities available to lend' on an individual
security basis'').
---------------------------------------------------------------------------

    Upon consideration, the Commission agrees with commenters' concerns
with the potential for underreported or inaccurate ``available to
lend'' data being reported. Therefore, final Rule 10c-1a has been
amended from the proposed rule to remove the reporting of ``available
to lend'' data, as described under proposed Rules 10c-1(e)(1)(iii) and
(e)(2)(iii), and to remove the

corresponding requirement that an RNSA make such information publicly
available, as described under proposed Rule 10c-1(e)(3). Additionally,
final Rule 10c-1a removes the reporting requirements for the
identifying information (e.g., legal name of the security, LEI of the
issuer, ticker symbol, ISIN, CUSIP, FIGI, or other identifier) of such
``available to lend'' securities, as listed under proposed Rules 10c-
1(e)(1)(i) and (ii) and 10c-1(e)(2)(i) and (ii). Therefore, final Rule
10c-1a does not include a requirement that ``available to lend'' data
be reported to an RNSA, by a lending agent, a person that does not
employ a lending agent, or otherwise. The elimination of this
requirement from the proposed rule responds to commenter concerns, will
limit the burden of the final rule's reporting requirements on covered
persons, and will preempt the potential for inaccurate or unreliable
data to be made publicly available to market participants.
5. Removal of Securities On Loan Data Element
Proposed Rule
    The Commission proposed a requirement that, by the end of each
business day that a lending agent was required to provide Rule 10c-1
information to an RNSA or had an open securities loan about which it
was required to provide information to an RNSA, the lending agent shall
provide to an RNSA the total amount of each security on loan that has
been contractually booked and settled (``security on loan'').\491\ The
proposed rule also required that by the end of each business day that a
person that does not use a lending agent provides Rule 10c-1
information to an RNSA, or had an open securities loan about which it
was required to provide information to an RNSA, the person shall also
provide to an RNSA the total amount of each security on loan that has
been contractually booked and settled (``security on loan'').\492\ The
Commission also proposed that ``[f]or each security about which the
RNSA receives [such] information . . . . The RNSA shall make available
to the public only aggregated information for that security.'' \493\
---------------------------------------------------------------------------

    \491\ See proposed Rule 10c-1(e)(1)(iv).
    \492\ See proposed Rule 10c-1(e)(2)(iv).
    \493\ See proposed Rule 10c-1(e)(3).
---------------------------------------------------------------------------

    The Commission stated its preliminary belief that securities on
loan data could help market participants plan their borrowing
activity.\494\ The Commission also stated that it designed the proposed
securities on loan data element to allow for the calculation of a
``utilization rate'' for each particular security.\495\ The utilization
rate could then be used by market participants to evaluate whether the
security will be difficult or costly to borrow.\496\
---------------------------------------------------------------------------

    \494\ See proposed Rule 10c-1(e)(3).
    \495\ See Proposing Release, 86 FR 69817.
    \496\ See Proposing Release, 86 FR 69817.
---------------------------------------------------------------------------

Final Rule
    Commenters provided differing views on the proposed reporting
requirement for the securities on loan data element. Certain commenters
supported or did not object to the requirement to report securities on
loan data \497\ in the proposed rule.\498\ One commenter recommended
that more granular securities on loan data be made available, including
that the ``total number of shares of each stock on loan [should be]
disaggregated by lender.'' \499\ Multiple commenters supported the
proposed requirement for an RNSA to make securities on loan data
publicly available on an aggregate basis,\500\ with one recommending
that ``[f]or each security, FINRA could disseminate the total volume of
securities on loan by shares or principal value (as applicable) and as
a percentage of the shares or principal value (as applicable) of all
securities that are outstanding.'' \501\ Another commenter disapproved
of the proposed securities on loan data reporting requirement,
expressing concerns that the data ``may be misleading,'' and
recommended removing it.\502\ The commenter stated that some brokers
use approaches to calculating securities on loan data that ``routinely
misrepresent the true number of borrowed shares.'' \503\
---------------------------------------------------------------------------

    \497\ The term ``securities on loan data'' refers to both the
``total amount of each security on loan that has been contractually
booked and settled'' information proposed to be reported by lending
agents under proposed Rule 10c-1(e)(1)(iv), and the ``total amount
of each specific security that is owned by the person'' information
proposed to be reported by persons that do not use a lending agent
under proposed Rule 10c-1(e)(2)(iv).
    \498\ See SIFMA Letter 1, at 4 n.9; SIFMA AMG Letter, at 11;
FINRA Letter, at 2 (stating that ``the information subject to
reporting under the Proposal regarding the aggregate quantity of
shares on loan . . . would provide useful information in monitoring
the levels of short selling activity occurring in a security and
determining when a security is hard to borrow.''); Better Markets
Letter, at 6.
    \499\ See Letter from Americans for Financial Reform Education
Fund, at 3 (Apr. 1, 2022) (``AFREF Letter 2'').
    \500\ See FIF Letter, at 11; ICI Letter 1, at 11.
    \501\ See FIF Letter, at 11.
    \502\ See S3 Partners Letter, at 12 (stating that ``prime
brokers often use their own internal inventory of shares which means
no actual `borrowing' takes place. By failing to take this
`internalization' into account, approaches that use `securities on
loan' routinely misrepresent the true number of borrowed shares.'').
    \503\ See S3 Partners Letter, at 12.
---------------------------------------------------------------------------

    Similar to the concerns described above, in Part VII.F.4, about the
proposed securities available to loan data element, the Commission
agrees with the commenters that there may be challenges to the
collection of accurate securities on loan data.\504\ Additionally,
aggregated information similar to the proposed securities on loan data
will be made available by RNSAs, without the additional, potentially
duplicative, reporting requirements of proposed Rule 10c-1(e)(1)(iv)
and (e)(2)(iv).\505\ Under the final rule, RNSAs will be required to
design and provide not only information pertaining to the aggregate
transaction activity \506\ for each reportable security, but also
distribution of loan rates for each reportable security.\507\ These
requirements should provide market participants with information to
help plan their borrowing activity, while avoiding potentially
duplicative reporting obligations. Such aggregated data would be
consistent with some commenters' support for requiring RNSAs to make
``securities on loan'' data available on an aggregated basis.\508\
Additionally, RNSAs will be required to make the disaggregated ``amount
of the security loan'' data publicly available,\509\ comparable to the
disaggregated ``securities on loan'' data recommended by one
commenter.\510\ However, as discussed below, in Part VII.J, such
disaggregated data will only be publicly available on a delayed basis,
on the twentieth business day after the covered securities loan is
effected, in order to protect the sensitive nature of individual
securities lending ``amount'' information (e.g., such as size or
volume).\511\ Furthermore, for the reasons described above, in Part
VII.F.4, final Rule 10c-1a will not require the reporting of an
available to loan data element, which therefore would not be available
to pair with the proposed securities on loan data element in order

to calculate a ``utilization rate'' metric.\512\ Therefore, while
certain benefits derived by market participants from the reporting and
disclosing of securities available to lend data and securities on loan
data elements together may not be realized, market participants may
benefit from the public availability of aggregate transaction activity
and distribution of loan rates.\513\
---------------------------------------------------------------------------

    \504\ See FIF Letter, at 10; S3 Partners Letter, at 11-12;
Linklaters Letter, at 5-6.
    \505\ See final Rule 10c-1a(c).
    \506\ See final Rule 10c-1a(g)(5). The term ``aggregate
transaction activity'' used in the final rule refers to information
pertaining to the absolute value of transactions such that net
position changes could not be discerned in the data. The addition of
the term ``aggregate transaction activity'' in the final rule limits
the possibility of publishing proprietary information while still
providing volume transparency to market participants.
    \507\ See final Rule 10c-1a(g)(5).
    \508\ See SIFMA Letter 1, at 18-19; SIFMA AMG Letter, at 10.
    \509\ See final Rule 10c-1a(g).
    \510\ See AFREF Letter 2, at 3.
    \511\ See final Rule 10c-1a(g)(2).
    \512\ See Proposing Release, 86 FR 69817 (``The utilization
rate, which would be calculated by dividing the total number of
shares on loan by the total number of shares available for loan,
could be used by market participants to evaluate whether the
security will be difficult or costly to borrow.'').
    \513\ See Proposing Release, 86 FR 69817.
---------------------------------------------------------------------------

    For the foregoing reasons, final Rule 10c-1a has been changed from
the proposed rule to remove the reporting of securities on loan data,
as described under proposed Rule 10c-1(e)(1)(iv) and (e)(2)(iv), and to
remove the corresponding requirement that an RNSA make such information
publicly available, as described under proposed Rule 10c-1(e)(3).
Therefore, final Rule 10c-1a does not include a requirement that a
lending agent or other covered person report securities on loan data to
an RNSA.

G. Timing of Required Reporting to an RNSA

1. Timing of Reporting of Loans
Proposed Rule
    As discussed above, in Part VII.F.1, paragraph (b) of the proposed
rule would have required certain loan transaction data elements to be
reported to an RNSA, on a transaction-by-transaction basis, within 15
minutes of the loan being effected, followed by an RNSA assigning each
loan a unique transaction identifier and then making such information
publicly available as soon as practicable. As part of the proposed
rule, the Commission sought specific comment as to the proposed 15-
minute requirement for reporting specified data elements to an RNSA.
Final Rule
    While the proposed 15-minute reporting requirement received some
support,\514\ most of the comments received by the Commission from
larger institutional market participants strongly opposed the proposed
rule's requirement that the specified data elements be reported to an
RNSA within 15 minutes after a loan is effected (i.e., in addition to
the data being publicly disseminated on a transaction-by-transaction
basis). For example, most of these larger market participants explained
that the terms of securities loans change during the day and are
generally not finalized until the end of the day.\515\ These changes
include reallocations of securities loans among lenders, re-pricings,
and changes in collateral.\516\ As a result, the commenters stated that
requiring transaction-by-transaction reporting, particularly on a 15-
minute/intraday basis, would result in significant unintended negative
consequences, including the public dissemination of incomplete or
misleading information, which could adversely impact the securities/
lending markets.\517\ Another commenter also stated that the proposed
15-minute reporting requirement is impractical and logistically
challenging and would ``create noise and misleading information in the
market.'' \518\ In addition commenters stated that there would be costs
to participants to create and maintain an entirely new infrastructure
for loan data reporting and dissemination.\519\
---------------------------------------------------------------------------

    \514\ Some commenters did express support for the proposed 15-
minute reporting requirement. These commenters were primarily
smaller retail investors who stressed the benefits of real-time
intraday reporting. See, e.g., Letter from Nick Morgan (May 4, 2023)
(advocating for transaction-by-transaction reporting and the 15-
minute reporting requirement, as well as promoting transparency in
securities lending, which will benefit retail investors and
strengthen the SEC's ability to fulfill its mandate while also
guarding against economic fragility and potential national security
threats). See also Letter from Edwin Liew (May 4, 2023) (supporting
the 15-minute reporting requirement saying the cost and effort are
justified to prevent fraud and prevent hiding in loopholes). In
fact, one commenter stated that at a minimum ``the final rule should
significantly shorten the 15-minute reporting timeframe.'' Better
Markets Letter, at 8. This commenter urged the Commission to
finalize the proposed rule without undue delay and without diluting
the proposal in any way absent credible, specific evidence that such
dilution will not have an impact on the utility of the data
reported. See id. This commenter also stated that ``the SEC should
also shorten the required timeframes for the reporting'' and
identified ``potential shortcomings of these timeframes, including
how they hamper real-time regulatory oversight or allow manipulative
activity based on information leakage or other means of exploiting
the 15-minute reporting delay . . . for public disclosure.'' Id.
Other commenters expressed support for the proposed rule and
specifically noted that it is a leading provider of data and
analytics in the securities lending market and is currently able to
do intraday reporting. See, e.g., Equilend Letter; see also
Morningstar Letter, at 4 (stating its support for the proposed 15-
minute reporting requirement). The Commission acknowledges the above
benefits stated by these commenters regarding the proposed 15-minute
reporting requirement and has considered the comments that argued in
favor of end-of-day reporting. As discussed below, in this part, the
Commission has determined to replace the proposed intraday 15-minute
reporting requirement with an end of day requirement that will allow
covered persons additional time in which to collect and report their
Rule 10c-1a information in compliance with final Rule 10c-1a's
requirements.
    \515\ See Fidelity Letter, at 2-3 (stating that ``[t]he
reporting timeframe for transactions should be no earlier than end
of day''). See also MFA Letter 1, at 8; MFA Letter 2.
    \516\ See FIF Letter, at 3.
    \517\ See, e.g., SIFMA AMG Letter, at 3 (stating that the
proposed 15-minute requirement would lead to the reporting of
superfluous information benefitting neither market transparency nor
regulatory oversight). See also SIFMA Letter 1, at 13-14; SIFMA
Letter 2, at 5. See also State Street Letter, at 2-3 (stating the
15-minute reporting requirement will result in incomplete or error
prone information because it ignores that loans are usually
finalized by the end of day). See also AIMA Letter 1, at 4; ICI
Letter 1, at 6.
    \518\ See, e.g., CCMR Letter, at 5 (stating that disclosing
securities loan activity on a transaction-by-transaction basis as
soon as 15 minutes after they are effected would likely signal to
the market that a short selling position is being actively
established in that security, which could have potential negative
effects on short sellers, increase costs associated with
establishing a short position through information leakage and
slippage; or lead to ``short squeezes''). See also SBAI Letter, at
2; AIMA Letter 1, at 3-4 n.11; RMA Letter, at 18.
    \519\ See MFA Letter 1, at 3.
---------------------------------------------------------------------------

    Other commenters stated that the proposed 15-minute reporting time
period would exponentially increase the number of execution (and
modification) reports that would be required to be filed.\520\ Another
commenter stated that requiring reporting every 15 minutes gives away
too much proprietary information to the market regarding closely
guarded trading strategies, risking exposures to short squeezes, front
running, reverse-engineering--particularly with hard-to-borrow
securities.\521\ Another commenter raised the concern that a 15-minute
reporting requirement may be unnecessarily frequent and that there did
not appear to be any stated rationale in the Proposing Release for how
a 15-minute reporting interval would be helpful to market participants
or why this frequency is appropriate.\522\
---------------------------------------------------------------------------

    \520\ See also RMA Letter, at 9.
    \521\ See AIMA Letter 1, at 4-5 (stating that in response to the
proposed rule market participants may adjust their trading
strategies or exit the borrowing market when they otherwise would be
active participants thereby reducing liquidity and increasing
volatility).
    \522\ See Letter from Tom Quaadman, Executive Vice President,
Center for Capital Markets Competitiveness, U.S. Chamber of Commerce
(Jan. 7, 2022) (``Chamber of Commerce Letter''). But see Nasdaq
Letter, at 3 (stating ``the data reported should be made available
to investors within a reasonable timeframe to utilize the
information effectively to make informed investment decisions. To
that end, it is unclear whether the fifteen-minute timeframe for
reporting certain data is optimal and is supported by sufficient
research or other justification. When compared to the speed at which
markets operate, the fifteen-minute delay may be excessive and, on
the other hand, there may be little benefit to investors in
receiving such information after a fifteen-minute delay as opposed
to a longer period, such as the end of the day. . . .''). See also
RMA Letter, at 9 (stating that ``[r]equiring reporting on an
intraday basis as proposed would be operationally impractical in
many respects and would provide little to no incremental value
compared to end-of-day reporting''). See also Federated Hermes
Letter, at 1 (stating that ``the requirement to report securities
loans within 15 minutes of `being effected' or modified does not
appear to reflect the reality that the terms of securities loans are
fluid and frequently modified throughout a business day''). Thus,
the commenter states it is difficult to identify a particular
intraday point that a given loan has been ``effected.'' See id.
According to the commenter, even if it were possible to determine
such an intraday point, 15 minutes is too short of a timeframe to
collect and accurately report the required transaction data. Thus,
the commenter stated that given the imprecision of defining the
exact intraday moment at which a lending transaction is effected,
and the frequency with which the transaction's details are modified,
new reporting requirements will be expensive and operationally
difficult to implement. See id. See also IHS Markit Letter, at 2
(opposing the proposed 15-minute reporting requirement and stating
``the frequency with which loans would be reported and disseminated
would be both an immense hurdle and costly burden for the industry
and could also lead to reduced market liquidity and participants
withdrawing from lending altogether'').

---------------------------------------------------------------------------

    To address these concerns, commenters offered possible
modifications for the final rule. Many of the commenters who suggested
an alternative approach favored an ``end-of-day'' reporting
requirement.\523\ They explained that end-of-day reporting would make
more sense and result in more worthwhile information being reported as
it takes into account that most securities loan trades are not
finalized until end of day.\524\ One of the commenters explained how
most securities loan market participants already use/rely on ``end-of-
day'' data because they view it as the most relevant and reliable
measurement of market activity.\525\ This commenter also stated that,
even though intraday data may already be available from service
providers, it is still widely seen as indicative in nature and subject
to frequent correction.\526\
---------------------------------------------------------------------------

    \523\ See, e.g., FIF Letter, at 4 (stating that reporting should
be end of day; however, the letter still discusses implementation
challenges for broker-dealers and complexity in requiring even end
of day reporting).
    \524\ See SIFMA Letter 1, at 3; see also ASA Letter, at 2-3
(stating an ``end-of-day requirement to report securities lending
transactions would be appropriate and provide investors with
sufficient transparency regarding the terms of these
transactions''); ICI Letter 1, at 6 (claiming any information
reported within 15 minutes risks being misleading to investors and
``noise'' as it would not reflect the parties' final terms);
Sharegain Letter, at 4 (stating its support for a longer reporting
time period than 15 minutes, ``[i]n our view, decreasing the
frequency of reporting to twice a day, or end-of-day reporting,
would render compliance with the timing requirement much more
reasonable'').
    \525\ See IHS Markit Letter, at 5.
    \526\ See IHS Markit Letter, at 2 (stating that ``[i]ntraday
data is also difficult to ingest and analyze and therefore
accessible to only the largest and most sophisticated participants
in the securities lending market''); see also ICI Letter 1, at 6
n.22 (stating ``it is well understood by market participants . . .
that intraday data may be incomplete and is subject to change'').
---------------------------------------------------------------------------

    Other commenters suggested reporting by end of the next day (i.e.,
on a T+1 basis similar to what the EU/UK's Securities Financing
Transactions Regulation (``SFTR'') reporting regime requires).\527\ For
example, one commenter stated it did not believe there is any
additional value to investors in providing intraday data, given the
nature of pricing for securities lending transactions, the potential
for intraday data to confuse investors, and the unnecessary costs and
burdens it would pose to market participants.\528\ Another commenter
who favored next day reporting maintained that it was a way to avoid
the operational challenges, disproportionate costs, and compliance
complexities associated with the proposed 15-minute reporting
requirement.\529\ Another commenter asked the Commission to amend the
15-minute reporting requirement in favor of end-of-day reporting on a
next day (T+1) basis and stated that the 15-minute reporting
requirement would be impractical, and that a T+1 standard would address
transparency, reduce implementation costs, and align with the existing
SFTR securities loan reporting regime.\530\ Another commenter suggested
that the proposed rule be modified to allow the lending agent to have
until the following business day to make the required report to avoid
reporting errors.\531\
---------------------------------------------------------------------------

    \527\ See, e.g., SIFMA AMG Letter, at 3 (suggesting ``end of
next day, T+1, or at least no more frequently than by the end of
each business day''); See also BlackRock Letter, at 2-3 (requesting
a T+1 reporting requirement); see also IIB Letter, at 2 (suggesting
``end-of-day'' reporting on a T+1 basis instead of intraday
reporting); ABA Letter, at 4 (suggesting ``until the following
business day''); RMA Letter, at 3 (suggesting ``end-of-day reporting
on a next day, T+1 basis'' instead of a 15-minute reporting
requirement because it aligns with the existing SFTR securities
loans reporting regime); S3 Partners Letter, at 3 (stating the
Commission should revise the proposed rule to require aggregate, not
transaction level, reporting on T+1). See also EBF Letter, at 2
(stating that it supports IIB's and SIFMA's EOD and T+1 reporting
comments); Citadel Letter, at 2 (referencing the significant costs
associated with transaction-by-transaction reporting and the
Commission's conclusion [albeit in another SEC release] that
aggregated and delayed disclosure of short sale positions was
preferable to transaction-by-transaction and intraday disclosure).
See also MFA Letter 3, at 5 (stating ``the SEC's proposal to require
the reporting of the material terms of a securities loan within 15
minutes of a loan ``being effected'' is unworkable in a securities
loan context''). According to this commenter, securities loans do
not involve an outright purchase or sale but may be on-loan for
extended periods, can be returned at any time, and may subsequently
be re-lent. The terms of a securities loan are typically negotiated
throughout the day and often not finalized until the end of the day
or the next day.'' Id at 5. See also Morningstar Letter, at 2-4
(stating support for loan-level data to be made publicly available
by next business day in order to provide investors with a more
transparent and complete depiction of a fund's lending activities).
    \528\ See BlackRock Letter, at 2-4.
    \529\ See Pirum Letter, at 2.
    \530\ See RMA Letter, at 3.
    \531\ See ABA Letter, at 4.
---------------------------------------------------------------------------

    Commenters also stated that next day or T+1 reporting would provide
more appropriate flexibility for developing systems and processes for
reporting at substantially lower cost.\532\ Some commenters expressed
support for modifying the reporting requirement to require next
business day (i.e., on T+1 basis) but also for an earlier reporting
requirement (i.e., end of the same day) provided that the Commission
provides clarity regarding the precise time period for such reporting
(e.g., the exact point in time that will constitute ``end of day'' for
purposes of the final rule) so that market participants will have the
clarity and certainty they will need to comply and report
accurately.\533\
---------------------------------------------------------------------------

    \532\ See, e.g., RMA Letter 1, at 11 (stating next-day reporting
would provide more appropriate flexibility for developing systems
and processes for reporting at substantially lower cost).
    \533\ See ICI Letter 1, at 6 (stating that for anything earlier
than T+1, the SEC should provide clarity regarding the timeframe for
such reporting to ensure it is feasible).
---------------------------------------------------------------------------

    After reviewing and considering the public comments and
recommendations regarding the proposed 15-minute reporting requirement,
the Commission is adopting final Rule 10c-1a(c), substantially as
proposed, but with targeted modifications to the proposed rule's
reporting period to address commenters' concerns about the proposed
timing requirement being unworkable and overly burdensome by replacing
the proposed 15-minute reporting period with end-of-day reporting, as
well as bringing the different regulatory regimes in closer alignment
with the final rule's public dissemination requirements. Adopting the
final rule with an end-of day reporting requirement will help reduce
the concerns raised by the commenters, while still furthering the
underlying objectives of the final rule.\534\
---------------------------------------------------------------------------

    \534\ Consistent with the proposed rule, the Commission is not
specifying the time that will be the ``end of each business day'' or
what holidays are a ``business day'' to give an RNSA the discretion
to structure its systems and processes as it sees fit and propose
rules accordingly, provided they are consistent with the rule as
adopted. See also Proposing Release, 86 FR 69816 n.104. See supra
note 72 (regarding an example for times set by an RNSA for other
reporting regimes).
---------------------------------------------------------------------------

    As modified, the final rule's end-of-day reporting requirement will
help prevent an excessive number of incomplete or slightly modified
reports that otherwise would occur throughout the day yet without
providing any incremental value. Thus, in modifying the final rule to
include an end-of-day reporting requirement, rather than requiring
frequent intraday reporting, the Commission understands the frequency
with which parties to a securities loan may agree to some of the

basic terms initially, but that some or many of the securities loan
terms may not be agreed to (or may be updated throughout the day and,
thus, not finalized) until the end of the day.\535\ Nonetheless,
whether or not a loan has been effected is a legal/factual question and
a delay in settlement (or if one of the agreed to loan terms is
modified the next day) does not impact the initial requirement to
report all loans (and modifications) within the required timeframes
under the final rule.\536\
---------------------------------------------------------------------------

    \535\ See RMA Letter, at 10 (expressing the concern that, ``data
reported during the course of the day would fluctuate substantially,
would be incomplete in many respects and would likely include
meaningful levels of exception reporting, outcomes that could be
mitigated by giving borrowers and lenders the ability to conduct
reconciliations at the end of the day prior to reporting'').
According to this commenter, most market participants would prefer
(trust) verified data with a time delay, which the commenter
believed would likely be more accurate than real-time data. See id.
    \536\ Under final Rule 10c-1a, in those instances where a
covered securities loan is not settled or finalized until the next
day, i.e., T+1, a covered person will still be required to report
the covered securities loan by the end of the day on which such
covered securities loan is effected by the parties. It will not need
to be reported again when it does settle the next day, on T+1--
unless the reported covered securities loan is modified the next
day, on T+1, when it does settle. See final Rules 10c-1a(c) and (d).
---------------------------------------------------------------------------

    As adopted, paragraph (c) of the final rule requires a covered
person (directly, or indirectly using a reporting agent) to provide the
Rule 10c-1a information, if applicable, to an RNSA ``by the end of the
day on which a covered securities loan is effected.'' \537\ By
replacing the proposed 15-minute reporting requirement with a more
flexible end-of-day (or ``EOD'') reporting requirement in final Rule
10c-1a(c), the Commission recognizes that many covered securities loans
are not likely to be finalized within that 15-minute time period or
until the end of the day. Unlike SFTR in Europe, final Rule 10c-1a's
reporting requirement (i.e., to an RNSA) will not extend until the next
day, on a T+1 basis. While final Rule 10c-1a and the SFTR both deal
with securities lending, they are two unique and different regulatory
regimes, with differences in their underlying objectives and scope of
regulations. Final Rule 10c-1a, however, does allow an RNSA until the
morning of the next business day (thus on T+1, the same as SFTR) to
disseminate the Rule 10c-1a information it receives the night before.
This allows an RNSA sufficient time it needs between receipt of the
Rule 10c-1a information and its dissemination to the public, which
necessitates the Rule 10c-1a information being collected no later than
the night before.
---------------------------------------------------------------------------

    \537\ Final Rule 10c-1a(c). See also infra note 541 and
accompanying text.
---------------------------------------------------------------------------

2. Timing of Reporting of Loan Modification
Proposed Rule
    As discussed above, in Part VII.F.2, paragraph (c) of the proposed
rule would have required that certain loan modification data elements
be provided to an RNSA within 15 minutes after each loan is modified if
the modification results in a change to the Rule 10c-1 information that
is already required to be provided to an RNSA under paragraph (b) of
the proposed rule (and for an RNSA to make such information available
to the public as soon as practicable).\538\ In issuing the proposed
rule, the Commission sought comment specifically regarding the proposed
timing requirement in paragraph (c), which would have required
specified loan modification data elements to be reported to an RNSA
within 15 minutes after a loan is modified.
---------------------------------------------------------------------------

    \538\ See proposed Rule 10c-1(c).
---------------------------------------------------------------------------

Final Rule
    Most of the comments received by the Commission on the proposed
loan modification data elements in paragraph (c) of the proposed rule
were focused on the proposed 15-minute loan modification reporting
requirement, with many of the commenters suggesting that it be replaced
with end-of-day reporting (i.e., similar to the end-of-day timing
modification discussed above with respect to the securities loan data
elements information originally reported to an RNSA).
    In addition to the comments discussed above, in Part VII.F.2,
commenters opposing the proposed 15-minute reporting requirement also
raised concerns that new trades can be executed for market delivery at
any time during the day before the close of settlement at DTC and, as a
result, that some market participants will book trades in ``batches''
or at their discretion, as opposed to individually when agreed.\539\
Some commenters stated that other reporting regimes do not require
intraday reporting, as certain activity reported intraday might
ultimately not result in an executed trade.\540\
---------------------------------------------------------------------------

    \539\ See, e.g., Pirum Letter, at 2 (explaining the batch
process and how the majority of the data are processed and received
in batches and, thus, end-of-day reporting, rather than the proposed
15-minute reporting requirement, will thereby allow sufficient time
for necessary control processes to take place to ensure the accuracy
of data submissions).
    \540\ See, e.g., SIFMA Letter 1, at 14; SIFMA Letter 2, at 5
(supporting concerns raised in the SIFMA Letter 1, at 14); ICI
Letter 1, at 6; RMA Letter, at 9; MFA Letter 1, at 9; Fidelity
Letter, at 3; IIB Letter, at 6-7; IHS Markit Letter, at 10.
---------------------------------------------------------------------------

    Reporting the loan modification data elements for each covered
securities loan that is modified is important to ensure that data
elements previously reported to an RNSA accurately reflect currently
outstanding covered securities loans and to prevent evasion of the
rule. However, in response to commenters' concerns, particularly with
respect to operational difficulties associated with the proposed 15-
minute loan modification reporting requirement and uncertainties as to
the scope of its intended application, the Commission is adopting the
loan modification data elements provision in paragraph (d) of the final
rule, substantially as proposed, but with a modification as to the
timing of the reporting period and some clarifying changes to the
proposed rule text.
    More specifically, to promote the integrity and consistency of the
reporting under the final rule, the Commission has determined to remove
the proposed requirement to report loan modification data elements to
an RNSA within 15 minutes after each loan is modified and to replace it
with the same end-of-day reporting the Commission is requiring for the
original loan data elements under paragraph (c) of the final rule.\541\
For the same reasons discussed above, in Part VII.F.1, allowing covered
persons until the end of the day to report any required loan
modification data information to an RNSA is appropriate because it will
help to address commenters' concerns and operational difficulties with
frequent intraday reporting while still furthering the transparency
objectives of the final rule.
---------------------------------------------------------------------------

    \541\ See final Rules 10c-1a(c) through (e) (as modified, and
for consistency, all three data elements paragraphs require end-of-
day reporting, rather than the proposed 15-minute reporting
requirement).
---------------------------------------------------------------------------

    As modified, the final rule requires the specified loan
modification data elements to be provided by the covered person
(directly or indirectly using a reporting agent) to an RNSA, by the end
of the day on which a covered securities loan is modified.\542\ By
replacing the proposed 15-minute reporting requirement with a more
flexible end-of-day reporting requirement in final Rule 10c-1a(d), the
timing modification should help reduce the concerns raised by
commenters, that is, by allowing covered persons and reporting agents

additional time (until the end of each day, rather than just within 15
minutes), to report any required loan modification information to an
RNSA and also to help reduce the overall implementation cost for market
participants, and allow such participants to better manage the flow of
data in line with the existing internal processes for reporting.\543\
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    \542\ See final Rule 10c-1a(d).
    \543\ See, e.g., Proposing Release, 86 FR 69815 n.96 (providing
an example of a modification that would not trigger as the
requirement in paragraph (c) of the proposed rule (i.e., when a
borrower posts additional collateral in response to an increase in
value of the loaned securities). Information about this change would
not have needed to be provided under proposed paragraph (c) because,
while proposed paragraph (b)(10) requires the Lender to provide the
percentage of collateral to value of loaned securities required to
secure such loan, it did not require information about the value of
collateral posted in dollar terms. See also supra note 413
(discussing an example of a non-qualifying modification).
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3. Timing of Reporting of Confidential Data Elements
Proposed Rule
    As discussed above, in Part VII.F.3, the Commission also proposed
that certain confidential data elements would be provided to, and
retained by an RNSA,\544\ but not made publicly available by an
RNSA.\545\ Such confidential data was intended to provide regulators
with specific information about the loan (such as the identity of the
parties to the loan) that would be kept confidential due to concerns
about potential misuse of such information. The Commission proposed
that such information be reported to an RNSA within 15 minutes after
the loan is effected.
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    \544\ See proposed Rule 10c-1(c).
    \545\ See proposed Rule 10c-1(g).
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Final Rule
    The Commission is modifying the proposed timing requirement for
reporting the confidential data elements, as adopted in paragraph (e)
of the final rule, similar to the timing revisions the Commission made
with respect to the proposed loan and loan modification data elements
adopted in paragraphs (c) and (d) of the final rule (i.e., by replacing
the proposed 15-minute reporting requirement with the similar end-of-
day reporting period). As modified, and otherwise consistent with the
rule as proposed, paragraph (e) of the final rule will continue to
require that any confidential data elements be reported to an RNSA;
\546\ however, an RNSA will be required to keep such information
confidential, ``in accordance with the provisions of paragraph (h) of
this section and applicable law.'' \547\
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    \546\ See final Rules 10c-1a(e)(1) through (e)(3).
    \547\ See final Rule 10c-1a(g)(4). Similar to the other data
element provisions under the final rule, modifying paragraph (e)'s
reporting time period in this manner will not only help to ensure
market participants' compliance with final Rule 10c-1a's
confidential transaction data requirements but will respond to many
of the concerns raised by commenters regarding a more frequent and
burdensome intraday timeframe, as was originally proposed.
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H. Definition of Registered National Securities Association--10c-
1a(j)(5)

Proposed Rule
    The Commission proposed that any person that loans a security on
behalf of itself or another person shall provide to an RNSA certain
specified information.\548\ However, the Commission did not include a
definition of the term ``RNSA.'' The Proposing Release stated that the
only existing RNSA has experience establishing and maintaining systems
that are designed to capture transaction reporting, similar to the
requirements of final Rule 10c-1a.\549\
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    \548\ See proposed Rule 10c-1(a)(1).
    \549\ See Proposing Release, 86 FR 69808.
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Final Rule
    The Commission received comments stating that FINRA, as the only
existing RNSA, is best positioned for such a role.\550\ To provide
additional clarity regarding the regulatory body that Rule 10c-1a
information must be reported to, the final rule defines the term
``RNSA'' to mean ``an association of brokers and dealers that is
registered as a national securities association pursuant to 15 U.S.C.
78o-3 (`section 15A') of the Exchange Act.'' \551\ This definition
applies to any association of brokers and dealers that is registered as
a national securities association pursuant to section 15A of the
Exchange Act now or in the future.\552\
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    \550\ See, e.g., OCC Letter, at 12 (stating that ``FINRA is
currently best positioned to serve in this role given FINRA's
experience and expertise to date in administering other trade
reporting systems''). See also HMA Letter, at 7; Nasdaq Letter, at
3-4; IHS Markit Letter, at 1; FINRA Letter, at 2; AFREF Letter 1, at
4 (stating that FINRA ``is the only RNSA that exists now, and the
Commission should rely on FINRA to aggregate and disseminate the
additional data on the securities lending market'').
    \551\ See final Rule 10c-1a(j)(5).
    \552\ See 15 U.S.C. 78o-3.
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I. RNSA Rules To Administer the Collection of Information--Rule 10c-
1a(f)

Proposed Rule
    The Commission proposed that ``[t]he RNSA shall implement rules
regarding the format and manner to administer the collection of
information in paragraphs (b) through (d) of [the proposed rule] and
distribute such information in accordance with the rules approved by
the Commission pursuant of section 19(b) of the Exchange Act and Rule
19b-4 thereunder.'' \553\ In the Proposing Release the Commission
stated its preliminary belief that permitting an RNSA to implement
rules regarding the administration of the collection of securities
lending transactions would enable an RNSA to maintain and adapt
potential technological specifications and any changes that might occur
in the future.\554\ The Commission also affirmed that it would retain
oversight of an RNSA's adoption of rules to administer the collection
of information under proposed Rule 10c-1.\555\
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    \553\ See proposed Rule 10c-1(f).
    \554\ See Proposing Release, 86 FR 69819.
    \555\ 15 U.S.C. 78s(b).
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Final Rule
    The Commission asked in the Proposing Release whether Rule 10c-1
should require that lenders provide material information to an entity
other than an RNSA.\556\ One commenter stated that FINRA, the only
existing RNSA, is best positioned to serve in such a role due to its
expertise and experience in administering trade reporting rules.\557\
Other commenters also supported the role of RNSAs in collecting and
distributing information under the proposed rule,\558\ with one
specifically stating that the format and manner through which
information will be provided to an RNSA should be defined by an RNSA
and should not be specified in proposed Rule 10c-1.\559\ The Commission
agrees with the commenters that an RNSA is well positioned to define,
consistent with section 19(b) and Rule 19b-4 of the Exchange Act as
well as an RNSA's own internal business requirements and systems
designs, the format and manner in which it collects Rule 10c-1a
information.
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    \556\ See Proposing Release, 86 FR 69809 (Question 13).
    \557\ See OCC Letter, at 12 (stating that it ``believes that
FINRA is currently best positioned to serve in this role given
FINRA's experience and expertise to date in administering other
trade reporting systems'').
    \558\ See HMA Letter, at 7. See also Nasdaq Letter, at 3-4.
    \559\ See IHS Markit Letter, at 11.
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    Alternatively, another commenter recommended that the Commission
should eventually transition the collection and dissemination of the
data collected under proposed Rule 10c-1 to an internal process at the
Commission to enhance enforcement of the proposed rule and allow the
Commission to share

relevant data.\560\ However, in addition to providing securities
lending information to the public, the final rule is intended to
provide additional tools to RNSAs to enhance RNSAs' surveillance over
the securities markets. An RNSA is appropriately suited for collecting
and analyzing such data for such surveillance purposes.
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    \560\ See AFREF Letter 1, at 4.
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    Some commenters expressed concerns or provided recommendations for
an RNSA's administration of information collected under the final rule.
One commenter stated the importance of RNSAs' compliance with section
19(b) and Rule 19b-4 of the Exchange Act when implementing RNSA rules
required by final Rule 10c-1a.\561\ Consistent with the proposed
rule,\562\ any proposed changes to an RNSA's rules required by final
Rule 10c-1a, including its Rule 10c-1a information collection and
dissemination practices, will also be subject to notice, public
comment, and Commission review pursuant to section 19(b) and Rule 19b-4
prior to implementation. This requirement, including the notice and
opportunity for public comment, will help the Commission ensure that
the direct reporting to an RNSA by covered persons is logistically
feasible, prior to the effectiveness and implementation of such RNSA
rule, and that its methodology helps ensure the accuracy and quality of
the reported data.
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    \561\ See Bloomberg L.P. Letter, at 4 (stating ``the importance
of RNSAs' compliance with section 19(b) of the Exchange Act and Rule
19b-4 thereunder when implementing rules pertaining to the
securities lending data'').
    \562\ See Proposing Release, 86 FR 69819 n.116.
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    Another commenter expressed concern that the proposed rule ``would
provide no mechanism for quality assurance.'' \563\ An RNSA could
choose to include mechanisms for quality assurance in its rules to
implement the system under the final rule. Further, all RNSA rules
implementing the system under the final rule will be subject to notice,
public comment, and Commission review under section 19(b) and Rule 19b-
4.
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    \563\ See S3 Partners Letter, at 5.
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    Another commenter stated that the Commission ``should ensure that
direct reporting to the RNSA is logistically feasible for entities that
are not broker-dealers.'' \564\ The final rule permits such entities to
enter into agreements with reporting agents that are brokers, dealers,
or registered clearing agencies to fulfill their reporting obligations
on their behalf, should they determine that direct reporting is not the
most appropriate choice for them.\565\
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    \564\ See BlackRock Letter, at 3.
    \565\ See final Rule 10c-1a(a)(2).
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    One commenter recommended that the collection, maintenance, and
publication of securities lending data, which an RNSA was required to
perform under the proposed rule, be subject to a competitive bidding
process to select a technology vendor or vendors to provide such
services.\566\ However, the oversight that the Commission maintains
over RNSAs, including oversight of their rules to administer the
collection of Rule 10c-1a information pursuant to section 19(b) and
Rule 19b-4, would not apply to the more general population of
``technology vendors'' that the commenter proposes should participate
in a competitive bidding process to collect, maintain, and distribute
Rule 10c-1a information.\567\ The commenter's proposed approach would
not be appropriate in the absence of such oversight. The Commission
agrees with one commenter's statement that the existing RNSA is well
positioned to serve in this role under final Rule 10c-1a given its
expertise in administering other trade reporting systems.\568\
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    \566\ See S3 Partners Letter, at 12-13.
    \567\ See S3 Partners Letter, at 12-13.
    \568\ See OCC Letter, at 12.
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    Having considered commenters' submissions, for the foregoing
reasons, the Commission is adopting the requirement that an RNSA shall
implement rules regarding the format and manner to administer the
collection and dissemination of certain information, substantially as
proposed. The final rule includes minor changes to reflect that the
relevant Rule 10c-1a information paragraphs have been renumbered to
align with the format of the final rule,\569\ to provide citations to
the statutory provision and regulation that such rules must be
promulgated pursuant to, the term ``distribute such information'' has
been modified to ``make publicly available such information'' to more
accurately reflect an RNSA's responsibilities for the publication of
data under final Rule 10c-1a(g), and the term ``approved by the
Commission'' has been modified to ``promulgated'' to more accurately
reflect the process by which RNSA rules are implemented pursuant to
section 19(b) and Rule 19b-4 of the Exchange Act.
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    \569\ See final Rule 10c-1a(g). References to the relevant
collected information in paragraphs (b) through (e) of the proposed
rule have been amended to reference paragraphs (c) through (e) of
the final rule.
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J. RNSA Publication of Data--10c-1a(g)

Proposed Rule
    The proposed rule would have required an RNSA to make available to
the public the information required by proposed paragraph (b),
including the legal name of the security issuer, and the LEI of the
issuer, if the issuer has an active LEI,\570\ and the ticker symbol,
ISIN, CUSIP, or FIGI of the security, if assigned, or other
identifier.\571\ In addition, modifications that resulted in a change
to the data elements required to be provided to an RNSA under paragraph
(b) of the proposed rule would also have been made public by an
RNSA.\572\ An RNSA would have also provided identifying information for
each security for which aggregate information would be made
public.\573\ Paragraph (e)(3) of the proposed rule further required
that an RNSA keep identifying information about lending agents,
reporting agents, and other persons using reporting agents
confidential, subject to applicable law.\574\ In addition, the
confidential data elements in proposed Rules 10c-1(d)(1) through (3)
would be kept confidential so as to not identify market participants or
reveal information about the internal operations of market
participants.\575\ The proposed rule also required an RNSA to assign a
unique transaction identifier to each loan.\576\
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    \570\ See proposed Rule 10c-1(b)(1).
    \571\ See proposed Rule 10c-1(b)(2).
    \572\ See proposed Rule 10c-1(c).
    \573\ See proposed Rule 10c-1(g).
    \574\ See proposed Rule 10c-1(e)(3).
    \575\ See Proposing Release, 86 FR 69812 n.85.
    \576\ See proposed Rule 10c-1(b).
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Final Rule
    The Commission received many comments that expressed support for
increasing transparency and price discovery in the securities lending
market by increasing the amount and availability of data to the
public.\577\ Commenters were generally supportive of the requirement
that an RNSA be responsible for making reportable data publicly
available.\578\
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    \577\ See, e.g., FINRA Letter, at 1 (stating that it ``agrees
with the Commission that the public dissemination of securities
lending information under the Proposal will, among other benefits,
improve price discovery in the securities lending market.''); Nasdaq
Letter, at 3; AFREF Letter 1, at 3; Better Markets Letter, at 4-7;
Bloomberg L.P. Letter, at 1 (``[w]e appreciate the Commission's
endeavor to improve the transparency and efficiency of the
securities lending market by increasing the availability of
information regarding securities lending transactions''); ASA
Letter, at 1; Letter from N. Abanes (Aug. 15, 2023); Letter from
Brandon Smith (Aug. 15, 2023).
    \578\ See, e.g., HMA Letter, at 7.
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    The proposed rule combined reporting requirements with RNSA

publication requirements, which resulted in commenters addressing these
respective requirements in conjunction with one another.\579\ The
Commission did not intend to conflate the requirements. The final rule
separates an RNSA's publication responsibilities from a covered
person's reporting requirements to improve the structure of the final
rule. Therefore, final Rule 10c-1a is modified to separate the
requirements of an RNSA from the reporting requirements applicable to
covered persons and reporting agents. Final Rule 10c-1a now places an
RNSA's publication of data elements into new paragraph (g).
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    \579\ See, e.g., proposed Rule 10c-1(b).
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    In response to the comments received that the disclosure of
reported information by an RNSA on a transaction-by-transaction basis
could increase the risk of revealing short sale strategies,\580\ final
Rule 10c-1a bifurcates paragraph (g) requirements such that certain
data elements will be made publicly available on a transaction-by-
transaction basis and aggregate transaction activity and distribution
of loan rates) will also be made publicly available in an aggregated
format for each reportable security. With respect to aggregated data,
the final rule includes a new requirement for an RNSA to make
``information pertaining to the aggregate transaction activity and
distribution of loan rates for each reportable security and the
security identifier(s) under paragraphs (c)(1) or (2) of the final rule
for which an RNSA determines is appropriate to identify'' publicly
available ``as soon as practicable, and not later than the morning of
the business day after the covered securities loan is effected or
modified.'' \581\ The term ``aggregate transaction activity,'' as used
in the final rule, refers to information pertaining to the absolute
value of transactions such that net position changes should not be
discernable in the data, and is intended to help ensure that only
aggregate information about net positions changes, rather than
individualized information, is provided to the public. The addition of
the term ``aggregate transaction activity'' responds to commenters'
concerns about the potential exposure of proprietary information, while
still providing volume transparency to market participants. Providing
information about the distribution of loan rates \582\ for each
security recognizes that the cost-to-borrow for loans of securities is
influenced by a number of factors (e.g., counterparty-creditworthiness)
and, thus, information about loan rates on a transaction-by-transaction
basis may not facilitate a perfect comparison of such rates between
loans of the same security. Consequently, knowing the distribution of
loan rates for a given security can give market participants
information to help market participants compare the pricing of their
covered securities loan against the pricing of other covered securities
loans. This can facilitate conversations between beneficial owners and
their lending agents or end borrowers with their brokers or dealers
regarding the terms of their loan.
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    \580\ See, e.g., supra note 399 and accompanying text.
    \581\ See final Rule 10c-1a(g)(5).
    \582\ ``Loan rate'' refers to aggregate fee and rebate
information provided to an RNSA in final Rule 10c-1a(c)(8) and final
Rule 10c-1a(c)(9). The loan rate for a security is reported
differently depending on whether the securities loan is cash or non-
cash collateralized. For cash-collateralized loans, the ``loan
rate'' is indicated by the rebate rate (as reflected in final Rule
10c-1a(c)(8)); for non-cash-collateralized loans, the ``loan rate''
is the lending fee (as reported in final Rule 10c-1a(c)(9)).
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    Additionally, the final rule delays an RNSA's publication of loan
amount, on a transaction-by-transaction basis in paragraph (c)(6), to
the twentieth business day after the covered securities loan is
effected along with the loan and security identifying information