2 minute read | January.16.2025
The SEC has approved FINRA's 6500 rule series, which governs the Securities Lending and Transparency Engine (SLATE).
The rules require some financial institutions to report securities loans to FINRA. They also require the public dissemination of certain loan details as required by the SEC's Rule 10c-1a on securities lending reporting.
Timeline: The reporting requirements will be implemented by January 2, 2026, and dissemination requirements by April 2, 2026, unless the SEC extends these dates.
Reporting must occur:
Reports must include non-confidential data, including the security issuer's name, identifiers, loan date and time, and confidential data, such as party identifiers. SLATE system hours are from 6 a.m. ET to 11:59 p.m. ET.
Meaning of the Term “Effected” and Rehypothecations: The SEC clarified that a loan is "effected" once parties agree to terms, even if not all details are finalized. FINRA requires reporting of loans before settlement, with provisions for unsettled loans using qualifiers like "if known." In addition, FINRA clarified that certain transactions, like rehypothecating shares for short positions, are not classified as covered securities loans under Rule 10c-1a.
Foreign Entities and Securities: FINRA clarified that Rule 10c-1a and the SLATE rules apply to transactions involving securities reported to U.S. systems like the Consolidated Audit Trail, regardless of foreign trading.
Compliance with Reporting Obligation: FINRA Rule 6530(c) outlines ongoing reporting obligations for covered persons. They must report initial covered securities loans and loan modifications accurately and on time. Agents can submit information, but the primary responsibility remains with the covered person unless a reporting agent is engaged.
Participation in SLATE: The rules require SLATE participants (i.e., those persons reporting) to obtain a Market Participant ID, comply with SLATE participant application agreements and adhere to FINRA and SEC rules. Reporting agents (i.e., broker-dealers and clearing agencies that report on behalf of lenders) must provide FINRA with a list of covered persons they represent.
What’s Next? The SEC’s rule is under litigation, meaning that Rule 10c1-a could be vacated or remanded. If that happens, FINRA’s rules will be impacted since its rulemaking authority is derived from Rule10c1-a rather that a direct statutory mandate. Further, the SEC’s Division of Trading and Markets approved the rule under delegated authority. As such, independent challenges to FINRA’s rules would likely have to SEC Rules of Practice 430 and 431, which outline how the SEC reviews the Division of Trading and Markets’ use of delegated authority.