The US Securities and Exchange Commission (SEC) has adopted a new rule to bolster transparency to market participants through increased public availability of short sale related data.
Named Rule 13f-2, the new rule will require institutional investment managers that meet or exceed specific thresholds to report short sale related information for equity securities through Form SHO.
Following this, the Commission will aggregate data about large short positions, including daily short sale activity, by security – maintaining the confidentiality of the reporting managers, alongside publicly disseminating the aggregated data via EDGAR on a delayed basis.
According to the SEC, this new data will supplement the short sale data that is currently publicly available.
“In the wake of the 2008 financial crisis, Congress directed the SEC to enhance the transparency of short selling of equity securities,” said Gary Gensler, SEC chair.
“Today’s adoption will promote greater transparency about short selling both to regulators and the public. This rule addresses Congress’s mandate and improves upon existing sources of short sale-related data in the equity markets. Given past market events, it’s important for the Commission and the public to know more about short sale activity in the equity markets, especially in times of stress or volatility.”
Elsewhere, the Commission has amended the National Market System Plan (NMS Plan) which governs the consolidated audit trail (CAT).
The amendment will require each CAT reporting firm (reporting short sales) to indicate when it is asserting state when it is asserting the use of the market making exception in Rule 203(b)(2)(iii) of Regulation SHO.
On the same day, the SEC also adopted new reporting requirements for securities lending transactions in the US, pivoting on a major aspect of the regulation in the final rules.
The proposed rule 10c-1 which was first put on the table at the end of 2021 was set to require securities lending information to be reported within 15 minutes of a loan being made, a requirement which many said would impose significant operational and compliance burdens on broker-dealers and other market participants.
In the final ruling the SEC has changed the reporting requirement to occur at the end of the day.
The move under chair Gary Gensler seeks to bring “securities lending out of the dark”, the SEC chair said back in 2021, and increase the transparency and efficiency of the securities lending market.