“Before I close, I want to say something about the SEC and its staff. It’s a remarkable agency. The staff and Commission are deeply mission-driven, focused on protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. 

“[…] It’s been a great honour to serve with them, doing the people’s work, and ensuring that our capital markets remain the best in the world.”

The words came during his ‘Car Keys, Football, and Effective Administration’ speech yesterday, 14 November, for the Practicing Law Institute’s 56th Annual Institute on Securities Regulation.

Read more: US Senate approves Gensler for SEC chair role

Gensler went on share some personal details in his conclusion, highlighting that neither of his parents had completed university or worked in finance, instead investing their savings and benefitting from the securities markets’ ‘common-sense rules of the road’. 

“The SEC’s effective administration of well-regulated securities markets promotes trust. It’s what brings investors and issuers to the market like fans to a football game. It’s what underpins the world’s largest capital markets. It’s what has contributed to our nation’s great economic success these last 90 years.

“[…] I’ve been proud to serve with my colleagues at the SEC who, day in and day out, work to protect American families on the highways of finance.” 

Gensler’s was appointed by the US Senate to chair the SEC in 2021, as part of the then-freshly appointed administration of President Joe Biden.

Prior to his various roles in public service, he spent 18 years at US investment bank Goldman Sachs working in mergers and acquisitions, fixed income and currency trading, and treasury. 

During his tenure, Gensler has faced consistent scrutiny from the market where some questioned his heavy-handed approach to regulation, with some having gone as far as to suggest that in some instances the SEC’s approach has been not only ‘over-reaching’ but also in some cases potentially ‘unconstitutional’.

Notably, Gensler’s potential departure comes as the incoming president prepares to begin their new term in two months’ time.

A spokesperson for the SEC confirmed that the regulator had no further comment when approached by The TRADE.

The post Gensler alludes to departure from SEC appeared first on The TRADE.

The additional minimum pricing increment or ‘tick size’ will apply to the quoting of certain NMS stocks, while the reduction in access fee caps will be linked to protected quotations of trading centres.

In addition, the new rules seek to increase the transparency of exchange fees and rebates and accelerate the implementation of rules that will make information about the market’s best priced, smaller-sized orders publicly available.

According to the watchdog, the changes have been designed with a mind to reduce transaction costs and improve market quality for all investors and to help ensure that orders placed in the national market system reflect the best prices available for all investors.

“A lot has changed – in technology and business models – since we last took a comprehensive review of the national market system rules in 2005. Thus, it is incumbent upon us to update our national market system rules,” said Gary Gensler, SEC chair.

“The reforms we adopted will help promote greater transparency, competition, fairness, and efficiency in our $55 trillion equity markets. That goes to the heart of the SEC’s mission. The reforms are pro-investors. They are pro-capital formation.”

Read more: The SEC’s equities overhaul: Necessary plumbing changes or a liquidity drain?

Tick sizes

Trading volume related to NMS stocks have experienced a marked increase since the adoption of Rule 612 of Regulation NMS in 2005, however, they have been constrained by the minimum pricing increments under the rule.

“The tick size proposal, in name only, is simple and one-dimensional, but in practice, there are changes to rebates, there are changes to pricing tiers, there are changes to odd lot data that’s being disseminated,” Eric Stockland, managing director, electronic trading for BMO Capital Markets, told The TRADE in August last year.

“This is like a big plumbing change and it’s going to impact institutions directly and affect what algos they use, what their implementation costs are, and just the way that stocks are even quoted and traded.”

Various NMS stocks could potentially be priced more competitively if not constrained by the market-wide minimum pricing increment of $0.01.

The adopted amendments to Rule 612 establish a new, additional $0.005 minimum pricing increment for quotations and orders in NMS stocks that are priced at, or greater than, $1.00 per share.

“The tick size for all NMS stocks will be based on the time weighted average quoted spread for the relevant NMS stock during a specified three-month evaluation period and thereafter assigned for a six-month period,” the SEC confirmed in a statement.

Access fees

The SEC has also adopted amendments to address distortions associated with access fees and rebates under the existing access fee caps, potential conflicts of interest, and increase the transparency of exchange fees, rebates, and other forms of remuneration.

The new rules reduce the access fee caps for protected quotations in NMS stocks that are priced $1.00 or more to $0.001 per share.

The SEC added that for protected quotations in NMS stocks priced less than $1.00 per share, the access fee cap will be 0.1 percent of the quotation price per share.

In addition, Rule 610 will now require exchanges to make the amounts of all fees, rebates, and other forms of remuneration determinable at the time of execution.”

Elsewhere, in a bid to bolster information about the best prices for smaller-sized orders, the SEC has accelerated the implementation of previously adopted definitions related to round lots and odd-lot information.

Definitions for this were approved in 2020 by the SEC, however, their implementation has been delayed.

The SEC has also adopted an amendment to the odd-lot information definition to require the identification of the best priced odd-lot orders that are available in the market.

The amendments will become effective 60 days after the publication of the adopting release in the Federal Register.

For Rule 612, Rule 610, and the round lot definition, compliance will begin on the first business day of November 2025. For odd-lot information, the compliance date will be the first business day of May 2026.

“These changes are about improving competition and efficiency in the market. We can debate the details and talk about the nuance, but ultimately, institutions benefit from a more efficient market,” added Stockland when speaking to The TRADE last year.

The post Tick sizes, transparency and fee caps: A look at the SEC’s rule amendments appeared first on The TRADE.

 

“In the UK, you will have to decide what policy and timing is right for you. I don’t suspect you will follow the timing of Argentina or Jamaica. I’d note, though, that if one looks at the 27 months it took the US from proposal to implementation, your implementation might be June 2026.” 

With the US well into its third week of T+1 settlement for equities, corporate bonds, and municipal securities, a change in the UK would align with the US market structure with its treasury markets and the UK’s gilt market, both of which already operate on a T+1 cycle. 

Gensler recounted the smooth transition in the US, which took 27 months from the proposal to implementation. He noted that setting and sticking to a firm implementation date was crucial for this success, acknowledging the collective efforts of market participants, clearing houses, and regulators.

“It’s essential to set a firm implementation date and stick to it. This collective action issue ensures market participants allocate resources for software updates and other necessary preparations. Having a set date helps organise system planning and implementation,” he stressed. 

The current timeline for the UK appears to include a plan being put in place in 2025 with the implementation of a T+1 settlement cycle in UK occurring no later than 31 December 2027. This, however, is still up for debate and subject to change. 

Gensler highlighted the global trend towards shorter settlement cycles, noting that Canada, Mexico, Argentina, and Jamaica have also adopted T+1. “Time is money and time is risk,” he said. “Shortening the clearing and settlement cycle saves money and lowers risk, which increases efficiency, boosts liquidity in the markets, and promotes resiliency during times of stress. 

“For everyday investors, this means that if you sell your stock on a Monday, you now get your cash on Tuesday, instead of having to wait until Wednesday,” Gensler explained. “This change is significant for the 58% of American households holding stock, many of whom were previously puzzled by the two-day waiting period,” he added. 

Echoing Gensler’s sentiments, Andrew Douglas, who chairs the UK T+1 Taskforce Technical Group, also stressed the importance of setting a firm date for the transition. This collective action issue ensures market participants allocate resources for necessary preparations, such as software updates and system planning. 

A collective effort 

Looking at the key takeaways, Gensler stressed that the settlement transition requires market collaboration. “Transitioning to T+1 is a team effort involving thousands of market participants, including clearing houses, depositories, custodian banks, broker-dealers, investment advisors, self-regulatory organisations, stock exchanges, service providers, industry groups, trade associations, and regulators. It’s also a global effort.” 

He shared that the SEC has engaged with market participants and regulatory counterparts worldwide, including in the Americas (Canada, Mexico, Argentina, Jamaica, and Peru), the UK, Europe, and Asia. This global coordination is crucial because of the interconnected markets, he said.   

T+0? 

Additionally, Gensler emphasised the importance of same-day or T+0 allocations, confirmations, and affirmations, which are critical for the movement of securities and cash on T+1. “When we proposed the rule in February 2022, only about two-thirds (68%) of transactions were being affirmed on trade day. By 29 May, the day after the transition, T+0 affirmation rates were approximately 95% by 9pm,” Gensler reported.  

“International investors may need to adjust their operations to manage foreign exchange risks, potentially moving to T+0 instead of waiting a day after the trade,” he noted, adding that the collective net benefit of lower risks and increased efficiency outweighs these costs. 

“Time zones also play a significant role in the transition. The UK might have an advantage because you can learn from our experience, being to the west of you. For us, it was more challenging because we were pioneering the shift. European asset managers moved staff to the US to manage foreign currency risks during the US 4PM to 6PM time zone rather than late at night in Europe.” Gensler said. He pointed out that European asset managers moved staff to the US to manage foreign currency risks during the US time zone, which could be a consideration for the UK. 

Mutual funds and ETFs in the US have largely adopted a one-day settlement cycle by business practice, aligning portfolios from treasuries to equities. Gensler highlighted that this change reduces market complexity, particularly in the area of corporate actions, where the ex-dividend date now aligns with the record date. 

Gensler reiterated the importance of this transition for the financial system. “Waiting two days to get your cash after selling something is outdated,” he stated. “This transition lowers margin requirements, frees up liquidity for clearing house members, and reduces risk. Although it might seem like a minor change in the market’s infrastructure, it has significant benefits. This requires a team effort for a smooth transition, as we saw in the US and the Americas.” 

Points for further discussion 

Looking ahead, Gensler outlined three key areas for further discussion. Firstly, he detailed new rules enhancing central clearing in the US Treasury market, scheduled for phased implementation over two years. 

These rules enhance customer clearing and broaden transaction scope, making the Treasury market more efficient, competitive, and resilient, he noted. “By March 2025, the separation of house and customer margin must be completed, meaning a clearing house can no longer net customer margin against house margin. By the end of 2025, certain cash transactions must be cleared, and by June 2026, repo and reverse repo transactions must be cleared. These dates are set, and I encourage everyone to start preparing, especially for March 2025.” 

He then advocated for regulators and market participants globally to consider shortening the settlement cycle for currency trading. “Currently, currency markets settle in T+2, but if major markets in North America and Asia move to T+1, it could be beneficial. Engaging with central banks and CLS about this possibility is crucial.” 

Gensler then moved on to encourage exploration of same-day settlement practices. “Moving affirmations and allocations to the same day and possibly settling transactions into the evening, like in China, could be beneficial. Our money markets, commercial paper, and certificates of deposit already operate on a T+0 basis. China and India are exploring this as well. These are discussions for the future, and you’ll need to decide what’s right for you, considering what’s happening elsewhere, particularly in Europe and the EU.” 

The post SEC chair Gary Gensler urges UK to set T+1 transition date appeared first on The TRADE.

Senvest Management is a registered investment advisor based in New York, employing investment strategies across approximately $3 billion in assets under management.

Senvest has admitted the facts set forth by the watchdog’s order, acknowledging that its conduct violated the federal securities laws and has agreed to pay a $6.5 million penalty, alongside agreeing to implement improvements to its compliance policies and procedures.

The SEC’s order found that from at least January 2019 until December 2021, Senvest employees at multiple levels of authority communicated about company business internally and externally using personal texting platforms and other non-Senvest messaging applications, in violation of the firm’s policies and procedures.

The advisory firm also failed to maintain or preserve the off-channel communications as required under the federal securities laws.

According to the SEC, in one instance, three senior employees engaged in off-channel communications on personal devices that were set to automatically delete messages after 30 days.

Elsewhere, the order concluded that certain Senvest employees failed to adhere to provisions of the firm’s code of ethics requiring them to obtain pre-clearance for all securities transactions in their personal accounts.

“The Commission continues to focus on regulated entities’ compliance with the recordkeeping requirements,” said Eric Werner, director of the Fort Worth regional office.

“Adherence to these requirements is essential for the Commission to effectively exercise its regulatory oversight and enforce the federal securities laws.”

Alongside the $6.5 million penalty, Senvest was censured and ordered to cease and desist from future violations of the relevant provisions of the federal securities laws.

Senvest also agreed to retain a compliance consultant to conduct comprehensive reviews of its policies and procedures relating to the retention of electronic communications found on personal devices, and the framework for addressing non-compliance by its employees with those policies and procedures.

Last year, US regulators handed out historically high combined penalties for recordkeeping and supervision failures.

Most recently, The Commodity Futures Trading Commission (CFTC) issued an order simultaneously filing and settling charges against Goldman Sachs for violating the cease-and-desist provision of a previous order.

The post SEC orders Senvest Management to pay $6.5 million penalty for recordkeeping failures appeared first on The TRADE.

Gary Gensler

Gurbir Grewal, director of the SEC’s division of enforcement, said: “The collapse of the Gemini Earn program underscores the unknown risks that investors are exposed to when market participants fail to comply with the federal securities laws […]  no amount of hype and advertising can substitute for the investor-protection disclosures required by the federal securities laws.”

The final judgment order means that the SEC will not receive any portion of the penalty until payment of all other allowed claims by the bankruptcy court have been completed. 

The Gemini Earn program claimed to be an investment opportunity wherein Gemini customers, loaned their crypto assets to Genesis under the expectation that the firm would pay interest earned from its use of the loaned crypto assets.

However, in November 2022, Genesis stated that Gemini Earn investors (approximately 340,000) would not be allowed to withdraw their crypto assets due to Genesis lacking sufficient liquid assets to meet the requests. The firm but this down to the volatility in the crypto asset market. At that time, Genesis held around $900 million in crypto assets.

Following this, Genesis and two of its affiliates filed for voluntary bankruptcy.

Read more: SEC launches new cyber unit as it doubles down on crypto crime

Speaking to the settlement, Gary Gensler, chair of the SEC, said: “Today’s settlement builds on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.”

The post Gemini to pay $21 million following SEC enforcement action appeared first on The TRADE.

The final rule is set to require certain hedge funds, among other market participants, to register if they meet one of two qualitative standards. 

Under the SEC’s final rules, an entity would qualify as a dealer or government securities dealer if they regularly express trading interest as close to the best price on both sides of the market for the same security, or earn revenue primarily from capturing bid-ask spreads or from capturing incentives offered by trading venues.

If applicable, the new rule requires the market participants in question to register with the commission, become members of a self-regulatory organisation (SRO), and comply with federal securities laws and regulatory obligations.

The SEC has also confirmed that the final rules exclude: any person that has (or controls) assets that total less than $50 million, investment companies registered under the Investment Company Act of 1940, central banks, sovereign entities, and international financial institutions (as defined in the final rules).

Speaking to the change, Gary Gensler, chair of the SEC, highlighted that the move is set to protect investors and “promote market integrity, resiliency, and transparency,” he added: “These measures are common sense. Congress did not intend for registration and regulatory requirements to apply to some dealers and not to others. 

“Absent an exemption or exception, if anyone trades in a manner consistent with de facto market making, it must register with us as a dealer – consistent with Congress’s intent.” 

Since the Commission initially proposed the rules on 28 March 2022 the market has understandably shared doubt as to the feasibility of the change.

While some, like Gensler, believe the move to be an update which reflects a change of the times across the industry, some, such as Jack Inglis, chief executive of AIMA, believe that “although the Commission did not adopt some problematic aspects that were included in the proposed rule,” the adoption is a significant departure from the market’s current set up.

“The US SEC has incorrectly concluded that customers of dealers, including certain AIMA members, may be dealers themselves – a clear departure from the statutory definition and understanding of what it has meant to be a securities ‘dealer’ for the past 90 years […] AIMA will review the final rule text and assess next steps,” said Inglis.

The final rules are set to become effective 60 days after publication of the adopting release in the Federal Register and compliance date to follow one year after the effective date of the final rules. 

The SEC explained that this change is set to “support market resiliency and stability and enhance investor protection across the US Treasury market and other securities markets,” and has come as a result of the advancement in electronic trading and subsequent evolution of the roles of market participants. 

The Commission claims that these developments could lead to “investors and the markets [lacking] important protections that result from an entity’s registration and regulation under the Exchange Act.”

The post SEC tags hedge funds trading Treasuries as ‘dealers’ under new rule change appeared first on The TRADE.

Coming in at number four in The TRADE’s most read stories for 2023 was news in September that Cboe Global Markets’ chief executive officer Edward Tilly had resigned over undisclosed personal relationships.

Tilly resigned from the company following the conclusion of an investigation into his conduct, launched in late August 2023. The investigation, which was led by the board of directors and an independent counsel, concluded that Tilly did not disclose personal relationships with colleagues, violating the company’s standards and values.

“Cboe strives to uphold the highest ethical standards across the organisation, and fully investigates and takes appropriate action when it determines that any of its policies have been violated,” said William Farrow III – newly appointed non-executive chair of the board of directors.

Appointed to replace him was a member of its board of directors, Fredric J Tomczyk, who assumed the role with immediate effect. Tomcyzyk assumed the role of chief executive officer after four years on Cboe’s board. Previously in his career, he served as president and chief executive of TD Ameritrade Holding Corporation for eight years and as vice chairman of TD Bank Financial Group. Prior to joining TD, he was president and chief executive of London Life and London Insurance Group.

3. SEC issues ruling for a new National Market System

Many of our most read stories over the last 12 months have unsurprisingly had a regulatory focus, given the number of changes taking place across the globe. While much of industry regulatory discussion over the past few years has been centred around the Mifid overhaul in Europe, with certain aspects such as transparency playing the role of poster child for post-Brexit divergence, our readers in 2023 have been more interested in what is happening in the US.

Coming in at number three in our most read stories was news in September that the US’ Securities and Exchange Commission (SEC) had issued a ruling for a new National Market System. Central to the announcement was a filing of a new national market system plan (NMS plan) by the watchdog, specifically directing FINRA and 18 SROs associated with Cboe, Nasdaq, and NYSE to act jointly in developing the NMS plan.

Incumbent exchange groups in the US, which include the aforementioned venues, have historically held total control and voting rights related to the production and dissemination of data. This has led to an ongoing debate by market participants, with many arguing that venues hold an unfair monopoly on the critical market data and creates a conflict of interest.

The SEC subsequently ordered exchanges to submit new plans for governance of market data in May 2020, in a bid to overhaul control over the equity consolidated tape and address conflicts of interest concerns. September’s announcement marked the filing of a new NMS plan “to replace the three existing national market system plans which govern the public dissemination of real-time, consolidated equity market data for national market system stocks”.

The results are set to be published for public comment next year, and according to the SEC, the revised plan must: include a date by which it will become fully effective, alongside a prescribed timeline and periodic progress reports; require that all those involved be subject to the plan’s conflicts-of-interest and confidentiality policies; include specialised provisions regarding the sharing of protected information; and outline rules regarding the use of subcommittees.

2. Perpetual merges regional asset management businesses under one global umbrella

At number two in our most read stories series, we have the announcement that Perpetual Group had merged its regional assets management businesses to form one global division in August. Among the asset management bands that were merged were Perpetual, Pendal, Barrow Hanley, J O Hambro, Regnan, Trillium and TSW. The Group said the move will help it to reap the benefits of a “global multi-boutique model” as well as a global distribution team in asset management.

Rob Adams took on the dual role of chief executive of Perpetual Group and chief executive, asset management. Two further roles were created to support Adams within the asset management leadership team.

“The changes we are making enable us to have an improved focus on our global asset management business and successful execution of strategy, while creating a simplified Perpetual Group leadership structure focused on driving future growth across all our businesses,” said Adams.

Graham Kitchen, who had served as chairman of Trillium and Perpetual corporate entities in the UK, will serve as global head of investment strategy while a search for a permanent candidate commences. Elsewhere, Clare Forster was appointed as global head of business management and strategic delivery. Regional chief executive roles for Europe and UK (EUKA), and the Americas were also impacted by the development. Alexandra Altinger, chief executive of asset management, EUKA (including J O Hambro) subsequently left at the end of August.

1. Majority of prop trading firms obliged to join FINRA under expanded SEC rule

And finally, we reach the crescendo of The TRADE’s most read stories for 2023. Coming in at number one with over 70,000 views was news in August that the US Securities and Exchange Commission (SEC) had moved to expand the remit of national securities associations such as the Financial Industry Regulatory Authority (FINRA) to cover previously exempt proprietary trading firms.

Once again with a regulatory focus at its epicentre, the story unpacked the move by the watchdog and what it would mean for certain types of participants. As the industry’s product universe grows but headcount shrinks, more and more firms are relying on publications such as The TRADE and market structure specialists to explain key regulatory developments.  

The SEC’s August decision to increase the number of broker dealer firms registering with FINRA came as the Commission aims to promote fair, orderly, and more efficient markets. The SEC under Gary Gensler has been overhauling many market areas throughout the course of this year, some of which haven’t seen an update to their regulations in decades.

“Today [23 August], many broker-dealers conduct significant cross-exchange or off-exchange activity,” said Gensler in an August statement. “Yet, some of today’s broker-dealers continue to rely on an exemption from national securities association registration that’s older than the cell phone era. This has led to a regulatory gap whereby a number of firms that have cross-market, monthly trading volume valued in the hundreds of billions of dollars are exempt from national securities association oversight.”

The decision is set to contribute to greater transparency – in particular for off exchange activity – and strengthened oversight in the treasury markets due in large part to the fact that FINRA requires members report post-trade activity in markets.

The post The TRADE’s most read stories of the year part three: Regulation, consolidation and resignation appeared first on The TRADE.

Jack Inglis

The associations are seeking to invalidate the two rules on the grounds that they are “arbitrary and capricious and will harm investors and markets,” as described by Bryan Corbett, president and chief executive of MFA.

They claim that the changes, clarified in October, have not sufficiently considered the interconnectedness of the rules when outlining the reporting requirements, and that the increased complexity will lead to a decrease in activity in the area – effectively “harming” the market.

The petition explains that despite the two closely related rules being finalised on the same day, the SEC adopted vastly different reporting requirements, leading to a contradictory approach to the two aspects of the same underlying transaction – “the short sales themselves and the loans of securities to facilitate those short sales”. 

In the same overarching point about a lack of cohesion between the two rules, the associations claim that though one of the SEC’s rules protects the value of anonymity for short sellers (acknowledging short sellers’ contributions to liquidity and price efficiency), in another it exposes the confidential securities lending and position information of the short sellers on a granular basis.

“The SEC entirely disregarded the impact of one rule on the other, including by failing to conduct a sufficient cost-benefit analysis of both rules’ cumulative impact,” the entities asserted in a joint statement.

Additionally, the petitioners claim that the newly adopted rules are set to create inconsistent and burdensome reporting regimes which will ultimately discourage short selling.

Corbett, said: “Despite our best efforts, the SEC decided to ignore the interconnected nature of these two rulemakings and failed to apply a consistent approach or principle to regulating these related markets […] The SEC needs to go back to the drawing board and develop a consistent, coherent approach that will protect investors and avoid undermining the resilience of our capital markets.” 

Read more: SEC adopts new short selling rule to bolster transparency for market participants

The associations also made reference to other flaws, which overall go against the SEC’s stated aim of protecting investors and maintaining fair, orderly, and efficient markets. Speaking in a joint statement, the petitioners claimed that they had previously raised issues during the rulemaking process, and that this litigation is a last resort. 

Jack Inglis, chief executive of AIMA, explained: “These two rules underscore how the SEC has ignored calls from industry, market participants, and Congress to consider the interconnectedness and aggregate impact of its rulemakings. The rules follow inconsistent approaches with broad extraterritorial scope and contain conflicting analyses and rationale even though they both address similar markets. The rules will impair market efficiency and price discovery and harm market participants and investors.

“The SEC should instead take into account their connected nature and apply consistent reporting and disclosure frameworks for these positions, which are designed to protect both market efficiency and market participants.”

The post Trade associations file joint lawsuit opposing SEC securities reporting and short selling rules appeared first on The TRADE.

The US watchdog is looking to bolster risk management practices for central counterparties in the US Treasury market and facilitate additional clearing of US treasury securities transactions through forcing some cash Treasury and repos to be centrally cleared.

The SEC stated that additional rule changes are designed to reduce the risks faced by a clearing agency and incentivise and facilitate additional central clearing in the US treasury market.

“Today’s adopting release addresses clearing of treasury securities in two important ways,” said Gary Gensler, SEC chair.

“First, the final rules make changes to enhance customer clearing. Second, the final rules broaden the scope of which transactions clearinghouse members must clear. I am pleased to support these rules because they will help to make the treasury market more efficient, competitive, and resilient.”

New amendments from the SEC also permit broker-dealers to include customer margin required and on deposit at a clearing agency in the US treasury market as a debit in the customer reserve formula, subject to certain conditions.

Elsewhere, the amendments require covered clearing agencies in this market to collect and calculate margin for house and customer transactions separately.

Policies and procedures designed to ensure that the covered clearing agency has appropriate means to facilitate access to clearing are also required as part of the amendments, including for indirect participants.

Kevin McPartland, head of market structure and technology research at Coalition Greenwich noted in a social media post that “finally [there is] some clarity from the SEC on Treasury and repo clearing. Bottom line: most repo must be cleared; Treasury trades between dealers must be cleared; dealer and customer margin must be kept separate.”

The SEC stated that the amendments also include an exemption for transactions in which the counterparty is a central bank, sovereign entity, international financial institution, or natural person.

“DTCC remains committed to supporting the industry and providing solutions that enable compliance with the expanded treasury clearing rule,” the firm said in an issued statement. 

“We are prepared for this significant undertaking and will continue to evolve our access models and enhance capital efficiency whenever possible to effectively support our clients. At the same time, we will continue to facilitate industry discussions and provide education and leadership around this important topic, as we work together towards a successful implementation.”

BNY Mellon’s head of market structure, Nathaniel Wuerffel, labelled the development as the most important day for the structure of ‘the world’s most important market in decades’, in a social media post.

“In finalising the rule the commission made key adjustments from the proposal that narrow the scope in the cash market and allow for inter-affiliate transactions,” he said. “Importantly, cash market transactions will have two years for implementation and repo will have two and a half years. This is better than expected and important for a smooth transition.”

The post SEC adopts landmark new clearing rules for US Treasury market appeared first on The TRADE.

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.

The post SEC adopts new short selling rule to bolster transparency for market participants appeared first on The TRADE.