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SEC holds roundtable on securities lending/short selling

Kevin J. Campion (Partner at Sidley Austin LLP, Washington, DC, USA)
Arik Hirschfeld (Associate at Sidley Austin LLP, New York, New York, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 16 March 2010

421

Abstract

Purpose

The purpose of this paper is to summarize and provide excerpts from a two‐day roundtable on securities lending and short selling hosted by the Securities and Exchange Commission (SEC) on September 29‐30, 2009.

Design/methodology/approach

The paper provides summaries and participants' comments from two days of SEC commissioner's questions and panel discussions. Day one – securities lending: Panel 1 – overview of securities lending; Panel 2 – securities lending and investor protection concerns; Panel 3 – improving securities lending for the benefit of investors; Panel 4: the future of securities lending and potential regulatory solutions. Day two – short selling: Panel 1 – controls on “naked” short selling; Panel 2: making short sale disclosure more meaningful.

Findings

Many pension and mutual funds view securities lending as an investment activity. Securities lenders see cash collateral as an important risk. FINRA and the SEC have considered the need for increased transparency and the possible benefits of a central counterparty for securities lending. The securities lending market is highly regulated, including through requirements imposed by Regulation T, 15c3‐3, 15c3‐1, Regulation SHO, and ERISA guidelines. The SEC has considered “hard locate” and “pre‐borrow” requirements for short sales, which some market participants believe would be uneconomical. An estimated 50 percent of fails are from ETFs. The SEC has considered enhanced disclosure requirements for short sales, both anonymous and public, their possible effects on fraud prevention and market efficiency, and any harm they could do to market makers.

Originality/value

The paper provides a discussion by regulators and industry experts on the most important current regulatory issues related to securities lending and short selling.

Keywords

Citation

Campion, K.J. and Hirschfeld, A. (2010), "SEC holds roundtable on securities lending/short selling", Journal of Investment Compliance, Vol. 11 No. 1, pp. 17-31. https://doi.org/10.1108/15285811011030176

Publisher

:

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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