The Winners and Losers in Mandatory Transparency
The Securities and Exchange Commission (SEC) recently proposed a new reporting regime to increase transparency and efficiency in the securities-lending market. The proposal is a sweeping change and a somewhat novel approach to bringing securities lending out of the dark. While the merits of the proposal's approach will no doubt be thoroughly scrutinized and debated, so should its cost and who will bear that cost. While the potential benefits would seem to flow to all participants in the securities lending markets, the SEC's choice to place the reporting burden on lenders and their agents also burdens those loan participants (lenders particularly) with nearly the entire cost of compliance.