Wall Street body proposes new rules on short positions and stock lending

Signage is seen outside the offices of the Financial Industry Regulatory Authority (FINRA) in Manhattan, New York, U.S., September 11, 2020. REUTERS/Andrew Kelly

WASHINGTON, June 7 (Reuters) – The Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulatory body, has proposed changes to its short-term interest reporting requirements to make the information more useful.

Proposed changes to Rule 4560 would increase the frequency of short-term interest reporting from twice a month to once a week, or even daily. The change would require clearing houses to report synthetic short exposure – bets made against stocks via derivatives – in corporate and customer accounts.

The move highlights heightened scrutiny of short selling, betting against stocks to profit if they fall, amid continued volatility in “equity memes”. These are driven by retail investors banding together to squeeze hedge funds betting against GameStop(GME.N) AMC Entertainment Holdings Inc.(AMC.N) and other actions.

The changes would also require clearing houses to report to FINRA certain information about stock lending that facilitates short betting “for regulatory purposes, but for possible public disclosure,” among other changes, it said. said the watchdog. The proposal was released on Friday evening.

“These potential changes could improve the usefulness of short sale information to FINRA, other regulators, investors and other market participants,” FINRA said.

FINRA is an industry-funded self-regulatory organization overseen by the United States Securities and Exchange Commission (SEC).

The proposed changes, which are subject to public consultation, would likely increase the burden on clearing companies and prime brokers, who bear primary responsibility for reporting short-term interests under current requirements, the Commission said. FINRA.

The agency currently collects and publishes this data, but it is not easy for many investors to access it. This proposal aims to remedy this.

Reporting by Katanga Johnson; Editing by Michelle Price and Cynthia Osterman

Our standards: The Thomson Reuters Trust Principles.