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Federal Register / Vol. 86, No. 151 / Tuesday, August 10, 2021 / Notices Reverse repurchase and repurchase agreements;
securities borrowed and securities loaned;
non-cash reverse repurchase and securities borrowed transactions;
non-cash repurchase and securities loaned transactions;
bank loan and other committed and uncommitted credit facilities;
total available collateral in the members custody;
margin and non-purpose loans;
collateral securing margin loans;
deposits at clearing organizations;
and cash and securities received and delivered on derivative transactions not cleared through a central clearing counterparty CCP.
According to FINRA, the SLS is tailored to apply only to members with the largest customer and counterparty exposures. Unless otherwise permitted by FINRA in writing, each carrying member with $25 million or more in free credit balances, as defined under Exchange Act Rule 15c33a8,8 and each member whose aggregate amount outstanding under repurchase agreements, securities loan contracts and bank loans is equal to or greater than $1 billion, as reported on the members most recently filed FOCUS
report, would be required to file the SLS. The SLS would be required to be completed as of the last business day of each month and filed within 24
business days after the end of the month. A member would not need to file the SLS for any period where the member does not meet the $25 million or $1 billion thresholds.

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III. Comment Summary As noted above, the Commission received one comment letter in response to the Notice.9 In its comment letter, SIFMA asked that the implementation timing of the SLS be aligned with the implementation of the Federal Reserve Boards 6G reporting framework with respect to the FR 2052a reports required to be filed by FINRA member firms that have bank holding company affiliates,10
or that additional time be allotted for the implementation of the SLS.11
Additionally, noting that some of the reporting requirements for the SLS may be duplicative of information that must be reported to the Federal Reserve Board on FR 2052a reports, SIFMA has asked 8 17

CFR 240.15c33 Rule 15c33.
supra note 4.
10 According to SIFMA, member firms are expected to be working on the implementation of the Federal Reserve 6G reporting through the end of 2022.
11 See SIFMA Letter at 3.
9 See
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that the SLS contain an overlay that is mapped to the 5G/6G reporting frameworks of the Federal Reserve Board. According to SIFMA, this would have the effect of consolidating certain reporting categories where the respective categories and definitions align for the FINRA and the Federal Reserve Board reports, which would in turn streamline the reporting process for firms that are required to file with both FINRA and the Federal Reserve Board.
Firms that are not required to file with both FINRA and the Federal Reserve Board would not be impacted, according to SIFMA.12
In response, FINRA reiterated that the proposed SLS is designed to improve FINRAs ability to monitor for events that signal an adverse change in the liquidity risk of broker-dealers that that file the schedule. FINRA also noted the extensive prior outreach and discussions that FINRA conducted regarding the potential burdens on broker-dealers that are subsidiaries of bank holding companies. According to FINRA, this consultation resulted in the alignment of categories in the proposed SLS with reporting required in the Federal Reserve Boards Complex Institution Liquidity Monitoring Report referred to as FR 2052a.13
FINRA also stated the SLS serves an important regulatory purpose because access to the information that would be reported on the SLS is important for FINRA to efficiently monitor on an ongoing basis the liquidity profile of its members. FINRA stated that the information would facilitate FINRAs efforts to understand and respond to firms that may appear similar based on their balance sheets, but in fact have different liquidity risk profiles which could negatively the ability to fund operations during periods of market stress or other stress events. Absent the reporting set forth in the SLS, FINRA
noted that it would need to request such information on a firm-by-firm basis as the need arises, which could, according to FINRA, result in similar or potentially larger costs for some firms.14
While acknowledging that some members that would be subject to the proposed SLS could face potential burdens with respect to reporting requirements from other regulators, FINRA stated that it would revisit the reporting categories in the proposed SLS
as appropriate with respect to potential alignments of such categories with other reporting requirements, including the FR 2052a, depending on how they 12 See 13 See
SIFMA Letter at 34.
FINRA Letter at 2.

14 Id.

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evolve in the future. Consequently, FINRA stated that it believes it would not be appropriate to delay implementation of the proposed SLS.15
Finally, FINRA stated that it believes that the proposed timeframe for implementation of the proposed SLS set forward in the Notice affords members sufficient time to prepare.16
IV. Discussion and Commission Findings After careful review of the proposed rule change, the comment letter, and FINRAs response to the comment letter, the Commission finds that the proposal is consistent with the requirements of the Exchange Act and the rules and regulations thereunder that are applicable to a national securities association.17 Specifically, the Commission finds that the proposed rule change is consistent with Section 15Ab6 of the Exchange Act,18 which requires, among other things, that the Commission determine any FINRA rule to be designed to protect investors and the public interest.
The Commission believes that the proposed SLS, which will require certain FINRA members, subject to the thresholds described above, to provide detailed information regarding various aspects of the members liquidity profile will enable more effective monitoring of the liquidity risk of FINRA members by the Commission and FINRA. The Commission believes that regular and ongoing access to such information is important for the purpose of understanding the liquidity risks that member firms face, as well as differences in liquidity risks among firms that otherwise may appear to be similar based on similar characteristics in the firms balance sheets. By enabling more effective monitoring of liquidity risk, the Commission believes that the information obtained through the SLS
will protect investors and the public interest by providing FINRA and the Commission with information needed to better anticipate and respond to the risks that FINRA member firms may face during market or other stress events that could jeopardize their ability to fund their operations. FINRA estimates that between 85 and 100 broker-dealers will be required to file Form SLS, the universe of broker-dealers carrying customer accounts with at least $25
million in free credit balances or with 15 Id.

at 3.

16 Id.
17 In approving this rule change, the Commission has considered the rules impact on efficiency, competition, and capital formation. See 15 U.S.C.
78cf.
18 15 U.S.C. 78o3b6.

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