SEC eases collateral rules: S&P 500 and Russell 1000 stocks can be used for securities lending

Gate News update: The U.S. Securities and Exchange Commission (SEC) has recently approved an important rule change that allows broker-dealers to use a diversified portfolio of S&P 500 and Russell 1000 index constituent stocks as a new category of collateral in securities lending transactions. This change breaks with long-standing restrictions that limited acceptable collateral to cash, U.S. Treasury securities, or bank guarantees, providing greater flexibility for institutional capital operations.

At the core of the new rule is the introduction of “qualified equity collateral,” which covers diversified baskets of publicly traded large-cap company stocks, as well as unlevered ETFs that track the relevant indexes. This means that, in the securities lending market, broker-dealers can pledge highly liquid equity assets to improve capital efficiency and reduce reliance on traditional, lower-yield collateral.

Operationally, the rule mainly targets large institutional investors. Eligible participants must meet strict thresholds, such as qualifying as a qualified institutional buyer as defined under Rule 144A, or holding at least $100 million in securities assets, or participating through an agent bank of equivalent scale. In addition, regulators require broker-dealers to set an over-collateralization ratio of 1% to 5% based on different currencies and to implement a daily mark-to-market mechanism to control the risk of market volatility.

The SEC selected S&P 500 and Russell 1000 constituent stocks as the underlying assets primarily because of their sufficient liquidity, relatively lower volatility, and strong market depth. This design helps maintain systemic risk under control while improving financing efficiency. The regulator also issued explanatory guidance documents to SIFMA and ISLA at the same time to ensure that market participants follow consistent standards during implementation.

From a market-structure perspective, this policy is seen as a key step toward enhancing liquidity in the securities lending market. With the expansion of eligible collateral, institutions’ operational room in areas such as short selling, hedging, and liquidity management has increased significantly, and it may also indirectly affect the logic behind risk-asset pricing.

In the coming months, whether institutions adopt this framework at scale will be a key point to watch. If adoption rates rise, it could further strengthen capital turnover efficiency in U.S. capital markets and have spillover effects on the liquidity environment for risk assets, including Bitcoin.