The US securities regulator has taken a major step in its bid to tighten up regulation of the US securities lending industry, the latest move by the watchdog in the aftermath of the GameStop controversy earlier this year.

The Securities and Exchange Commission published on Thursday a proposed rule that would, if made law, force lenders of securities to report the terms of their securities lending transactions to a registration body such as the Financial Industry Regulatory Authority (FINRA).

Under the proposal, called Exchange Act Rule 10c-1, the regulator will then make the terms of the securities lending transaction available to the public.

SEC chair Gary Gensler, who has pursued an aggressive regulatory reform agenda since taking charge in April, said in a statement: “Securities lending and borrowing is an important part of our market structure. Currently, though, the securities lending market is opaque."

Gensler added: “In today’s fast-moving financial markets, it’s important that market participants have access to fair, accurate, and timely information. I believe this proposal would bring securities lending out of the dark. We have put out this proposal for comment, and I look forward to hearing feedback from the public."

The SEC said the proposed rule, which is subject to a 30 day consultation, is consistent with the Commission’s mandate under the Dodd-Frank Act to increase transparency in the lending and borrowing of securities, and to ensure regulators have up-to-date information on the lending market.

SEC chief economist Jessica Wachter said: "The rule will bring much needed transparency into the securities lending market giving the market information that is both comprehensive and timely."

The SEC issued last month a report into the GameStop affair of January 2021 when retail investors drove up the share price of the US listed firm to thwart short-selling strategies from US hedge funds.

The SEC outlined four key lessons from the unusual trading that took place at the start of the year centred on: Forces that may cause a broker to restrict trading; digital engagement practices and payment for order flow; trading in dark pools and through wholesalers; and short selling and market dynamics.

FINRA approved at the start of November the launch of an alternative trading system by Provable Markets, a New York-based fintech aiming to make the world’s largest securities lending market more efficient.