October 20, 2011
34-65459 Sep. 30, 2011 Notice of Filing of Proposed Rule Change to Amend Certain Trade Reporting and Compliance Rules
Comments due: 21 days after publication in the Federal Register
Submit comments on SR-FINRA-2011-053
this appears to be a restatement.
but i am going to note that the settlement must be much clearer.
make it clear so that people know what to do:
before T, if short, mandatory borrowing before selling short or mandatory stock in portfolio to sell. NO exceptions, marketmaker must borrow shares on T or buy in on T.
T = mandatory report within a certain period of time. check margins, fix any trades with erroneous information by the next day.
T+1, if short borrow stock every day that the failure to deliver exists.
T+2, check credit, margin, make stock available for the settlement.
if failure to deliver T+4, settlement or buy in mandatory. selling broker is first mandatory buy in and clearinghouse is second mandatory buy in and buying broker is third mandatory buy in.
if shares were provided but shares were suspicious for any reason, borrow the shares daily and resolve the difficulty within four business days. if still not unresolved, buy in and charge the selling broker. shares could be submitted to a clearinghouse to be put on account BEFORE the shares are sold in order to have enough time to validate the shares. maybe establish a time frame to validate shares. however, if not validated and shares are returned, a document should be given to explain the reason. that document should travel with the shares to any future clearinghouse or broker. introducing broker should be notified also.
if shares are borrowed T+1 to give to the buyer on T+3, then T+1 is the new T, so that T+4 is T+3 settlement. i suppose it is possible to borrow shares on T, T+1, T+1, T+1 perpetually, if there are enough shares to do that. but under no circumstances do you get more than 4 days to settle transactions.
if shares are supposed to be provided, there is no harm in buying in in order to let the buying broker have their shares.
no more 13 days to manipulate prices before you buy in.
settlement needs to be attempted at least twice a day.
no shares should be in the brokers' name only. you might review this practice because brokers NEVER acquire title to the shares of their customers unless a margin account must sell shares or brokers use a margin customer's shares for borrowing/lending. brokers cannot vote.
borrowing shares does not allow give the borrower the right to vote, right to collect dividends or any other benefit. borrowing shares does not really pass title without depriving the owner of those shares, through no fault of their own.
if you sell me a taxicab, you cannot own the cab, you cannot lend my cab if i own it outright. you cannot collect the taxi fares that i have already earned. you cannot take my taxicab and hold it for an extended period of time and allow my broker to hold a cadillac (that he might not be able to sell because he doesn't have title) and collect interest because you took my cab.
i don't like borrowing shares to deliver to a buyer at all. because those borrowed shares are borrowed from an OWNER of those shares, creating two owners. (you say temporarily.) however, if you buy shares and those are naked shares, you are not buying anything except an endorsement that those shares exist sometime in the past.
as far as i'm concerned, the difficulty with borrowing shares starts with selling shares that are imaginary, making "netting" calculations at the clearinghouse. if everything was REAL shares, then you would not need to borrow shares and there would be no imaginary shares in the market.
it is ok to slow down the settlement process by requiring real shares to settlement. reduce the clearing days to a more reasonable time. this is the age of puters and instant communication. if this annoys HFT, oh well. they are just traders. the market should see to the investors FIRST. traders are parasites on the healthy stock market. if you have no investors, you don't have a good market. traders try to remove risk but this makes the market less robust and secure for the investors who want to invest. traders take $ out of the market. investors put $ into the market, help capitalize companies.
get it right, be explicit, and everyone will know the rules, procedure.