Apr. 12, 2025
I’m writing as an individual investor in U.S. markets to express my strong support for We The Investors' (WTI) petition to amend Regulation SHO. The issue of Failures to Deliver (FTDs) has gone unchecked for too long, and it’s time for meaningful change. The loopholes left behind from the Bernie Madoff era continue to undermine market integrity, and investors deserve a system they can trust. As Professor John Welborn outlines in Reg SHO at Twenty, these loopholes have allowed certain stocks to stay on the Threshold List for hundreds of days, and some ETFs for over a thousand. That’s not normal, and it’s a clear sign that the system isn’t working as intended. When enforcement is weak and market rules aren’t followed, investor confidence takes a hit, and systemic risks grow. Price discovery should be fair and accurate, yet unchecked FTDs distort it. The solution is simple: Firms that fail to deliver should be automatically fined, discouraging both accidental and deliberate violations. A universal pre-borrow requirement would ensure short selling happens responsibly. Closing the loopholes in Reg SHO would eliminate an outdated system that has been exploited for years. There’s no reason to delay these changes. Strengthening market rules isn’t about restricting trading—it’s about enforcing fairness. I urge the Commission to take swift action and put an end to these regulatory gaps. A more transparent, efficient, and trustworthy settlement system benefits all investors.