Mar. 27, 2023
Exemptions and loopholes in this proposed rule are a black eye to the US financial system, and prove that it's corrupt. To whit: The exemption for risk-mitigating hedging activities is absurd. This exemption allows hedge funds to engage in conflicted positions - taking positions that help themselves and harm the investing public in the name of hedging. This should NEVER be allowed, and represents an exploitable flaw in the proposed rules. The exemption for "bona fide market making" is similarly wrong-headed. It will allow securitizers to engage in the same kind of conflicted behavior in the name of "making a market". Why is market making seen as some kind of holy service that must be provided? The lack of a market means that the owners of a security are unwilling to sell at a price that buyers are willing to pay. No more, no less. That's fine, if that's the true state of the market. During times of market duress (like now) the market becomes illiquid. But it's a false conclusion to say that liquidity will therefore solve the problems that created the illiquidity. It's the diseased regulatory framework around securities that is causing both. And putting market makers on a pedestal in the hopes that it will fix the framework is obviously counter-productive, because it makes the regulatory framework more exploitable and corrupt. The exception for certain liquidity commitments is bad policy. The motives to allow securitizers to make such commitments may be pure, but it will again be used as a loophole to create conflicted positions and allow hedge funds to deal against their customers. The problem is that ANY ONE of these loopholes is enough to make the "rules" of the US financial system a farce. They ALL MUST BE REJECTED as a matter of sound policy.