March 14, 2022
Hello
As a Canadian this is the first time I have ever written to the SEC to engage and be heard.
I appreciate the SEC bringing these matters up for review and hope you will continue to improve transparency, reporting and significantly increase fines for those not following the rules. I currently work in the financial services industry.
I have provided my answers below each of the questions I answered below:
Q6:
o Should reporting Managers be required to report short sale related data for a different universe of securities than equity securities consistent with Regulation SHO? If so, please explain why and describe the universe of securities that would be more appropriate.
A:Yes, there is current zero transparency in terms of institutional short reporting that retail investors can reference. Reporting needs to be provided on a much quicker basis and the average investors needs to be able to access that information in some capacity. On top of that we have ETFs that are shorted to 1200% like XRT, how is this not creating a massive risk to the markets. When I invest in the free market it is based on the assumption of earnings growth relative to the # of outstanding shares. How can a retail investor make an educated investment if they have no idea how many shares real and shorted are currently outstanding. The large players can continue to short a stock into the ground relentlessly while creating phantom shares while never having to report (or self reporting?? what?) and never having to close the trade or therefor avoid paying taxes.
o Should other securities be included under Proposed Rule 13f-2? If yes, identify such securities, explain why, and describe what costs and benefits might be associated with such reporting.
A: ETFs need to also be impacted as we now have some ETFs that are 1400% short like XRT.
o Should certain securities be excluded from Proposed Rule 13f-2 reporting? If yes, identify the securities in question, and explain why.
A: No. We need increased transparency across the board on short interest with reporting within 24hrs. We need increased regulation and enforcement and penalties that \"at least\" negate any profits made from an illegal trade otherwise these tiny fines are simply the cost of doing business.
o ETFs would be included under Proposed Rule 13f-2. Should ETFs be excluded from Proposed Rule 13f-2? If yes, describe why. If no, explain why not.
A: ETFs need to also be impacted as we now have some ETFs that are 1400% short like XRT. How many ETF investors, which the market has pushed retail investors into over the last 10yrs, have any idea the short exposure on their index? Market makers can short an individual company by shorting the ETF and going long on all the individual stocks except the company they wish to short. This can be done without any sort of reporting on the short interest on that company. There is no transparency or reporting for retail investors to have any idea what the hedge funds are doing.
Q7:
o Should a Manager also be required to include short positions resulting from derivatives in determining whether it meets the Reporting Thresholds? If so, explain why, and describe any associated costs and benefits to doing so. If not, explain why not.
A: Short positions from derivatives and swaps all need to be reported as well. How are hedge funds able to get around disclosing short exposure by hiding those positions in total return swaps and other derivatives? Increased transparency, increased enforcement, and fines that negate the profits of illegal trades and activities are needed to help make the markets free again.
Q8:
o Should a Manager also be required to separately report its end of month gross short position in derivatives, including, for example, options? Please explain.
A: Yes. there are way to many avenues for hedge funds and large institutions to hide illegal short positions or short exposure that is greater that the number of outstanding shares in derivatives. More transparency and reporting within 24hrs is needed to help protect retail investors as the amount of excess leverage + MBS derivatives is what resulted in the financial crisis in 2008.
Q9:
o ETF creations and redemptions would be included under Proposed Rule 13f-2. Should ETF creations and redemptions be excluded from Proposed Rule 13f-2? If yes, describe why. If no, explain why not.
A: ETFs should definitely not be excluded from the proposed rule. why? XRT. Please explain how it is even possible to short 1400%? what is the impact to the underlying holdings but even worse, what is the potential risk this is creating for long ETF investors that are unsophisticated and have been convinced to buy a cheap index from the media and commercials?
Q10:
o Should Managers be required to consider short positions that the ETF holds in individual underlying equity securities that are part of the ETF basket in determining whether the Manager meets a Reporting Threshold for such underlying equity securities that are part of the ETF basket? If yes, explain why. If no, explain why not
A: The reporting threshold should be 0%. The issue is that there are too many ways to hide short positions in subsidiaries or shell companies that can easily be created in order to hide the short positions.
Q11:
o Is monthly reporting by Managers appropriate? If so, explain why. If no, explain why not and describe an alternative frequency of reporting that is more appropriate.
A: reporting should be taking place within 24 hours to the regulatory bodies. Trades, settlements, confirmation etc are all electronic now, there is no way any firm spending 100s of millions on algorithms cannot provide reporting within 24hrs of trades taking place.
Q28: If there is a more accurate means of estimating the volume of anticipated annual buy to cover order marks, please describe its structure and why it is more accurate.
A: I think the retail investor would 100% disagree with this statement. There are way too many examples of companies with millions of failure to deliver outstanding in the market. Short positions are currently \"self regulated\" which is disgusting, and we have seen examples of short positions as high as 220% GME (and this is self reporting) or 1400% with XRT. There are a number of fines that have been levied to hedge funds for failure to deliver and the fines are a miniscule fraction of the profits being generated by these activities. This short behavior can also have a significant impact on the options market as we have seen many times before. If there was more transparency and proper reporting, the SEC would be able to see which funds are shorting and who is actually closing off those positions within the stated time. Currently there are too many ways for hedge funds to hide those short positions in derivatives.