March 14, 2022
(Q6) Securities Covered: Under Proposed Rule 13f-2:
- ETFs should 100% be considered for reporting. How else can we find out why XRT is consistently over 500% sold short? As of writing this comment, on 14Feb, it's reported as 1,000% short. How is this possible?
(Q8, 11) Short Position Information: Under Proposed Rule 13f-2, Managers that meet a Reporting Threshold are required to report their end of month gross short position in the equity security:
- Reporting should be on a weekly or twice-weekly cadence. 30d reporting requirements allow for too many book-cooking opportunities. If you want investors to have faith in the accuracy of your reporting requirements, it needs to be stringent and frequency.
(Q9, 10) Short Sale Activity Information Reported by Managers: Under Proposed Rule 13f-2, Managers would be required to report on Proposed Form SHO all activity in the equity security on each settlement date during the calendar month.
- ETFs need to be kept in the reporting requirements. There is ample evidence of ETFs being used to create phantom shares of companies for the purpose of selling short. The only way this ends is if the SEC has teeth to prevent it. The only way that happens is if a spotlight is shone on it.
At the end of the day, the Gamestop event in 2021 showed just how convoluted and opaque the \"pipes\" of the US market are. There had been seemingly little interest in going after these types of crimes until that knowledge became more mainstream. Any rules that...
- Increase transparency into short sale positions
- Diminish the ability to create phantom shares within reporting windows
- Shuffle short positions around various ETFs to avoid reporting requirements
...are a good start to building trust amongst individual investors.
The market doesn't belong to hedgefunds.