Aug. 16, 2022
August 16, 2022
I thank you for this opportunity to offer comments and suggestions regarding the proposed rule under file no. S7-18-21: Reporting of Securities Loans.
Arguing that the Proposal impairs price discovery is quite ironic when market makers pay brokerage firms through PFOF to re-route retail investors' orders to wholesalers and internalize them, or send them off-exchanges which directly impedes price discovery to the detriment of retail investors.
Virtu Financial CEO stated on CNBC Television on June 8, 2022: \"... to the extent there's not liquidity on a lit exchange, fundamentally, the wholesalers are providing infinite liquidity at the NBBO or the inside price, so if we get an order for a thousand shares in Reg NMS stock that no one's ever heard of, and there are 200 shares on NASDAQ in New York, we fill out a thousand shares at that inside price, that's meaningful liquidity ..., who's going to provide that, the liquidity fairy? ...\".
So why would anyone argue that the Proposal impedes liquidity and be a problem if infinite liquidity can be provided by wholesalers? Additionally, it would be unreasonable to think that market makers would have an issue with liquidity given that they can freely engage in bona fide market making.
The Proposal being met with opposition, predominantly by numerous market participants, simply exposes their prevarication and pretext. The implementation of the proposed rule will help the Commission's examination division in unveiling the nefarious and illicit activities that market participants are involved in, and those who currently are not willing to relinquish their revenue streams coming from loopholes and rules violations. It is unsurprising to note such vehement and absurd claims within comments from proven offenders of the markets.
Finally, I urge the Commission to not cede and temper down the Proposal. I wholly support the proposed rule, the transaction-by-transaction short sale public reporting, and the Commission's goal of increased transparency.
Sincerely,
J.T.