Oct. 08, 2022
October 8, 2022
Dear SEC,
Thank you for the opportunity to post comments regarding this proposed rule. I am greatly in favor of the proposed ruling as is and commend the staff behind its inception.
I would like to address some points of criticism specifically raised by Citadel and the DTCC.
Citadel claims that the rule change will increase costs of establishing short positions and that it will lead to copycat strategies. I fail to see how increased costs are of concern. Short positions are a profitable strategy and will remain a profitable strategy even with an increase in costs. Shorting is inherently a high-risk strategy. Therefore I would argue that a higher barrier to entry would help protect naive investors by further dissuading them from opening short positions.
In regards to copycat strategies, I again fail to see the issue. In trading, the party that moves first, profits most. Fundamental research is and will still be necessary in order to gain and maintain first-mover advantage on trades.
It is important to keep in mind that the concerns Citadel has raised with the ruling like solely in the ability to profit rather than the aspect of increased transparency and accountability, which is what the ruling is intended to address. As a government agency, the SEC should prioritize keeping markets open and free over facilitating private profit.
The DTCC's criticism claims that the ruling will create confusing data via double reporting. Frankly, the obvious counterpoint to the DTCC's claims is that double-checking and cross-referencing are both important steps in ensuring the integrity of data. Having the same data come from multiple sources sounds to me to be a positive. What I find confusing is the DTCC's claim that imposing a reporting obligation on it would disincentivize clearing while simultaneously requesting the future ability to act as a reporting agent.
Again, thank you for the opportunity to comment on S7-18-21. I look forward to its implementation.
Regards,
Alexander B.