Oct. 09, 2022
October 9, 2022
To whom it may concern,
First of all, thank you for the SEC's transparency on recent press release informing investors about technical error and comments missing. It is extremely disappointing to say the least for obvious reasons, but being transparent is the only way to win back trust towards SEC from investors and appreciate that I have high expectations that this blunder will not repeat again.
Security lending market is a breeding ground for rehypothecation of security, dilution of supposedly limited quantity, given how little information is available. Providing transparency through RNSA can help with somewhat preventing aggressive loaning from large investment firms, market makers, but I still have doubts on efficacy of the proposed rule. But I'd like to advocate making the information in 10c-1(d) publicly available through EDGAR instead of RNSA. SEC may not see benefit at this moment and cost appears to be a concern but that should never be a concern if the proposed rule can bring trust and integrity to the US security market, which is priceless. I do fully sympathize of position SEC is in, almost an impossible task that is given, but that should not stop SEC from acting to restore health of security market and bring back the eroded trust. And there may not be an obvious benefit as of this moment but humans do not know what we do not know until we do and SEC should do wh
atever it takes to bring transparency to the market participants, and limiting availability of information seems to achieve just the opposite. Fees should be charged by participants of security landing, not those accessing the information.
I think SEC has to ask this question to themselves. Who else can make lending transactions if the entity is not registered with the Commission? If so, how can the entities lend US security without the acknowledgement of SEC? Securities are not a fractional banking. It is not a fiat currency, it cannot be created out of thin air by marking them as liability. Unfortunately, it seems to be the case as SEC basically allows FTD, which is absurd given securities should be limited in quantity.
NO EXCLUSION SHOULD BE MADE. Why is SEC always trying to complicate the rule which ends up making loopholes that can only be exploited by bigger players such as broker-dealers/market makers that harms market participants such as corporates and individual investors? SEC is degrading trust in US security market by making exceptions only certain priviledged entities can exploit, which discourages entry to the market. Please take this into consideration for any further rule making.
Both borrowers and lenders should be reporting to an RNSA. It is important for SEC to be able to tell whether security that has been loaned does not get loaned again. How is SEC going to prevent it from happening if SEC cannot get the full picture of which entities are borrowing/lending the security? Rehypothecation of security should stop.
RegSHO has been shown very ineffective at stopping aggressive shorting through making FTDs. RegSHO still opens a huge loophole by such complexity, entities can deliberately build up FTDs for 4 consecutive days, but not longer. Does that really fixes the issue with rampant FTDs in SEC's view? We definitely need more transparency into loaned shares but need clear, succinct way of managing FTDs. Please make sure security market does not become fractional reserve banking advocating growth in return of gigantic systemic risk that is a ticking bomb. Please, no exceptions, exclusions, exemptions, different rules for thy. Thank you.