Oct. 08, 2022
October 8, 2022
I find it personally fascinating that Rule 10c-1 is new and not part of our financial systems.
In general, investors make decisions for their investment holdings based on public information. The very foundation of a \"free market\" is based on information, available to all, through easily discernible means. Such information could be corporate filings, press releases, patent notices, but also stock price, available share counts, percent sold short, and the relevant interest rates and borrowing information.
The fact that there appears to be quite large amounts of short selling occurring with no traceable information as to who, for how much, and how often, acts to effect price discovery, and threatens to make the entire US Stock market into nothing more than games for high speed algorithms exploiting various loopholes and advantages in the systems.
Such things are entirely inconsistent with \"market price discovery\" based on public information.
The fact that vast amounts of short selling appear to be happening, and that several companies in the past have been \"cellar boxed\" into oblivion having their entire floats sold short from underneath them suggests that maybe disclosures of securities lending transactions on a wide scale may be of great use to both retail and long-term investment management firms, who want to really understand what's on the other side of their swaps.
So much of this takes place in dark and OTC markets with no real traceability of who is loaning to whom, or for how much, or for how long, or at what rate, makes it hard to discover the true value of securities that get sold.
Transaction by transaction reporting, in
15 minute data releases will provide a great value to retail investors, providing them with the ability to see the real story of certain price movements in securities.
Indeed, increased transparency is always of benefit to long term investors. It seems the decreased transparency is good for \"short seller\" type investors, whose entire financial model revolves around either riding things into the ground, or forcing them into the ground by hiding information necessary for informed decisions behind walls of aggregate, high-speed, trading-noise.
Long lending chains, built with swaps and derivatives indexed to unknown amounts of short positions whose true data is unknown makes extreme counterparty risk easy to hide, and presents a significant risk to the market as a whole.
Providing more support for companies made victims by untracked short selling activity is a significant risk to startup companies, and indeed all companies, on the market right now. If you can't know the true picture of who's invested in your stock, and at what value, it's very hard to fend off short-attacks, and equally hard for institutional and small retail investors to make cogent, long-term decisions, when prices of tickers move against all fundamental concepts of \"value\" fairly regularly. Rule 10c-1 would provide another point of data feed that can be used by all investors in the interest of furthering a free and fair, transparent securities market.