Oct. 08, 2022
October 8, 2022 the SEC has previously provided exactly the reasoning regarding why this rule change is terrible. To whit: the Commission, in proposed rule 13f-2, explicitly noted its awareness of the myriad ways in which short selling can be used to abuse individual investors and working families. In proposed rule 13f-2, the Commission said it is ...mindful of concerns that certain short selling activity can be carried out pursuant to potentially abusive or manipulative schemes. For instance, market manipulators may seek to spread false information about an issuer whose stock they sold short in order to profit from a resulting decline in the stocks price. The Commission has previously noted various other forms of manipulation that can be advanced by short sellers to illegally manipulate stock prices, such as bear raids. That is sufficiently clear by itself, but I want to provide my own comments as well. Transparency implies Transaction-by-transaction reporting. This should be the standard for EVERY OPEN MARKET, because it eliminates the ability to \"hide within the aggregate. Without the ability to see each and every transaction, the market is obscured and therefore harmed. Secret positions allow short sellers to parasitically draw value way from actual investments, which has been shown to be catastrophic to overall market health.. The 15-minute reporting requirement, in particular, is LESS THAN WHAT SHOULD BE ACCEPTABLE in 2022. Think about this: I get a text message instantly when I spend a dollar at starbucks from my credit card company. How is a 15 minute grace period acceptable? How can market participants even request with a straight face that the 15 minute requirement be waived? Its absolute insanity. Any cost and effort are to implement it are trivial relative to other costs of being in the market, and are absolutely justified to prevent fraud and prevent hiding in loopholes. Again: recent experience proves this to be true. Your new strategic plan puts \"working families\" front and center. This is good, but its not enough to be an idea: you need to USE THIS IDEA to GUIDE POLICY. This is your chance, because working families and everyday people that are victimized by financial predators. But besides people, companies are victimized and have to have some ability to defend themselves against predators that \"short selling in the dark. This creates a self-fulfilling prophecy, causing a company to fail WHEN IT COULD HAVE SUCCEEDED I cant think of a less American and less capitalistic idea than allowing a practice to steer a company that could be successful into the ditch by using market manipulation. It harms true competition and price discovery. The idea that a small number of short-selling funds \"know best\" and can hammer unsuspecting companies in the dark is shameful. Secret short selling hurts individual investors in the name of greater profits for hedge funds. THIS IS NOT WHAT THE PUBLIC WANTS from its government. Timely detection of fraudulent and abusive activity MUST COME before Wall Street profiteering EVERY TIME. Again, the same strategic plan the SEC has espoused applies here. By entertaining rule changes like this, the SEC seems to be prioritizing short sellers over investors putting hedge fund comfort and profiteering over investor protection and market transparency. HOW CAN YOU EVEN CONSIDER THIS? While short sellers might be afraid of short squeezes that can follow the identification of their short selling strategy, that is not a reason for the Commission to decide against greater transparency. EVER. If short selling is chilled, then short squeezes and dangerous volatility become less common. Sophisticated investors will quickly learn to avoid positions that could result in such dangerous volatility, which will clearly benefit the market overall. The fact that this needs to be repeated after the Global Financial Collapse of 2008 is stunning. We KNOW what we need to do. And failure to keep the system sane, and send the offenders to prison will only ensure that this happens again. All market participants benefit from transparency, and it should be a decision-rule that it be increased at any opportunity. At this point CHINA has more transparent markets than the US, to the extent that they DO NOT HAVE FTDs. Period. Ever. How can China be leading the United States in finance like that? It boggles the mind. Transparency gives all investors better understanding of the risks of our decisions and transactions, which allows better investing, which creates a stronger healthier economy. If rule changes like this allow some corners of the investment landscape to be left in shadow (a dark pool of capital, if you will) then hedge funds are allowed to targeted and assassinate a company at will. When funds are allowed to short in the dark, the rest of the market remains dangerously unaware of the risks they take on when purchasing securities. How can an institution whose mission is market fairness every consider this? More timely reporting allows for more timely reactions sl ower reporting prevents retail investors and working families from protecting themselves from abusive and predatory short selling practices. Working families and the individual investors need to be able to look both ways before they cross Wall Street. No one wants working families to get run over in the name of superior returns for hedge funds. Evolving internet and social media patterns allow the public to serve as first-line watchdogs in monitoring short selling data for securities fraud. Ultimately this will strengthen the SEC and allow it to better fulfill its mandate AT NO COST and with BETTER COVERAGE/SCRUTINY/ATTENTION. This type of crowd-sourcing allows more timely, higher-resolution reporting would create a waterfall effect whereby some individual investors analyze the data and make that analysis publicly available for free, which is then disseminated widely and re-analyzed, spurring more activity. This allows individual investors to help each other, and allows busy working families to be the recipient of aid for free. Working families do not have the resources to buy data and analysis, nor do they have the time to analyze data themselves. Greater transparency has positive effects on investor protection that go far beyond the obvious. The Commission must not remain ignorant of how social media facilitates a protect ive web of information sharing that protects investors. The Commission must not behave as though they are ignorant of how greater data provision empowers whistleblowers, who extend the Commissions reach and greater empower it to meet its strategic goals. Failure to maximize transparency at every opportunity creates dangers that are inherent in long, untracked lending chains. These chains create a fragile house of cards that is brittle, and cannot withstand normal market events/stressors thereby leading to economic fragility. Allowing the American market to move in this direction is REGULATORY MALPRACTICE. Securities lending activity can hide massively destructive chains of obligation that can even be a threat to national security, and so transparency in this area is more important than it has ever been. The risks associated with reckless securities lending and short selling - highlighted with terrifying clarity following the events of Jan 28 2021, go far beyond any theoretical benefits of secret short selling for superior returns. Investor protection should come first. Always. And the path to investor protection is transparency. Reject the feigned distress of the market-rigging banks who have created this problem for themselves, and now want a shade to be pulled across the market so that they can reshuffle the cards in their favor. Any concession to them is a failure of the SEC.