Oct. 08, 2022
October 8, 2022
The market transparency provided in this rule, would seemingly help level the playing field for retail traders, who are often taken advantage of. Retail traders are often referred to by the media as dumb money. Retail traders are taken advantage of by several methods, from brokerages and hedge funds.. I will discuss a few methods that stand out in this comment.
Brokerages take advantage of retail traders through means such as payment for order flow (PFOF), share lending programs, margin accounts (risk and implementation not clear), improper distribution of dividends with regard to tax purpose and actual intent of filing company (eg. Gamestop share issuance of share split as dividend), and many other ways.
Reporting from the SEC (https://www.sec.gov/data/foiadocsfailsdatahtm) shows that FTDs (fail to deliver) on shares is a rampant issue that is not very well policed. Reg Sho is also widely sidestepped by funds using exotic options and derivative instruments such as swaps to misrepresent short positions for reporting purposes. This rule would help negate the effectiveness of the methods currently used to sidestep existing regulations.
This rule would help retail investors make more informed decisions and shed light on a widely abused loophole in our current regulatory reporting system.