Oct. 08, 2022
October 8, 2022
Thank you for giving us, the people, the opportunity to comment on this proposed rule change. First and foremost, I as an individual investor and person who engages in market activity fully support this rule and the strength of it. It should come as no surprise that some Hedgefund/Market Makers are against this, it hurts their ability to print free money in the dark.
We can look at their main concerns together now before I explain my reasoning more. 1) They are concerned this rule would raise the cost of short selling. This is comical, they already break the rules on a yearly basis and get slapped with fines miniscule to what they make from it. They wouldn't be operating in something that wasn't maximum profit for minimum input - thus why this is ABSOLUTELY needed, it has been unchecked and dark activity has opaqued everyone's ability to see (besides themselves). 2) They are concerned others may copy them and reduce profits. I'm sorry, but wasn't the point of a healthy short selling function to expose the companies that are fraudulent and doing bad things? That you should research the company and find out that they are bad? Wouldn't more people finding out that companies are bad through short selling practices be a good thing - in their own words? As you can see from their response, it's a bold face lie. They only care about their ability to make
infinite money with no downside. 3) Funds are concerned others might figure out what they are doing and trade against them. Would transparency in the market be that bad? Wall Street knows what us individual investors are doing well before we know what they are doing. They trade against us on a daily basis, front run us actually and call it a good thing (payment for order flow). They state it would be \"unfair\" to have this applied unilaterally, even though they still have 15 minutes of function trading at microsecond speeds. This statement is laughable, to be completely honest and goes back to the above \"I can't make maximum profit with minimum (read none) input\". 4) Funds are concerned if short selling is less profitable, greedy people would research companies less. Wow look they said it out loud. They want to do as little work to maintain market function and health making as much money as possible. They won't change the level of research they do with this rule change, that is
complete posturing trying to make themselves seem the good guy. Anyone not doing research in the market before making financial decisions shouldn't be in the market. If this statement then needs to extend to these large entities, where they will make financial decisions with less research...well I will just let you process that thought yourselves. In essence it is \"well we would have to pay a little more attention and time to what we are doing, so it goes against our maximize profits with minimum input stance\".
Now that we have gotten their argument stances out of the way, and hopefully shown that they have literally no justification in opposing this outside of greed, let me explain why this is a good thing.
1) We NEED to support transaction-by-transaction reporting because it eliminates the ability for them to \"hide within the aggregate.\" Transparency is key to a healthy market and aggregate blocks are not transparent, they are opaque and designed that way on purpose (they fear transparency). Secret short selling can and does dissuade actual investments in companies as these large funds attempt to glean profits from the investors and claim ignorance when healthy companies begin to crumble. We need to look no further than their own playbook of death spiraling companies and cellar boxing - I'm looking at you Mr. Griffen, September 2001 magazine about purposefully murdering healthy companies for profit. It is understood in the industry and prevents actual company function.
2) There is a NEED for a 15 minute reporting. Anything larger than this gives them too much wiggle room to commit fraud and utilize loopholes in reporting. The increased cost of them needing to report in this manner is completely justified to prevent rampant fraud and hiding in loopholes. Everyone should want a healthy market function. Case point - Melvin Capital - who before going before Congress to deny they knew what happened after the January 28 run up, had filed their short positions then amended it twice. Why? Their actual positions over the past year hadn't changed, but what they wanted to let people know about over that time did. It basically aligned with months of time where they could say they closed out positions, which popped back up about a month later. This wouldn't be possible with 15 minute reporting.
3) Everyday people, Americans and anyone involved in the American market, take the hit for large funds committing fraud and abusing loopholes. Working families are the victims of these financial predators: investments, pension funds and 401ks. They gamble and siphon money from the everyday folks and this strategic plan puts the working families FRONT AND CENTER. It should be that way, protect the people who are most likely to be abused. It comes from the SEC top and we need to actually perform this action.
4) Companies victimized by these financial terrorists - predators - need a better ability to defend themselves and make corrective measures. Short selling in the dark harms true competition and price discovery, the very definition of a healthy market. Furthermore, the idea that these small number of short selling funds \"know what is best\" is ridiculous and that they can hammer these unsuspecting companies in the dark is absolutely shameful. Secret short selling hurts individual investors and the investments in the companies in the name of greater profits for hedge funds. Is this what you are aiming for? Of course the answer is no, or it had better be. The public expects the government not to protect the abusers but the victims. Timely detection of fraudulent and abusive activity should ALWAYS come before Wall Street profiteering.
5) A short seller is not an investor, but rather they are the exact opposite. They hope for the crumbling of companies so they can suck up the actual invested money of the people who built the company and put their time and effort into running it. The SEC seems to be prioritizing hedge fund comfort and profits over investor protection and market transparency (read as healthy market function). Short sellers are afraid of a \"short squeeze\" but it should not be a reason for the Commission to decide against greater transparency. If they are so sure of their short sale position and the fraud of the company they are uncovering, why are they afraid to make it known? If short selling is chilled due to this rule change then short squeezes become even less common and the insanely dangerous volatility becomes even less common still. This seems like a no brainer. The so called \"sophisticated investors\" will quickly learn to avoid the positions which could ultimately blow themselves up and re
sult in dangerous volatility, which will clearly benefit the market overall.
6) Retail and the greater market as a whole will benefit from increased transparency. We, as retail investors, will have a much better idea of the risks of our own decisions and transactions if we can see who is targeted and targeting (in terms of companies shorted and those shorting). If funds are allowed to continue to short in the dark, retail remains dangerously unaware of the risks they take on when purchasing securities. More timely reporting allows for more timely reactions slower reporting prevents retail investors and average working families from protecting themselves from abusive and predatory short selling practices. I've seen it referenced before and I liked it: \"Working families and individual investors NEED to be able to look both ways before crossing Wall Street.\" No one wants, or should want, working families to be run over in the name of \"superior returns\" for hedge funds.
7) There is something occurring now that hasn't happened before: the public is watching wall street and collecting data on fraud and abuse of systems. This is a VERY desirable phenomenon where the public serves as the first line of defense in monitoring issues, strengthening the SEC and better enabling it to fulfill its mandate, AT NO COST. More timely, higher resolution reporting would therefore create a waterfall effect where some individual investors, data driven analysts, analyze the data and make it publicly available at no charge, which is then consumed and re-analyzed - a continuous cycle to get the truest information. This allows individual investors to help each other, and allows for working families to receive this aid free of charge to help in their own decisions. Working families do not have the luxury of paying for data analysis themselves, nor do they have the time to do the work. Greater transparency has positive effects on investor protection that go far beyond the ob
vious. I implore the Commission not to remain ignorant of how social media facilitates a \"protective web\" with information sharing. The Commission must not act as if they are ignorant to how greater data provision (what Wall Street fights for sole ownership of) empowers doers at all levels. It further supports whistle blowers if they know the data can be seen when wrongdoing occurs, which extends the Commission's reach and empowers it to meet its own strategic goals.
8) Final note: everyone should be well aware of the dangers in long, untracked lending chains. Who actually owns what and owes what to who? This information is so opaqued there is no answer without extensive time and effort. It reminds me of the old check kiting scam if I am being honest. Where lack of information transfer allowed for floating of a single check between multiple parties (locations). These unchecked chains, as they are now, are prone to severe economic fragility and create MASSIVE destructive chains of obligation which can be a threat to national security. Transparency in this area is more important now than it has ever been. The risks associated with reckless securities lending and short selling - highlighted with terrifying clarity following the events of January 28, 2021, go far beyond any theoretical benefits of secret short selling for \"superior returns\". Investor protection, protection of our country and average citizens, comes first.
The Commission itself, in rule 13f-2, explicitly noted its awareness of the myriad of 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 stock's 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.'\"
All in all, increased information only benefits us as individual investors and market health as a whole. Those who argue against that are doing so for their own benefit and as such their claims should be rejected, as we act for the betterment of all not a select few. When price discovery and supply and demand are actually upheld, a market functions. I fully support the rule change in reporting and the 15 minute requirement. All information is good as it better informs us, you the Commission and our legal abilities to defend ourselves from fraud. Do not bend to Wall Street's cries and whines. They routinely break rules, as you are well aware, and as such we need as up to date information as possible in order to limit the wrongdoings.