Oct. 08, 2022
October 8, 2022
This is a comment in support of proposed Rule 10c-1. My comment is primarily in regards to the Rule's potential for combating the practice of unsecured \"naked\" short selling.
The only way a free and fair market can exist is through transparency and equal access to information, and thanks to the very limited reporting requirements for derivatives, investor pools and institutions can wield them to manipulate the market in their favor without fear of reprisal from regulators because it is difficult or impossible to identify the actors or even whether manipulation is occurring at all. This is a distinct advantage that is held exclusively by Wall Street, and it is harmful to both smaller investors and to the companies who issue their securities through the DTCC.
Securities issuers who are harmed by naked short-selling currently have no recourse to defend their stock. The DTCC does not allow issuers to withdraw their membership (SR-DTC-2003-02, see opposing comments on that rule for many examples of victims of naked short-selling), so all issuers are at the mercy of DTCC Participants who bet against them and then fix the game by flooding the market with excess supply. This allows institutional Participants to choose winners and losers in the market, and there is currently no way to even identify the parties undertaking these attacks. Invisibly influencing the market is severely antagonistic to the duties of regulators and their capacity for enforcement, the prosperity of investors, issuers, and the economy at large, and even to the very purpose of the stock market itself.
Rule 10c-1 will help to reveal both the attacks and the attackers. It will limit the hostile institutions' ability to conduct their manipulations in secret, it will aid regulators in their constant effort to maintain a free market, and it will help ensure that issuers' securities may achieve their true intrinsic value to the benefit of themselves and their investors.
Thank you for your consideration.