Oct. 14, 2022
Thank you for taking the time to review all comments submitted by concerned individual investors. To begin, I'd like to point out an error that's in the fact sheet posted on the SEC website. It states that securities loans are "transactions that are vital to far, orderly, and efficient markets." This is false. The current way securities lending is structured now enables the multiplication and rehypothecation of shares in circulation. For example, when brokers lend the shares that are meant to be held for investors, it's equivalent to replacing the bought share with an IOU. Securities lending ignores the investors right to vote in matters of corporate governance and to receive tax qualified dividends. Furthermore, a fail-to-deliver (FTD) that is "closed" with a borrowed share is not really closed, it leaves open that IOU with the lender. With that logic, securities lending actually harms market efficiency by inflating the number of shares in circulation, which in turn hampers true price discovery by artificially increasing supply. When short selling practices occur in the dark and "current" short sale information is provided long after a position has been entered into, retail investors and the like cannot be aware of the risks that they take on when buying securities. You can understand why this lack of information would represent a problem for all investors, who are expected to invest on incomplete and dated short sale information. I support the intraday 15 minute reporting requirement. The cost and effort involved with this is justified to help in early identification of abusive shorting practices, to reduce the ability of toxic market participants to hide behind loopholes and to attempt to prevent such fraud occurring in the capital markets. The new rule would provide any victimized companies a greater ability to defend themselves against predatory short selling, as short selling in the dark harms true competition and price discovery. The enactment of this rule would also introduce the ability for the general public as well as public companies to serve as watchdogs for the SEC as an initial line of defense against abusive practices, by being able to more granularly monitor short selling for securities fraud for those securities they are invested in, helping and strengthening the SEC's ability to fulfil its mandate and to help weed out market participants that are working against SEC rules, all at no additional cost to the SEC. I am a strong supporter of transaction by transaction reporting. It is clear that aggregated reporting is not transparent and provides far too much rope where fraud can be hidden in aggregates. Why should one individual or entity have to suffer a worse execution whilst another individual or entity benefits from a better execution, just because it is more convenient for certain institutions to report their short selling practices in the aggregate? It is wholly unfair and contrary to the requirement of best execution and so it should be a mandated requirement for transaction by transaction reporting. Thank you, Daniel Abad Jr.