Oct. 17, 2022
October 17, 2022
Dear Ms. Countryman,
I want to register my full support for proposed rule S7-18-21 regarding Reporting of Security Loans. While short selling may have useful functions in market structure and price discovery current rules governing practices around short selling and its disclosures are insufficient to insure that the net benefits of short selling outweigh the potential risk added to the market when short selling is insufficiently monitored. An example of this is the ability for a security to be loaned multiple times through successive borrowings and sellings, allowing a single security to create many times its value in potential liabilities and generate large amounts of risk in otherwise efficient markets. Recent examples of this include the serial short-squeezes in early 2021 as well as the large amounts of unreported short selling thought to have occurred during, and worsened, the financial crisis of 2008. Greater reporting of security loans will be beneficial to the market as a whole by allowing marke
t participants to better profile market risk and support prudent financial decision making.