Feb. 20, 2022
Dear SEC, Here are my comments. I like that you are regulating swaps. However, I think the 150 million threshold of swaps is too lenient. Anyone with CDS exposure in excess of 10 million should be audited weekly. These things can go tits up fast Include a one time audit of everyone's books when the rule passes, for all firms, institutions, family offices, hedgefunds, etc with a position or exposure in excess of 10 million dollars. Learn everyone's positions because the financial plumbing of the markets is in disarray. (Reverse Repo is stupid high, something is wrong. Figure it out.) Add in rules for automatic force audit when being involved reverse repo operations reaches a specific threshold. I would like an official statement on the Credit Suisse Archegos report on GME, attached here at your convenience. Here is my understanding. Bullet Swaps are a type of CDS where the payments are only done at expiry, meaning someone's exposure can explode if the underlying changes price significantly. Archegos had a lot of bearish CDS (as a bullet swap) on a basket of stocks, including GME. Meaning he would get paid out if the price of these assets dropped. Additionally, the CS report (footnote 77) Archegos positions at CS were representative of the same positions at Morgan Stanley, Jefferies, Nomura, Wells Fargo, Deutshe Bank, and UBS. This means these firms were also counterparties. Yet the most important fact is this: in order to hedge being a counterparty to a bearish CDS, the firms would short the underlying. This means if the price went down, they would have money to pay out the swap. Knowing how these firms would hedge would increase the value of the swaps as they would short the underlying en masse, while avoiding direct exposure to Archegos. Notably, these firms can short the underlying to hedge the swap if the prime broker is also a market maker. This should be explicitly prohibited, as this is not bona-fide market making activities to benefit the general public. Now this whole things begs the following questions: A. How big is the short position on GME, and how will it be resolved as these positions were opened when GME was sub 100 dollars? B. Explain to me -like I'm a stupid head - what sections of the S7-32-10 will I) prevent people creating a large short position among institutions II) Preventing financial institutions frome accepting a CDS that they would have to go naked to hedge. C. Specific changes to risk management strategy, such that a bank representative can look at their own books and decline being a counterparty to a CDS when they must go naked. 5. Short positions should only be allowed to be opened for 3 years, with force covering and realization of gains and losses. Short covering should be forced when a security is delisted. Uncle Sam needs to get paid. 6. Please ban PFOF. 7. Please allow companies to encourage Direct Share Registration. 8. Please prevent the internalization of retail's orders. It prevents price discovery when buy pressure is suppressed. It also allows brokers to short their own customers. (Give them an IOU, take the money, wait for a lower price to buy the security.) 9. Darkpool limitation? 10. Explicitly prevent the lending of securities in retirement accounts. Consider it a breach of fiduciary duty to lend en masse (more than 30% of the total in all held IRA accounts) with no regard to the owner of the retirement account. Limitless lending of retirement account shares allows for stupid amount of short sales, devaluing the investments they are supposed to protect. 11. Same day settlement of money and securities by 2023. 12. Please give an official statement explaining how reverse repo's skyrocketed. Thank you for your consideration. Sincerely,