Jul. 25, 2023
Good morning. In the last three years I have become more conscious of my financial future and the avenues in which I can adequately plan for that future. Whether it be a traditional 401k, an IRA, or a Non-qualified brokerage account, I have been diligent in researching about our markets and how I can participate in them. However, since that time I have discovered a lot of concerning, if not illegal, behavior of larger market participants, captured regulatory bodies, and a market that is in many cases in complete contradiction to what the SEC is charged to support and protect. From it's website, the SEC motto and its mission is "...to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC strives to promote a market environment that is worthy of the public's trust." Yet, over the last three years I have been disheartened by the degrading regulatory system and its failure to act in the face of broad and brazen manipulation or fraud. A system that lacks sufficient transparency, provides little accountability (firms and funds charged with various forms of failed compliance or nefarious behavior that is the result of gross negligence at best or wide-sweeping illegal and fraudulent behavior at worst) in which no admittance of wrongdoing is made, and consequences and penalties which are not commensurate with the behavior and therefore are just the cost of doing business. I applaud the work of this SEC to submit proposals in hopes of achieving greater transparency and fairness in our markets, but there is still yet much to be done. In regard to specific aspects of this proposal s7-32-10 and my staunch support of it, please remember that public reporting is key to properly functioning markets. I strongly support transparency and the public disclosure of this data and I am concerned that excessively large swaps are a threat to financial and national stability. Please look into Archegos Capital Management and other potential hidden risks that pose a threat to the overall market. By providing the public with more data, more of this fraud may be detected. It is important that the rule be hardened against evasion (e.g., by multiple actors colluding to build a large position through separately acquiring smaller positions that evade reporting requirements). We do not want to see the rule watered down in practice. I also support applying this rule internationally so funds and firms cannot use borders to evade the rules of the market. I suggest looking at the entire swap portfolio to determine reporting requirements, not just parts: “The Commission should follow the precedent in Rule 13h-1, which identifies “large traders” using the trader’s entire position in all National Market System securities. The overall picture of a trader’s appetite for excessive risk can only be formed by looking at their total swap position. Allowing large traders to take on excessive risk via swaps in many different individual securities while avoiding reporting requirements is against the spirit of the rule and goes against the Commission’s prior rulemaking. The Security-Based Swap Position includes all security-based swaps based on the same underlying security or reference entity, regardless of whether they are debt (including CDS) or equity-based, so that funds and firms cannot evade reporting requirements by using different types of complex financial instruments. I agree with the definition of security-based swaps and it must be appropriately wide to minimize evasion. I agree with daily reporting and praise the Commission’s public release of the data. It empowers citizens to protect themselves from excessive risk and the companies they own from hostile actors. “The Commission should absolutely utilize its authority under Section 10B(d) of the Exchange Act to publicly release data. Fraud is widespread, and the resources of the SEC are limited. By allowing the People to see potentially dangerous swap activity, they will be better able to assess the investments they make and observe the dynamics of the market. A more level playing field is absolutely in the public interest, and the damage that can be done via swap activity (e.g., Archegos) necessitates that investors be equipped to defend themselves and the markets they use. The SEC should finalize this rule without delay "...to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation." Regards, Lewis Newman