Aug. 22, 2023
Greetings, I would like to comment on the proposed rule S7-32-10 My opinion is that the final rule should implement at a minimum a daily reporting requirement for all swaps representing an excess of 10 million USD notional exposure of (potentially different) underlying financial assets, regardless of the particular nature of the underlying assets/instruments, payout structure, term, or type of swap. All details/terms of swaps should be reported daily in digital format. Swaps can be used to obtain an effective secondary source of leverage through counterparty hedging particularly when positions are cross margined with different brokers/counterparties and as such pose risks to the financial system. For instance a Fund A entering into a return swap with broker B on Fund A’s positions, will induce the broker to hedge their end of the swap by buying the equities that Fund A is long on and short selling equities that fund A is short on, generating a knock on effect that magnifies the price movement in the underlying - counterparties are incentivized in this case to hedge by taking the same positions as the fund magnifying the effects on the price on the underlying by additional buying/short selling. This dynamic can be abused (Cf Archegos) to magnify price movements in equities that do not efficiently allocate capital and finance productive investments which is a desirable function of capital markets (vs simple gambling and speculation). This is just one example pertaining to return swaps yet the same dynamics apply to other types swaps, and can lead to the magnification and spread of contagion Without up to date, complete, accurate information investors cannot make good choices regarding the allocation of capital. Publication of swap on a daily or even hourly basis is not difficult nor consuming since it merely involves publishing digital information already collected and monitored intensely by brokerages/funds alike involved in swaps I urge the Comission to adopt the written proposed rule changes , and to go further and maximize transparency in this sector of the market Regards - Roscoe T H Linstadt, PhD Organic Chemist -- Roscoe Linstadt, Ph.D. Chief Scientific Officer ACatechol Inc. Lab Address: 1396 Poinsettia Ave, Vista, CA, 92081 email: rlinstadt1988@gmail.com cell/text: (805)-636-9439