April 20, 2022
As I understand it, this rule would allow certain market participants, when needed or desired, to more conveniently pause, sell, cover, defer, or otherwise suspend their obligation to live-up to their side of an unfavorable trade or set of trades. As I understand it, the proposed purpose would be to provide greater liquidity to markets and help entities avoid defaults and losses.
My question to the committee is then: Who then will be held responsible for negative outcomes assisted by these SFTs? Furthermore, is it not apparent to everyone that this proposed rule would allow for lesser market transparency and thus easier manipulation? (don't pretend that it doesn't exist)
Additionally, the NSCC specifically acknowledges in their proposal that \"SFTs
provide liquidity to markets and facilitates the ability of market participants to make
delivery on short-sales, and thereby avoid failures to deliver, naked shorts, and similar situations\" (NSCC 2022, pg.4). This is preposturous as there are currently many rules and regulations in place to prevent these types of things from happening to promote increased market fairness.
Not only would the implementation of this proposed rule by the NSCC further increase risks such as (but not limited to) market participant collusion or manipulation via the greater freedom of operation provided through SFTs, but would also add to the growing problem of wealth and power inequality that is most proportionally exacerbated by the richer and more powerful that current market participants and makers are.
In short, SFTs existence would arguably inappropriately most benefit those wishing to use them to \"avoid failures to deliver, naked shorts, and similar situations\" (NSCC 2022, pg.4). Many current illegal or borderline illegal market practices used and known, but most often hushed, would essentially become legal, invalidating decades of work done by honorable and integritous people trying to make markets fairer, more popular, and more easily accessible to anyone.
For these reasons I am against the implementation of SR-NSCC-2022-003 and would strongly urge and recommend deciders to reject it.
Thank you for your time.