April 21, 2022
Proposed Rule SR-NSCC-2022-03 serves no benefit to retail investors and the individuals who participate in the market. Specifically, by facilitating and clearing overnight SFTs, you are ensuring that the use of SFTs and by extension share lending and short selling, will be utilized more by hedge funds and institutions. This is inherently risky behavior that they engage in to maximize their own profits. They bear that risk for their returns. By mitigating the risk to hedge funds and institutions, you guarantee that they will expand this practice.
I understand that short selling and share lending carry with them potential negative externalities to the market at large, including the \"fire sale\" scenario you describe in the proposed rule. I understand that your stated intention is to try to mitigate the risk to the market at large. However, your attempt to do so only encourages additional risky behavior in the market. The odds that this increase in share lending to facilitate short selling leads to widespread market disruption increases more than this proposed rule would allegedly help.
Further, you expressly state multiple times in the rule that the SFT clearing function would \"alleviate constraints\" created by capital reserve requirements. This is not a good thing. Capital reserve requirements are the failsafe that prevent the market from collapsing due to excessive lending, borrowing and overleveraging. Helping to circumvent these \"constraints\" introduces additional systemic risk to the market for the purpose of... increasing institutional and hedge fund profits?
And that is truly the heart of this matter. The SEC serves the American people. This rule clearly does nothing to assist the everyday retail investor, 401k holder, self-administered IRA holder, or any other small fish. This rule only helps hedge funds and large institutions at the expense of the transparency of the market at large.
This rule must be rejected if there is any interest at all in making markets fair, transparent, and beneficial to the investors of this country.