April 22, 2022
Dear to whom,
I find this proposed rule a cynical attempt to kick the can of potentially illegal naked positions further down the road and delays the inevitable/ natural expiration of such trades. In principle the pawn shop (2021-010) is a good idea. The problem with '2022-003 is the CNS method of execution.
It still ultimately relies upon bona fide rules of exemption that are constantly being abused IMV. This new rule is therefore NOT in retails best interests. '2022-003 would potentially only work on cash balances. The actual numbers of longs or short shares aren't taken into consideration whatsoever.
I understand the want to prevent fire sales but isn't that the natural consequence of over-reaching? The problem is the maintenance of the hopeless position and the trader that took such a decision.
Therefore as has been proven many times in the past this new CNS mechanism in this particular form will be abused. For liquidity's sake many times more short shares (maybe even a few long) will be hidden away in a perfectly 'Bona fide' manner.
Certainly without the CAT system in full operation this will occur because there is currently nothing available to track them. Furthermore, who is to say all the ATS and OTC platforms will be monitored properly?
I think this rule is a terribly irresponsible attempt to maintain untenable short positions and utilizes American tax payers money for the purpose of suppressing their own economic life chances whether unintended or otherwise. This is precisely the pee in their pocket and telling them it's raining policy scenario.
IMV '003 and centralizing responsibility actually heightens the potential risk of economic collapse and will increase in magnitude many fold due to the the increased scope provided by allowing more institutions to be dragged down by such poor choices (yet again). Bring back '2012-010 along with the CAT system simultaneously if you want to properly isolate fire sale risks from spreading market wide.
Thank you for your service.