April 26, 2022
As an Irish investor in the USA stock market , this Rule would be the final nail in the coffin for me continuing trading in this Market. True price discovery is not present as shown by the endless amounts of FTDS and higher than 50 % consistently OTC for AMC. AMC has demonstrated the abuse of SFT ,by shares continuously being available to borrow, yet the stock is at 100% ultilisation for weeks.
This new rule will further ARM the hedge funds and Market makers to hide transactions from Retail and enable them to wipe the value off legitimate companies market caps by dumping borrowed, from borrowed from borrowed shares on the market, diluting the stock . THIS MUST BE STOPPED TO BE A FAIR MARKET.
Thank You Due Diligence.
This proposal does is allow shares to change hands without any of it passing through the market. It defeats price discovery and there is nothing in this proposal that will stop an institution with good credit from abusing it at high volume. The only measures that are supposed to limit it are based on the NSCC's discretion and depend heavily on the accuracy of member reporting .
This is BAD for the Stock Market. It creates huge incentives for the loaning of shares and helps to facilitate short attacks on stocks across the entire market. It subverts Reg SHO's locate requirements. It defeats price discovery. Combine this with the infinite share printer that the Market Makers are abusing every day, and now the Hedge Funds have an extremely effective set of tools for double-dipping their shorts whenever they have a stock they desperately need to kill.
On paper, it can theoretically double the number of shares on the market (if every shareholder were to loan it as an SFT). In reality, there actually is no upper limit because theres no upper limit to the number of shares that can be floating around at any given moment. We know this because the share accounting at the DTC is complete and utter dogshit. If they actually could keep accurate track of the shares in existence, we wouldnt even be here shouting up at the SEC every damn day and making demands for a blockchain stock market.
Example: ..
Whats going to happen if one member borrows an SFT share, sells it to an SFT lender, then that lender turns that share into another SFT to lends it to another borrower
Theres really nothing in this proposal that stops this from happening.
Theres really only one thing I see holding a SHF back from using SFTs to continue multiplying the shares in circulation, ad infinitum: the amount of collateral required to do so.
However, those collateral requirements are based on the market price of that stock. If the stock goes down because dumping SFTs on the lit market dilutes the price, then the collateral requirements for securing the next day's SFTs also go down as well. If their scheme works, they could use SFTs to flood the market and drop the price faster than the SFT would cut into their collateral. The only hard limit to SFT abuse in this proposal is the $5 minimum threshold for eligibility.