Apr. 20, 2022
I am writing to oppose proposed rule SR-NSCC-2022-003. The proposed rule allows the NSCC to create SFTs, in the name of "providing liquidity" - a phrase that retail investors have come to recognize as a dog whistle for policies that artificially inflate the supply of a security, preventing true price discovery. These policies prop up players who are short the security (typically hedge funds) at the cost of investors who are long the security. The NSCC admits this in the proposal: "NSCC understands 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." Allowing the NSCC to print SFTs would prevent FTD's in name but prolong them in practice. This harms investors who are long the security. Long investors are the victims of increased liquidity for short sellers. Furthermore, retail investors are already at an information disadvantage compared to hedge funds. Rules that increase the number of layers of transactions make the system more difficult to understand, and therefore easier for retail investors to be taken advantage of. Thank you, Jacob Stern