Apr. 20, 2022
As I understand it, this rule proposes using a vehicle, they call an SFT (Securities Financial Transaction), as a placeholder for any securities transaction. As I understand it, these SFTs are fungible like a dollar bill. So, if you have 100 worth of SFT that you SHORTED, and want to Fail to Deliver rather than buy-in at market value, you can resolve it by utilizing another SFT worth the same amount set for the same delivery date. The cost one would pay for this "feature" would be based on the difference in closing price from one day to the next. This cost would be much cheaper than a market buy-in. Seems like a cheap way to can-kick a scary-ass FTD problem, rather than buy-in at current market value. I.e. seems crafted to protect the practice of abusive short-selling, when it doesn't work out for the SHF. This is yet another attempt for large players in the market to fleece retail by using complexity to their advantage. If the aim is to alleviate high-risk, quick-deleveraging (fire sale) scenarios, this is a terrible band-aid and even less of a solution to the real issue: Market opacity. So to solve fire sales, rules should make it so high risk position can be seen and therefore properly assessed by participants, as intended in a "fair and open market." This proposed rule does the opposite of that and therefore should NOT be approved.