Apr. 20, 2022
This section on page 4 is particularly concerning to me. “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.” Why are naked shorts/FTDs allowed to get so out of control that a rule needs to be made to save big institutions? There should be no “understanding.” This is outrageous. If there is no liquidity in a market, say, GameStop stock for example. Why would liquidity need to be created? If no one wants to sell and/or no one wants to buy then… why is there a problem? That’s literally the free market. If there are no shares that are available to be lent out, more should not just be created out of thin air. We need stricter rules on how shares can be lent out. The punishment for naked shorting needs to be something that actually threatens a business, not a fine that is just viewed as the cost of running their business. The only thing I see this rule doing is giving large institutions the ability to make a bad bet and then, they get to get out of it for free. This happens all too often. I don’t care if a big institution fails (NO COMPANY IS TOO BIG TO FAIL), if you give them the ability to get out of trouble, what is their motivation to assess risk? They will continue doing what they are doing and no one will go to prison. The only thing this rule does is hurt retail investors and the free market, and it further skews the playing field. Thank you