Apr. 20, 2022
To The Securities and Exchange Commission (SEC): I am gravely concerned to see this proposal re-emerging following the previous two withdrawals. I implore you to revoke this proposal immediately. To act on behalf of retail investors, such as myself, would be to vote NO. This rule is another egregious example of leveraging complexity to fleece over retail by keeping them ignorant. This rule aims to assist in obfuscating Failure-To-Deliver (FTD)’s and illegal naked shorts. The NSCC "understands" that large FTDs, Naked Shorts, and other such items must be cleared. This regulation suggests a service that will "avoid" certain bothersome responsibilities. It does this by creating a new transaction layer that "novates" (replaces) existing commitments between NSCC member lenders, short sellers, prime brokers, and other parties with a new obligation between a member and the NSCC as the new counterparty. This novation entails even more securities lending. This regulation recommends utilizing a SFT (Securities Financial Transaction) vehicle as a placeholder for any securities transaction. These SFTs are fungible identical to a $1 note. If you have 100 worth of SFT that you shorted and wish to Fail to Deliver, rather than buy-in at market value, you may fix the problem by using another SFT with the same amount set for the same delivery date. The cost of this “feature” would be determined by the change in the closing prices for one day to the next. FTD’s are indicative of an inefficient market, hinder price discovery, and in some cases may signal fraud. If market participants got themselves into hot water, it does not mean the SEC should change the rules to protect them from the consequences. We cannot allow borrowers to renege on their promises by granting them overnight “IOUs.” To even consider these rules heavily implicates that your overseen counterparties do not meet adequate collateral to close certain short positions. The intention is as transparent as it is shameful. Further to the point, the Basel III output of the “Committee on Banking Supervision in response to the financial crisis of 2007 – 2009” was intended to be adhered to by 2015 but has been pushed back repeatedly and is now set for Jan 1st, 2023. The brazen disregard displayed by this idea that - after several years of compromise in the form of delay, to ensure participants might be ready for the new regulatory environment - the NSCC be used as a vehicle to escape a portion of the duties before they even come into force is maddening and morally deficient. In the latest video, https://www.youtube.com/watch?v=nJLInucDwZ8, Chair Gary Gensler reflects on the past year. He claims that he and staff submit “25 proposals, finalizing 4 to help your markets work for you.” I would like to note that none have been implemented. Regulatory capture is an economic theory that says regulatory agencies may come to be dominated by the industries or interests they are charged with regulating. The result is that an agency, charged with acting in the public interest, instead acts in ways that benefit incumbent firms in the industry it is supposed to be regulating. Financial market deregulation, at the behest of the industry, combined with taxpayers guarantees, in monetary and fiscal bailouts, are widely believed to have greatly contributed to the Great Financial Crisis (GFC). Regards, Jordan Manntz A Concerned Retail Investor