Mar. 15, 2023
March 15, 2023
I find it quite ironic that you have amended a rule intended to reduce problems arising from conflicts of interest, in order to add exceptions for market makers, some of which also run hedge funds (under the same beneficial ownership), itself a collossal conflict of interest that the SEC MUST put a stop to, particularly given the extensive powers granted to market makers in ways which can impact asset prices.
Submitting to demands of your market makers and hedge funds is one of the prime causes of the corruption and fraudulence of the US stock markets (more accurately termed \"meme markets\", due to their absurd lack of a level playing field and clear regulatory capture).
Your market makers have their hand on the scales by internalising trades, routing buy trades off exchange and sell trades to lit exchanges, failing to deliver and naked shorting for securities that they don't want to appreciate in price. This is bad enough, but they also operate hedge funds that short the stock at the same time (and hide short positions in married options and total return swaps, at enormous system risk). This is not to mention alleged illegal activities, like market manipulation by short and distort campaigns and spoofing the order book.
Why are you granting even more loopholes to these people? (Did they write their own exemptions for you to rubber stamp?) They are stealing from household investors. Read the comments, read the replies to Gary Gensler's tweets - the wider public are aware of the fraudulence of these meme markets and are clamouring for the protection that the SEC is tasked with (and failing at) providing. The paper-trail of your inaction is growing by the day.
Failures to deliver should be illegal. With modern technology there is no excuse for them. I cannot fail to deliver payment for shares, so failure to deliver the shares that are paid for should not be allowed. It only exists to allow large market participants to profit by waiting to deliver household investors shares until a time that it costs them less to buy them (if they ever actually do so). It is a hallmark of the fraudulence of these markets.
ALL trades, large and small, must be processed on the lit markets, with actual price impact on the NBBO. Any argument for hiding some trades from price impact is plainly an argument for market manipulation in order to aid Wall Street in skimming / stealing from household investors.
Fines must be set at far above 100% of the profit from illicit schemes, otherwise those schemes remain profitable and the fines issued are just a cost of business.
Infinite liquidity, or loopholes and exemptions granted in order to \"improve liquidity\are concepts that manipulate markets and prevent real price discovery due to supply and demand. If there is no liquidity at a given price point then the buyer must raise their bid in order to entice owners to sell their shares. Giving market makers the power to insert infinite liquidity instead is fraudulent, and market manipulation, bordering on handing over total control of all asset prices to market makers. These same market makers also run hedge funds which profit from the movement of asset prices, even to supsiciously high levels in years like 2022 when most market participants saw low performance from their assets. These kinds of returns against a negative market backdrop were not even seen in the peak of Bernie Madoff's illicit schemes.
Short selling itself should be made illegal, as it creates incentive to see otherwise viable businesses fail, and entices hedge funds to spread misinformation about stocks in order to drive their price down. Some short positions seem to become \"too big to close\", tempting market participatnts, clearing houses, brokers and regulators into committing collossal acts of fraud and rewriting the rule book on the fly in order to try and hide the ticking time bomb or prevent real price discovery. Short selling itself inevitably creates systemic risk.
If short selling must be allowed (hopefully after at least some reasonable arguments are made for it), there must be transparent data reporting, including the names of top institutions short selling any stock (just as there is for long investments) and the size of their position. Locates of shares for borrowing to short sell must be unique and identified, without any of the fraudulent loopholes given to hedge funds and particularly market makers (e.g. reasonable confidence that a blockchain tokenised security not approved by the issuer has some underlying ownership of stock that they never have to prove). Household customers must give specific active approval for their stocks owned in brokerages to be lent or used as a locate, and they must be the party to earn all of the interest from lending their asset, rather than the broker.
The proposal at hand should be passed, but only after excluding the entire \"Exceptions\section. Conflicts of interest must be prevented, including those mentioned in this proposal, but also (and more significantly) the absurd situation of the same beneficial owners operating a market maker and also a hedge fund.
The market makers of your meme markets are building an empire of fraud and crime that eclipses the original Ponzi scheme or Madoff's more recent schemes. Please do not help them further. Please do not rubber stamp their amendments to your (rather tepid) rule change proposals.
Please do your jobs and reduce the fraudulence of the meme markets by cracking down on FTDs, rampant naked short selling and various types of market manipulation. Honest investors are demanding fair markets with real price discovery, without any further delay.