Mar. 23, 2023
To whom it may concern, In the fact sheet for this rule proposal labelled 33-11151 you state that: "Rule 192 would prohibit a securitization participant from engaging, directly or indirectly, in any transaction that would involve or result in any material conflict of interest between the securitization participant and an investor in an ABS, subject to certain exceptions. Prohibited transactions would include, for example, a short sale of the ABS or the purchase of a credit default swap" You then go on to say: "the proposed rule would provide exceptions for: • Risk-mitigating hedging activities; • Bona fide market-making activities; and • Liquidity commitments." These two statements, I believe, are contradictory, as the very organisations most often culpable in this activity are hedge funds, market-makers and providers of liquidity. In particular, market-makers create material conflicts of interest every time they sell a security they do not own and fail to deliver it. Market-makers with dark pools can manipulate the price of a security to their advantage by routing sales to individual investors through the dark pool and sales from individual investors through the lit market. It is a conflict of interest when the market-makers benefit both from the sale of the security and the downward trend of the market price of the underlying security through devious hedging activities. Liquidity commitments are a matter between participants and the federal banking governance, and should never involve the manipulation, however "reasonable", of securities owned by individual investors. If a participant, through its own hubris, brings about a liquidity crisis, it must not be allowed to fall back on an exception to this rule to break free of the consequences: for instance, by selling a security without first locating it. For clarity: if a stock that has been sold short dries up, it is on the short-seller to deliver it and/or purchase it at the true market price. If this results in the failure of the participant, that is their problem, not the individual investor's. Finally, I think it is important to state very clearly that I believe this rule should prevent devious activities such as cellar boxing, payment-for-order-flow and prejudiced use of end-user features such as "the buy button". The proposed exceptions will create a giant hole through which these devious activities can thrive and make a mockery of the fair market the SEC seeks to create. Faithfully, -- MATTHEW OGLESBY