January 27, 2022
Thank you for requesting a comments on the new proposal.
I appreciate the latest push towards greater transparency in the markets, however I must say that it is not in the right direction.
The blow up of Reverse Repo transactions has been noticed by a few people and I feel this new rule is but a popularity move on the commision's part to appease the masses.
I would really appreciate if the commission would instead focus on the CNS (Continuous Net Settlement) system ran by NSCC. Within the system, as reported by SEC, only 0.12% of all FTDs are settled. If that is not a red flag, I am not sure what is.
A borrowed share must be returned for appropriate functioning of the market, and not written off for a balance of another. That would be akin to returning an apple for a borrowed orange and calling it a day.
Currently, the commission only submits net values for the public, but the retail sector would really benefit from all the data that exists on that system.
Within the system, a single share can be borrowed n times between n/2 participants, and still show up as net 1. This is not indicative of the market balance and fragility if there are 100s of participants (n100). Which would make 50 share borrows, but FTD would only report 1.
Further, like any appropriate inventory management system, I would appreciate if the SEC would look into reporting serialized share trades on a daily basis.
Serialization would allow the public to trace each share in existence, allowing for better market visibility. And may actually slow down the HFTs that are trying to hunt for the shares.
Essentially, I am suggesting is to go back to the basics: What share has been traded, how, when, and by whom? You can keep the 'whom' hashed to avoid some hedge fund manager from throwing a tantrum - as long as the hash can be used to trace the trades to that same entity.
I don't want to speak about all of retail, but I believe we have shown resilience through reading and understanding the limited information available to us. We are all at a point where all eyes are on the regulators to do the right thing - to actually do something for once ... a job the commission was established to do in the first place. Let us see for ourselves just how badly the system has been abused, and maybe we can even step in to help you out.
Before I sign off, swaps would be great to get some data on in the same manner as discussed above - but I feel the request above is enough of a hill to climb for now.
Thank you,
Flam