February 20, 2022
Overall I agree with a majority of the sentiment from this proposed rule change. Although I do have some concerns. Unfortunately it starts with the first line of the proposal.
I believe ALL transactions should be moved to a T+0 settlement date, not MOST. Please do not allow any loopholes in this proposed regulation in which the entities this rule is supposed to regulate can carve out a special section of the rule (or make an amendment or new rule 5 years from now) whereby their specific transaction allows them to avoid T+1 or T+0.
See Rule 15c6-1(a), I believe this rule should be removed completely or amended with strict set of guidelines detailing specific types of unusual transactions which qualify for T+(anything over 0). Rule 15c6-1(a), was originally proposed and commented on with the belief that moving from T+3 to T+2 would lead to a reduction in credit, market, and liquidity risk, and as a result, a reduction in systemic risk for U.S. market participants. https://www.sec.gov/rules/final/2017/34-80295.pdf Evidence of the January 2021 meme stock event shows this rule did not achieve its intended goals. I believe adoption of T+0 would achieve those goals.
The system as it currently exists allows for manipulation of securities clearing timeframes as well as securities pricing in many ways. From payment for order flow, block trades, borrowing securities, short selling, marking long trades as short, failure to deliver, dark pools, private bank owned ATS and more. I believe the commission should be focused on transitioning to T+0 as soon as possible. 2024 is far too long to wait for T+1 given the current market of increased volatility and decreased liquidly. It is quite likely that we experience another meme stock issue where certain stocks are unable to be traded. This event caused severe harm to retail traders all over the world it should never have happened and should never be repeated. The current framework of T+2 allows idiosyncratic risks to exist in the market and this leads to an unstable and unfair market for all.
I believe the DTCC and its underlying NCSS should not be trusted as they are a self-regulated agency owned and directed by the customers it serves (banks, brokers, hedge funds etc). It is quite telling that the DTCC released a whitepaper on these very issues the month after the meme stock phenomenon. While the DTCC is in favor of T+1, risks to the market will still exist under this framework. Many of the issues outlined above continue to exist under T+1. The speed and capabilities of modern computer and internet systems certainly allow for T+0. This would also improve price discovery.
I propose the commission focus on Section IV Pathways to T+0. While hurdles do exist for T+0 currently they can be overcome rather quickly with current technology (see Gary Genslers MIT OpenCourseWare on current and potential blockchain application in the financial sector).