Feb. 18, 2022
Hello SEC, I wanted to leave some comments on your proposed ruling to shorten the securities transaction settlement cycle from T+2 to T+1. As an avid investor and enthusiast of the stock market and cryptocurrency markets, I wanted to provide my opinions regarding the settlement cycles. Since the events that took place with GameStop stock in January 2021, I have been interested in learning more about the inner workings of our markets. The event seemed like an anomaly, but there were many factors leading up to it. In my opinion, the news media and institutions have not been truthful about what has taken place and the events that have unfolded since then. I have spent many hours reading posts/comments on the sentiment regarding this situation. It has fascinated me endlessly and I continue to observe as the situation has escalated. I am totally convinced that GameStop stock (in addition to many other securities with very high short interest) is continuing to be manipulated by hedge funds/institutions to this day. I have spent countless hours observing level 2 data in real time, specifically the orderbooks that display the bid/ask spread. I have noticed that since January 2021, the trading volume and liquidity of GameStop stock have decreased dramatically since the initial "short squeeze" that had taken place. I believe that the SEC's GameStop report earlier this year mentioned that there was no evidence of a short squeeze or gamma squeeze occurring in the events of January 2021. Judging from the sentiment and discussions that are had in stock market communities, many individual investors have come to similar conclusions (from their own due diligence). Individual investors had discovered Computershare, a service that allows one to directly register shares in their name. It is distinct from shares that are held with the DTCC, which have the potential to be loaned out without permission or awareness of the stockholder. Theoretically, if the entire float of GameStop stock is directly registered, it will effectively force short sellers to close their short positions. Shares have to be bought back on the open market to close short positions, so the forced closure of these short positions has the potential to cause another dramatic increase in the stock price. As a result, I believe we will see very high levels of volatility in the market, especially as more and more retail investors discover what is taking place in this situation. My understanding of the situation is that due to the many "phantom" shares that are currently in circulation, institutions and hedge funds who are short GameStop will have to buy back all synthetic shares to cover their "failures to deliver". Trading volume as of recently has been incredibly low, as many of the buy orders are being processed through "dark pools" and outside of lit exchanges. I believe that buying pressure is being rerouted so that the stock price continues to drop, despite overwhelmingly positive sentiment and the company's current efforts to transform the company from the ground up. It is a stark contradiction from what the news media has told us regarding this situation, so I have continued to investigate as these events continue to unfold. As an American, I am concerned about the rampant naked short selling that has occurred in our markets as of recently. I believe that this is having a toxic effect on not only our market structure, but with struggling working class families, especially during the COVID-19 pandemic. Institutions and hedge funds are being given insane amounts of leverage on their trades. Retail investors are disadvantaged from the start, it is an uneven playing field. Combined with inflation, millions of families are struggling to pay their bills right now, as prices on just about everything continue to increase. Meanwhile, inflation is progressing to a point where wages are effectively decreasing, even as wage hikes are being implemented. Naked short selling has been found to bankrupt companies and cause workers to lose their jobs in the process. Hedge funds do not have to buy back shares if the company is delisted, so it is advantageous for them to manipulate the price of the shares downwards and generate profits along the way. It is absolutely sickening to me that billionaires continue to benefit from this system while millions of people in the United States live paycheck to paycheck. I am a college student, so my knowledge and understanding are limited, but I am passionate about this subject nonetheless. I am genuinely concerned that a T+1 settlement cycle will be inefficient in addressing naked shorting in markets. As evidenced by the ongoing probe by the Department of Justice into short-selling and abuses in trading, the problem has been pervasive for many years and little action has been taken. We need to have same-day settlements in trading, with no exceptions. In the year 2022, technology is moving very quickly. The stock market and its mechanics are outdated, and the abuses of the markets should be addressed. I recently learned about "spoofing" in the order books, in which buy orders are placed with very low bids, with no intention to have them executed, to artificially inflate the buying pressure and cause the stock price to increase as a result. I believe that abuses of this nature need further investigating, as I believe it has contributed to many real-world problems that Americans are currently struggling with today. Thank you very much for your time and efforts to improve our market structures. I am looking forward to positive rule changes being implemented to safeguard our markets and allow for more transparency and integrity in our markets.