June 25, 2023
I am a retail investor. My income is higher than 50% of the country. I am about as cookie-cutter a retail investor as exists. I am college educated, have children, and I work in a relatively prestigious industry. I say this to say that I am nothing special, and my bias is entirely relative to the security of my own investments.
The problem with the proposed rule is that it would legitimize the bad actors already abusing rules and absorbing fines as the cost of doing business. Take a look at the recent OCC report detailing commercial bank derivatives exposure. The scale of financial chicanery is staggering. You are talking about diluting my ownership rights of any security for which my investment is the underlying in a derivatives bet.
A derivative is an informed bet. To be fair, it is very much like a sports bet placed here where I live in Las Vegas. Regardless of a foundation in perceived knowledge, it is still a bet. An investment, on the other hand, is something you can buy, hold, forget, and potentially come back to profit later.
This rule would transfer one of the most fundamental beneficial ownership rights and pass it to a bunch of gamblers, many of whom would benefit from the underlying assets declining in value. It is actually antithetical to investors' aims to allow derivatives to carry ownership rights which might be abused to sabotage a company through exercising those rights.
Market Makers, brokerages, and hedge funds are currently allowed to naked short the market. Many positions they end up in necessitate bankruptcy of the underlying, lest they be forced into bankruptcy themselves due to insanely leveraged positions with infinite upside loss potential. They already leverage their own massive positions to drive media, trade in one direction on dark pools and another on lit markets, and manipulate stock prices with derivatives bets.
Giving them another tool to drive companies into bankruptcy does not benefit me, the retail investor. Giving them another tool to install executives complicit in the tanking of another good business does not benefit me, the retail investor. Giving them another tool that allows them to multiply their own impact while necessarily diminishing mine does not benefit me, the retail investor.
Please, tell the hedge funds who have turned into immoral, even if not always unethical, negative-side market profiteers, and the Market Makers and brokerages that have enabled them, to get their hands out of my, the retail investor's, pocket. Please and thank you.