March 14, 2022
The SEC oversees $100T in annual securities, yet is only funded by $2B per year, 4500 people against the globe. Thats 0.002% funded vs. overseen. It is borderline a waste of taxpayer money at that point, but this is an absolute failure on behalf of congress, not the SEC.
To help to mitigate this disparity, the rules issued should be clear and concise. Presently, it is shown that is not the case. Rules are vague, loose, and filled with loop holes. One would assume the SEC is primarily comprised of economists and lawyers. The lawyers should be proficient in criminal law, enacting laws that are actually enforceable and clearly protect the public. Additionally, the laws should be made clear and concise as they stand, not stacked such that further laws are added on top of already existing laws addressing similar matters, in which the laws become overly complicated. These claims can be seen within the proposed rule and existing matter referenced in the proposed rule.
The SEC submits a 200 page new rule proposal, when there is ample issues with existing conditions. The methodology to regulate the market is not sound, and appears as a shotgun effort. At this time, this comment reply will comment towards the introduction and fundamentals within the rule proposal. It is difficult to comment on a new rule proposal, when the SEC has shown to be unknowledgeable in existing issues causing the problematic conditions that the new rule proposal attempts to address.
Introduction, Reference 2: Short selling does not need to be, and should not be, defined as the seller not owning the security. The justification to permit short selling is for entities to profit from expected price downward movement, to provide liquidity / efficiency when there is more buying than selling (this will be revisited), and to hedge against long positions. It is clear that all of these claimed benefits can be realized through ownership of the security, and by entering in a put option contract. Why are the other avenues to realize the claimed benefits not good enough by those that advocate for the allowance of short selling as described in 17 CFR 242.200? The only answer is that short selling described in this manner is not used for the claimed benefits, it is only used for the referenced detriments in the proposal. The detriments being to intentionally, maliciously, and criminally drive the price of the security down, thus manipulating the stock. There is no need and no proven justification to permit selling of that which does not exist. That is the root cause of all that this rule proposal attempts to address. Allowance to trade in this manner destroys the fundamentals of supply and demand in which the very markets are built upon. I compel the SEC to prove otherwise. Unless sound reason is shown in which these benefits cannot be perceived though other considerations, the new rule proposal should make short selling as described under 17 CFR 242.20 illegal. As it stands now, by continuing to allow this practice, the SEC is actively and knowingly participating in market manipulation and abandoning their sworn duty to protect the markets and investors equally as shown with the information provided in this comment. The SEC has acknowledged claimed benefits and detriments of short selling described by 17 CFR 242.200. The claimed benefits can be realized through methods which do not share the the claimed detriments. The only reason to maintain allowance of short selling as described by 17 CFR 242.200 is to purposefully retain the recognized detriments. This accusation should not be taken lightly.
The comment should be closed with the above, though additional information will be provided to further elaborate.
Introduction, Reference 3: This shows an uneducated explanation of basic market mechanics. First, supply and demand is based on exactly that. If the supply does not exist, meaning if there is not a party on the exchange selling the security, then the security is not for sale. For reference, observe any other market than the stock exchange for a basic understanding on the principles of supply and demand. If said valuation of a security were ever to be artificially high, the owners of the security would sell the security, as they would realize that the security is overvalued, they can profit from the artificial price, and buy back in at a lower price. However, if the owners of the stock do not sell, then it is proven that the price is not artificially high. The price, is the price. If the owners do not sell, the security is not for sale. Let this be clear, there should be no reason that a market maker ARTIFICIALLY SELLS a security, claiming liquidity or market efficiency. This is pure market manipulation. This is back to selling that which does not exist, which manipulates the natural supply and demand value of the security.
To go even further, why would a market maker care about filling a buy order at a price that they want it to be filled out? Millions of buy orders go unfilled every single day, so do market makers just arbitrarily choose which securities are illiquid? Why are the market makers not selling all of the securities at the buy order prices? The answer is simple, that is not how supply and demand works. In this case though, the orders that go unfilled would be at a loss to market makers if filled. Buy orders are artificially filled by market makers due to the market makers insider knowledge that their overall entity will realize financial gain from the transaction. This is a massive conflict of interest that results in textbook insider trading from the very entities that are trusted with market making privileges.