Mar. 14, 2022
Hi, my name is Peyton and I’m a retail investor. I’ve only been involved with the stock market for about two years, so I apologize if my writeup isn’t as professional as you’re used to. Ill just be simply answering questions you submitted in the rule proposal as best I can. The overarching theme to my answers is that I want total market transparency for all players in the stock market. Hedging Information, Question 3 Managers should absolutely be required to identify their hedging status. Assume it’s a perfect world, and Hedge fund A is shorting Company A because the company’s business model is hemorrhaging money and not turning a very good profit. Hedge fund A might decide not to hedge fully against a bet like that, because its very clear that Company A is going in the wrong direction. That kind of information could be very useful for a retail investor like me, because I can see Hedge fund A is clearly confident that this company is going to drop in stock price. Now this wouldn’t convince me that I should but puts on the stock myself, but I certainly wouldn’t invest any dollars into the company expecting it to go anywhere. Now if Hedge fund A had decided to fully hedge their risks, and I catch wind of that, then I can assume Hedge fund A decided that this company could turn around and make a profit at a later date. This kind of information would change how I approach some investment opportunities. So the pro of this is that information from bigger players DOES help the retail investor, and I am sure other hedge funds could use this information to make investment decisions as well. This also allows ruling bodies like the SEC to catch wind of an incredibly leveraged risk that isn’t hedged. Being able to find out these things overall could help prevent cataclysmic events in the future. Of course you guys already laid this all out in your proposal, but this was an opinion I already had prior to commenting. Information is key for a healthy economy. Whether or not managers know how hedged their risks are is a question nobody should even have to answer. ALL MANAGERS SHOULD KNOW IF THEIR SHORT POSITIONS ARE HEDGED OR NOT. Investing is an information game, if they don’t have the info they should not be playing. I would ask to take better care with how you describe partially hedged in the rule proposal. On a spectrum of 100-0, fully hedged and not hedged would only take up two spots on the spectrum, 100 and 0 respectively. Partially hedged can mean 99-1. If someone shorted a security and reported partially hedged, then I need to know how much they hedged. Did they hedge 30% of their risk? Or 80%? what about 1%? Would all that fall under partially hedged? I wouldn’t be able to draw any reasonable conclusions if that were the case. If this is gonna be the case, then I ask that the managers publish that info, and the public have access to find out directly from the managers just how much they have hedged for a certain short sale. Nobody likes taking shots in the dark. OR, you could break up partially hedged into two separate categories. Give a different value to when they are hedged over or under 50% of their risk. That way, even if I don’t know the exact amount they are hedging their bets, I can assume a safer or riskier position because I will know if they have hedged over or under 50% of their risk. You could even go so far as to break it up thrice, and there would be a different variable for partially hedged in 33% increments. The more information the better. That’s all I have on this particular segment. Ill send a couple more comments as I read through this document, hopefully my opinion is of use to you. -PB