Oct. 29, 2022
October 29, 2022 The Commission has identified the following shortcomings with current data: (1) fails to distinguish economic short exposure from hedged positions or intraday trading, (2) fails to distinguish the type of trader short selling or identify individual short positions, even for regulatory use, and (3) fails to capture the various ways that short positions can change and the various ways to acquire short exposure. In addition, The Commission explained that shortselling volume and transactions data cannot easily explain changes in short interest, exposing a gap between these two types of existing data. 4 Furthermore, these data sets are subject to differences in reporting lag, and can misrepresent the amount of short selling due to mismarking. These are significant and material shortcomings in the transparency of US capital markets, but the Commission neglects to acknowledge the impact of these shortcomings. The lack of transparency into short positions has led to deep mistrust in markets for retail investors, and especially for newer retail investors. The Commission risks alienating these investors and driving them away from US capital markets if they do not act to provide transparency and certainty for them.