Mar. 5, 2023
March 5, 2023
Dear Ms. Countryman,
it is no secret that Fails-to-Deliver (FTD) can be easily hidden via Total Return Swaps (TRS) by certain market participants that are engaged in naked shorting of stocks and other securities.
The hiding of FTDs in TRS does not contribute to a transparent and fair market for all market participants.
It also is detrimental to the U.S. securities and financial market, since it causes investors of any size -- from household to professional and institutional investors -- to question the accountability of market regulators such as the Securities and Exchange Commission (SEC or Commission) and to lose their trust in the U.S. financial markets.
The proposed rule S7-08-22 is certainly a step into the right direction and I thank the Commission for making that proposal.
However, I propose to add to the above rulemaking proposal that the FTD reporting requirements for NSCC member organizations be increased to include the following:
The Fails-to-Deliver data that is provided by the SEC on a bi-monthly basis via the SEC's Fails-to-Deliver Data website (https://www.sec.gov/data/foiadocsfailsdatahtm, or 'FTD website') should, in addition to the data fields SETTLEMENT DATE, CUSIP,
SYMBOL, QUANTITY (FAILS), DESCRIPTION, PRICE the following data fields:
1.) PARTY: The name of the party or counterparty that is subject to the FTDs as per the NSCC's Member Directory (https://www.dtcc.com/client-center/nscc-directories)
2.) NSCC_ID. The unique identifier of said party or counterparty causing the FTDs as per the NSCC Member Directory file's 'gutsno' field.
3.) CLEARING_NO. The clearing number of the party or counterparty as per the NSCC Member Directory file's 'clearing no' field.
In addition to the above, I propose to increase the publication frequency of the FTD data via the FTD website from twice a month to daily. The publication should occur as soon as technically possible after a trading day has ended, i.e. with maximum one day delay after the FTDs have occurred ('T+1').
I am positive that these measures will certainly increase market transparency and I am hopeful that they will rebuild the necessary trust in the U.S. securities and financial markets that has previously been lost in the past months and years due to a lack of enforcement of existing rules and a lack of FTD-related market data.
Please note that we are here, we are educated, and we are not leaving.
Thank you for considering my proposals.
Sincerely,
Alistair C. Faircloth