Jul. 18, 2023
Dear SEC, File number S7-11-23 is a good step in the right direction but it leaves some room for improvements to make the rule requirements more simple and adaptable/flexible for the future. Seperating the client assets/funds from the broker-deal should be done with an additional step of also seperating negative value investments, like shorting or swaps - Positive securities/swap account - Positive cash account - Negative securities/swap account This would give any institution or goverment agency a clear status of each of the broker-deal clients positive balance against their liabilities in a glance without needing to resort to extensive accounting techniques. Regarding the interval change from once per week to once per day is an improvement, but I sincerely recomment making the required daily transfer of assets/swaps/funds to PAB accounts every next business day befor 1200 / 1300 EST, for the following reason: - This would allow broker-dealers to settle the previous day transactions in the morning. - Transfer the account holdings to their respectful PAB accounts at noon (1200 / 1300 EST). - The main benefit is that it would disrupt any potential intra-day market disruptions with client assets or funds befor the client account has to be settled. The time interval change should be implemented directly as these are automated system that are already doing it currently and just need their operating timeframe changed to daily, preferably mid-day 1200 to 1300 EST for the below reason of disrupting intra-day market disruptions. The required reporting threshold should be changed from $250,000,000 and linked to FDIC+SIPC insurance coverage ($250,000 + $250,000), there are several reasons for this: - Linking the threshold to FDIC+SIPC would allow reporting standards be set dynamically without needing to amend any rules. - Linking the threshold to FDIC+SIPC with a fixed modifier allows for amending the threshold in the future while still linked to FDIC+SIPC insurance limits. - This would allow broker-dealers to be regulated on a financial weight base with both their business performance and client performance when taking the calculations into effect set by the insurance coverage once a business grows outside of it's scope (both broker-deal and/or clients) including their liabilities (counter $0 balance accounting tricks to avoid reporting requirements). When using this reporting threshold for any business dealing in securities, swaps or FOREX, it would be dynamically adjusting for financial risks that are outside of insurance coverage and it would mean that the SEC would not have to modify or amend reporting thresholds when risks arise and FDIC or SIPC modify their insurance coverage leaving more room to enact on other rules then revisiting and locking oneself into a fixed threshold that can not be modified easily. When a financial institution grows bigger than the insurance for securities and fiat they essentially become a liability on the insurance part of the financial system which is also regulated by the same governing agencies. When working with the CFTC to implement these FDIC+SIPC reporting thresholds for securities, swaps and fiat currencies, it would allow for broader coverage to enforce rules and regulations from multiple enforcing agencies to cooperate with resources and enforcements. The cost of business should be abiding by the rules set by the commision and not the calculation if paying a fine is cheaper than obeying the law. Any business or institution that wants to invest or operate in the financial system should be doing everything in their power to operate under the laws set in the past, current and future through increasing either man power, software updates or system upgrades. -- It's not the games we play that show our humanity, it's the way we play them.