January 7, 2022
Subject: File No. S7-18-21
From: D. R. S.
January 4, 2022
Thank you for taking comments on S7-18-21.
This filing is a great start yet a greatly short step toward solving the underlying issue of transparency and fair markets, and I can't imagine the SEC's resources truly require public comment to realize it.
The truth of this reform is that it fails to address the heart of the problem that allowing the multiplication of a company's security in excess of actual supply without enforcing true final settlement with an unborrowed share is yet the opposite of lending's purported necessity to provide fair, orderly, and efficient markets.
Honoring supply, demand, and strict accountability for delivery are what make markets fair. If there there is no availability to deliver, there is nothing fair, orderly, or efficient about allowing the pervasive inflation of a security's supply in the name of liquidity that the market does not collectively wish to provide.
Continuing to fail to enforce delivery, as this filing does, knowingly persists yet unquestioned outsized returns for lenders seeking to allow others to speculate on the hopeful poor performance of a company by shorting its stock beyond the actual float's allowance while allowing final settlement for their bet with an again borrowed share.
What good is returning a lent share with another lent share if not only to serve as a tool for the pervasive manufacturing of securities to inflate away the infinite risk short sellers wish to adopt with honest conviction that a company truly is not a long value hold? Should not the transparent reporting of short positions and actual delivery serve enough proof that a company fundamentally is flawed and will therefore lose value without distorting its coveted security supply? What benefit does the lender and in turn wider market reap by accepting an IOU share for an IOU already promised to the street name investor off of whom the lender profited while simultaneously punishing?
Candidly speaking, half-hearted and somewhat punitive reporting in the name of transparency is a wet bandaid over an open wound of ever permitted FTDs. But if S7-18-21 is meant to be productive toward actionable transparency without fixing FTDs:
Why are the names of the entities lending and borrowing not explicitly being made public?
Why are street name investors not being notified that their exact shares are being lent for profit, as this practice renders them unable to vote or receive tax-qualified dividends?
Why is revenue received from lending retail shares not made public?
Why are loans allowed to exist without due dates if not to promote indefinite lack of settlement?
If only there was a way to direct register ownership of shares and remove the ability for dishonest yet still rewarded parties to claim location of shares all while safely slow SEC reforms skirt addressing root cause enforcement...
Enforce FTDs and the burden of compliance to report intra-day short positions becomes irrelevant--simply require parties to deliver or forbid them from trading.
The SEC's reported settlement rate for FTDs is a stain on the American market's report card, and while punishing to unproductive actors continuing to opaquely operate in opposition of the total positive growth of US security prices and ingenuity, this is easily rectifiable with swift enforcement it appears the SEC is yet unwilling to deliver.
Please actually enforce FTDs with actionable punishment for lack of honest compliance to truly support fair, orderly, and efficient markets for ALL parties. Transparency beyond S7-18-21 could theoretically be a catalyst for incremental change, or it could just as easily appear as a simple byproduct of immediate root cause enforcement.
The opportunity to do right by all investors is in your hands.
Thank you very much for your time.
D. R. S.