Oct. 08, 2022
October 8, 2022
As a foreign participant in the US Markets, I've come to learn that illegal practices that affect price discovery, hide price action, and benefit only large corporations have corrupted the integrity of markets worldwide.
It is imperative that the SEC take long overdue action to stunt bad actors, especially since the SEC itself has publicly stated this is their aim. Take for example, proposed rule 13f-2, wherein the SEC explicitly states that is it aware of the widespread yet illegal practice of naked short selling and ways that unfairly disadvantage regular individual investors and working families. In proposed rule 13f-2, the Commission said it is ...mindful of concerns that certain short selling activity can be carried out pursuant to potentially abusive or manipulative schemes. For instance, market manipulators may seek to spread false information about an issuer whose stock they sold short in order to profit from a resulting decline in the stocks price. The Commission has previously noted various other forms of manipulation that can be advanced by short sellers to illegally manipulate stock prices, such as bear raids.
Any decisions to grant exemptions to market makers, or the DTCC, are anti-transparency, distort the free market, and enable bad actors to profit off the little guy by rigging the game, essentially. This only serves to bolster distrust in fair markets and devalues the american markets as patently fraudulent. If the SEC is truly committed to enforcing regulation, and opening the system to individual investors, then the proposed rule must be passed, and rigorously enforced.
As the SEC surely knows, the dangers inherent in long, untracked lending chains do lead to economic fragility. Securities lending activity can hide massively destructive chains of obligation that can even be a threat to national security, and so transparency in this area is more important than it has ever been. The risks associated with reckless securities lending and short selling - highlighted with terrifying clarity following the events of Jan 28 2021, go far beyond any theoretical benefits of secret short selling for superior returns. Investor protection must come first
Thank you for the opportunity to comment. I am hopeful that the SEC will act to curb short selling and protect investors, and in turn, the global economy.