Nov. 01, 2022
November 1, 2022 These rules are a substantial improvement to the transparency of the market and have the potential to greatly reduce market-wide risk. Swaps are currently being used to evade reporting requirements of short positions and their opaqueness allows absurd leverage ratios and heavily oversubscribed collateral resulting in market events such as the largest single trading loss in history ( so far ) with Archegos Capital's losses - an event leading to severe losses to multiple large banking institutions. Unfortunately the strategy and lucrative nature of this instrument makes an attractive and simple method to both keep short positions off the 13-F and attain exceptionally large leveraged value positions with few actors involved, with banks ultimately taking on the greatest exposure - potentially allowing cascading failures to occur. I agree with the definition of security-based swaps and the it must cast a wide enough net to not be evaded by small technicalities. The proposed rule would go lengths towards making sure reporting requirements are closer in kind to other standard financial instrument requirements. However the rule could be improved in several ways: 1) The rule needs to require public disclosure of this data - to make sure any and all lenders have access to the data at all times and to even reporting requirements for long and short positions of other financial instruments. 2) The threshold should be lowered and be robust to shell companies or other techniques to break the position out into several small ones to evade by technicality or subsidiary, in other words effective aggregate positions over stake holders under a common organization should be used. 3) These rules need to be applied internationally to prevent moving the trade/position somewhere else where it's legal and moving back at to cash at the end - which otherwise could side-step regulations with all the same global market participants in play. 4) Per underlying security should be tallied in reporting requirements as for example if a weighted ETF/ETN is employed - the effective unit count of the base underlying security should be used ETF/ETN is all too easy to use to evade per security requirements as \"different\" securities even though they are designed to track the same security. If it is a basket - weighting the basket proportion against the size of the position will yield the true contribution towards a per-security aggregate. 5) Security based swap positions include all security based swaps based on the same underlying security regardless of whether they are debt (including collateralize debt security) or equity based so complex financial instruments cannot work around market rules. Finally I hope this rule is instituted as soon as possible. I believe the SEC is performing its congressionally placed duty with the creation and institution of such rules in particular by making such reporting public to protect all parties from fraud and hostile actors.