Aug. 14, 2023
Good day, and thank you for the opportunity to comment on this very important rule proposal, Rule S7-32-10 Position Reporting of Large Security-Based Swap Positions. I had commented on this proposal last year as "Concerned Citizen #8". I feel it is necessary to update my opinions on this very important bill. I strongly support this proposed rule and anything that promotes transparency in our markets. For too long, most of the important information that needs to be public in our current system is well hidden to the average market participant. Security-based swaps of all sizes have the potential to wreak havoc in our financial markets in certain situations, as we've seen with the collapses of entities such as Archegos and Credit Suisse. This bill should also include certain types of swaps, especially those known as "bullet swaps", and I would hope that those instruments are also considered and included in this proposal. A bad actor, in my opinion, has the power to, essentially, destroy the fabric of time-and-space with advanced derivatives strategies, ETFs and short sales and then conceal the global threat to the markets from regulators with certain swap instruments. The exposure to this threat must be prevented for the stability of our markets and I believe Proposed Rule S7-32-10 is making progress towards that resolution, assuming proper enforcement takes place. Though there are many other firms violating the law, Goldman Sachs was recently fined a $15 million penalty by the CTFC in April 2023 for "failure to disclose dozens of pre-trade-mid-market marks (PTMMM), in violation of Regulation 23.431" (https://www.cftc.gov/PressRoom/PressReleases/8685-23). This firm also had exposure at the end of Q1 2023, to roughly $56.4 trillion in total notional amount of derivatives contracts and $34.9 trillion in over-the-counter swaps contracts (https://www.occ.gov/publications-and-resources/publications/quarterly-report-on-bank-trading-and-derivatives-activities/files/pub-derivatives-quarterly-qtr1-2023.pdf, page 28). This is major money with major power to move markets and potentially destroy them. The threshold for these swaps, in my opinion, needs to be much lower than the proposed $100-$200 million and at $0 for the reporting threshold, ideally. After the many market crashes I've witnessed in my lifetime, I've seen enough to know that there are people in this system out to take advantage of the loopholes and honest investors, and this rule and a much-lowered threshold for the disclosure of security-based swaps can prevent much harm to markets and to the millions of investors who participate, including even those people who don't ever participate! It's a shame these rules aren't firmly in place already at this point in history. I've noticed some other comments that suggest that this rule would reduce liquidity or increase costs to issuing firms of security-based swaps. The market, from my understanding, is supposed to operate on the laws of supply and demand, and in turn should dictate liquidity issues. A short-seller claiming this proposal goes too far, citing irrelevant cases, and not being willing to take out large short/swap positions without disclosure is failing to cite how without proper regulations and enforcements, the whole market can come crashing down due to nefarious actions and exploitation of non-disclosure. A short-seller should understand the infinite risks associated with such trades before making them, and if they have to hide large positions for whatever reason, then something is majorly broken with the system and their business model, evidence of a necessary increase in reporting and supervision of these actions. These multi-billion-dollar firms that complain about increased workload costs due to these new regulations bear a small price to pay for market integrity and the continued stability for the future of our economy and markets. There have also been concerns from certain commenters about privacy concerns. In a world where there exists such things as Payment-For-Order-Flow routing and database server breaches, it seems that the public's privacy is of far-less concern than that of the institutions. How is the playing field not level when one side has all the data but then doesn't want to disclose their positions? Even when those positions might threaten the entire existence of the market? Seems counter-intuitive and weak-minded for these types of arguments on a proposal that will clearly bring some much needed protection to the total of all investors. Another thoughtless claim is that the reporting of swap positions should be required only for regulatory purposes. I believe that the accurate reporting of any size swap position and, subsequently, reporting of all positions is critical for any investor to make an educated decision before making an investment. I need to know when there's a ticking time-bomb in the market into which I'm about to invest money at any time. Full disclosure of security-based swap positions is a must, and enacting this law is the correct thing to do for society. The swap positions of major players in our markets need full disclosure and transparency for the protection of all market participants. I would hope and assume this rule would give the regulators the power to find and remove the corruption that I currently perceive plaguing our markets. Time is long past due for this change. The market belongs to everyone willing to participate in it and even those who aren't yet aware of the opportunities. Be courageous and let's fix this world together! Juan B, Business Owner