Mar. 03, 2023
Dear SEC, I am writing to express my concern about the recent proposed rule change by the Cboe BZX Exchange. Specifically, I am concerned about the proposed change to Rule 11.12(a)(4), which would allow certain sell short orders to be modified without losing their time priority. While the Cboe BZX Exchange believes that this change is consistent with the Securities Exchange Act of 1934, I believe that it negatively impacts the retail investor, particularly during a short squeeze. Short squeezes occur when investors who have shorted a stock are forced to buy back shares at a higher price, creating a demand that drives the price even higher. During a short squeeze, time priority is crucial, and the proposed rule change undermines this. By allowing certain sell short orders to be modified without losing their time priority, the proposed rule change creates an unfair advantage for institutional investors over retail investors. Institutional investors, who have access to advanced trading tools and real-time data, will be able to modify their sell short orders more quickly and efficiently, giving them an advantage in the market. Retail investors, who often lack these resources, will be left at a disadvantage. Furthermore, the proposed rule change increases the potential for market manipulation. In a short squeeze, institutional investors may use their ability to modify their sell short orders to drive down the price of a stock, and then quickly modify their orders to buy back shares at a lower price. This creates a self-fulfilling cycle of buying and selling that benefits institutional investors at the expense of retail investors. In conclusion, I urge the SEC to reject the proposed rule change to Rule 11.12(a)(4) by the Cboe BZX Exchange. The change would negatively impact the retail investor and create an unfair advantage for institutional investors during short squeezes. Instead, the SEC should prioritize protecting the integrity of the market and ensuring fair and equal access for all investors. Thank you for your attention to this matter. Sincerely, Michael Johnston