Feb. 13, 2022
To whom it may concern: I would like to be clear that I disagree in critical fashion with some of the proposed rule changes in the SR-NSCC-2021-010 filing. The suspension of free market mechanics during exceptional circumstances such as default or liquidation may seem like a reasonable idea on the surface but in practice serves mainly to provide a license for market participants to 'look the other way' when abusive market practices are occurring. The complexity and speed of financial markets demands a continuous assessment and reassessment of all positions and strategies. This is not only necessary for successful investing, but necessary for marketwide stability. If, as in the proposed rule change, the 'ultimate borrower' is exempted from liquidation during a default, the suspension of free market mechanics will leave them in an advantaged position from the results of the liquidation. This creates a powerful incentive to be the 'borrower' of toxic (liquidation-exempt assets) which will create a demand for separate, relatively disposable lending entities needed as transaction counterparties. This proposed asymmetric structuring of risk is anathema to the free market that investors from around the world clamor to participate in and as a result I cannot support this rule. The particularly disagreeable part, reproduced below: NSCC would only need to liquidate the defaulter’s net positions. By contrast, in the context of a default by a broker-dealer intermediary that runs a matched book in the bilateral securities market, both the ultimate lender and the ultimate borrower need to liquidate the defaulter’s gross positions. Limiting the positions that need to be liquidated to the defaulter’s net positions should reduce the volume of required sales activity, which in turn should limit the price and market impact of the close-out of the defaulter’s positions. Thank you for your time, Rolando