Apr. 08, 2021
As someone relatively new to investing, I have followed the recent events surrounding highly shorted stocks. These events led to a very concerning few weeks where Americans could not willingly participate in the purchase and trade of certain preferred/popular stocks. It appears these events continue as those who remain short continue to borrow and borrow synthetic shares to force the price of popular yet highly shorted stocks downwards in price. Be it failures to disclose true positions through the shorting of ETFs, the use of OTCs/dark pills to buy synthetic shares overnight and then sell these fake shares to drive the price down, abusive naked shorting or the failure to deliver shares in the time period mandated by the regulations of this commission after a contract closes, institutional investors are not being held accountable for violations of existing standards of the regulation. The existing rules do not appropriately deter and punish these offenders. Take for instance failures to deliver beyond the 21 day period. The penalties are so minuscule, shorts are incentivized to continue to fail to deliver actual shares instead opting for a fine that pales in comparison to the exposure they have in the trade. While 801 is not the end all be all to curbing all practices surrounding abusive shorting, it appears that in conjunction with the reporting process in recently passed section 201 of these rules, these rules will promote accountability and allow the DTCC to analyze and limit huge structural risks before the situation is made worse by the greed or desperation of an institution digging its hole deeper when confronted with an unwinnable short position. True positions should be disclosed in real time and those responsible for delivery of real shares for FTDs shall be made to cover their short interest and supply the shares in the time period mandated. I think 801 will help this and should be passed in earnest. I copied this because it was hard to explain myself but these past weeks trading have been very sad to see fake news and illegal activity making the poor feel powerless ..