March 24, 2021
All parties concerned:
Proposed rule regarding supplemental liquidity deposits in filing NSCC-2021-801 is a necessary and welcome amendment in the pursuit of upholding and strengthening the integrity of the American financial exchanges, and the ideal of the fair and efficient markets they represent.
Even so, the gulf from present to ideal remains sizable. The transition from a monthly to a daily timeframe is a logical one, and arguably, one long overdue.
Securities exchange has and continues to evolve, and with these changes come the necessity of regulatory changes that suit the present and look to the future.
Together, the regulators that maintain the systemic integrity of the American markets must reevaluate and iterate upon established regulatory procedures to reflect the shifting market environment.
Several present-day factors are unaccounted for in the prior, unamended regulation regarding the calculation and collection of supplemental liquidity deposits.
These include but are not limited to: significantly greater transaction frequency and volume, increasing retail investor participation in the markets, and the disproportionate leverage exerted on the securities market by the derivatives market and the hedging procedures of its market makers (e.g. delta and gamma hedging).
Relevant to this amendment, the aforementioned elements provide the opportunity for a significantly-leveraged member of the Commission to manipulate the market, and in the process of doing so, assume and conceal positions with outsize risk, thus endangering other members of the Commission.
Of course, my understanding of the amendment is limited by my lack of personal experience in regulatory filings and enforcement, but if I have correctly interpreted the proposal and intended outcome in NSCC-801, I strongly believe that it provides a great measure of resolution towards mitigating the risks outlined in the issues addressed above and will provide momentum for further improvements to the system, such as T+1 settlement.
NSCC-801 is an excellent starting point to encourage the growing trend of individual investment and consequently the economic prosperity of the country, and thus has my full support.
Gratefully yours,
C. J. Chou.