April 19, 2022
This rule proposes using a vehicle, they call an SFT (Securities Financial Transaction ... sigh), as a placeholder for any securities transaction. As I understand it, these SFTs are fungible like a dollar bill. So, if you have 100 worth of SFT that you SHORTED, and want to Fail to Deliver rather than buy-in at market value, you can resolve it by utilizing another SFT worth the same amount set for the same delivery date. The cost one would pay for this \"feature\" would be based on the difference in closing price from one day to the next. This cost would be much cheaper than a market buy-in, especially when the floor for a security is like $1,420,696,969,420,741. Seems like a cheap way to can-kick a scary FTD problem (idiosyncratic risk?), rather than buy-in at current market value. I.e. seems crafted to protect the practice of abusive short-selling, when it doesn't work out for the SHF.
Increasing complexity in the market is not gonna resolve fundamental transactional flaws. It doesn't take a phd to understand that if you fail at the bottom layer of transaction, the top layers will eventually crash too. Hard. This proposed rule does not improve or resolve the issue in the markets.