April 20, 2022
From my understanding, the proposed rule is ment to alleviate liquidity problems arising from, e.g., the accumulation of Fails to Deliver (FTDs).
However, in my opinion, by establishing the proposed Securities Financing Transaction (SFT) Clearing Service the root of the problem - which is increasing market instability due to overgrowing market complexity - is not tackled.
The problem is not tackled, since SFTs will constitute just another (potentially abusable) vehicle, which is ridiculous as it by definition increases complexity and thus exacerbates the aforementioned problem.
Lastly, I like to point out, that this rule will definitely not protect retail investors, as retail who does certainly not engage in short-selling or similar activities on a questionable scale, leading to unreasonable high amounts of FTDs in different securities.
Instead, I strongly advise the SEC to find ways to force the locating of lend-out-securites, when a participant accumulates abnormal amounts of FTDs. It should be clear, that settlement of failed transactions is paramount.
Sincerely,
M.P.