April 20, 2022
This proposal should not be considered. I disagree with its intent 100%.
If an obligation was taken on by taking money and promising delivery of an item, that obligation must be fulfilled. Failure to deliver is not acceptable to me, nor I expect any other investor. Any delay in delivery is also not acceptable to me, nor I expect any other investor. Multiple delays should not even be considered as a possibility.
Securities Financial Transaction (SFT) is completely unacceptable to me. There is no reasonable need for borrowing of Items held by pension funds or sovereign funds or investment company funds. The potential borrower has no positive intent for borrowing from these sources. The proposal does not give transparency or any decision making to the actual owners of the funds e.g. pension plan participants, and the item borrowed is typically used to devalue that same asset, without appropriate consultation of the item owner nor appropriate compensation proportional to the value change from lending.
Liquidity provision is not an acceptable reason for the insanely excessive borrowing that this proposal requests nor would allow. Liquidity provision in fact has negative intention towards the item owner, and would only be beneficial to those entities that wish to borrow. Excessive borrowing is needed by those who cannot deliver the items initially promised and for which a payment has already been accepted.
The intent behind the novation and this (SFT) type of transaction is clear: it is to delay the obligation of the exact item promised in the first transaction. The proposal has potential for abuse (I suspect it is designed for this purpose) by allowing multiple levels of borrowing of the same items to the point of irresponsibility.
The proposal claims the following: NSCC understands that SFTs provide liquidity to markets and facilitates the ability of market participants to make delivery on short-sales, and thereby avoid failures to deliver, naked shorts, and similar situations. The reality is that failures to deliver and naked shorts are not minimized by SFTs. Instead, SFTs would help and encourage the potential borrowers criminally poor initial assessment of liquidity. This poor initial assessment of liquidity is the matter that should be targeted and prevented SFTs are being proposed as a means for borrowers to never have to address already existing failures to deliver That means that money was taken for an item that was never delivered and is planned to never be delivered This should be criminal. This proposal would hurt the tools and abilities that regulators have available to protect an investor. The quoted section of the proposal betrays the intent of the NSCC: the reality has been twisted in their proposal to hurt the popular retail investor, and protect those entities with existing obligations to come good on failures to deliver. This is unacceptable behavior to me. These entities MUST meet their obligations to deliver as soon as possible. There must be zero tolerance towards allowance of failures to deliver.
Any subsequent proposal that has the intent of this one should be immediately thrown out from consideration.
This proposal introduces complexity that does not suit me nor investors of my style. Added complexity is completely detrimental to this subject area. Proposals that aim to simplify are the only type of interest to me.