April 23, 2022
If an insitution is overextended in their positions to the extent that they can not pay what is owed to their creditors in the event of a justified margin call, the only correct approach is for them to liquidate their postitions in order to pay out. The risk they have taken on was known to them and they took it anyway. Financial institutions are supposed to know and understand the risks that they enter when taking on leveraged positions in derivatives markets and through other financial instruments. Under no circumstance is there a reason to give these parties any additional ways of escaping their obligations under the guise of liquidity or otherwise.
The way to combat market disruptions from fire sales is to tighten regulation on the leveraged derivatives positions which institutions can take, not the creation of additional ways for them to get out of their situations when things inevitably go bad.
I strongly disagree with every proposition made in this proposed rule change.
The proposed benefits are miniscule at best, in comparison to the build up of massive future problems created by this regulation, which would end up being magnitudes greater than anything that would supposedly be remedied by this rule change.