Apr. 20, 2022
To whom it may concern: I am writing about a concern I have regarding the SEC's recent rule proposal: SR-NSCC-2022-003 This rule would allow hedge funds and other nefarious actors in the US stock market to effectively steal from the American retail investors and businesses for little to no risk. I'll spare you the technical details but this rule change is the absolute anti-thesis of a fair and transparent market. The sponsors for this rule at the NSCC are asking the SEC to assist in their illegal naked shorting activities. As you may already know, naked shorting is the illegal practice that Wall Street firms use to pocket money by short selling companies through borrowing shares and selling them back to the market without actually having possession of such shares. Done at scale, this practice drives down stock prices artificially, stealing gains from retail investors and choking growing businesses of essential capital. The only risks of naked shorting are regulation enforcement and unexpected price discovery causing short sellers to lose money as the shorted stock actually rises in price, forcing them to close their position at a loss a.k.a. a short squeeze. Essentially, this rule would enable avoidance of true market price discovery through onward lending. It prevents short squeeze scenarios as it allows firms to avoid forced delivery of shares and essentially 'wait out' stock price rises while keeping their short positions intact. It removes the infinite risk of naked shorting entirely under the guise of liquidity, and in so doing removes the deterrent of engaging in what is supposed to be very risky and ILLEGAL business practice. It's all upside for market makers which excessively naked short securities, and all downside for those on the wrong side of their shorting which would constitute retail traders, the very people the SEC is supposed to protect. This rule is the opposite of creating a fair market and dumps all risk onto retail, allowing naked shorts to obfuscate and dilute their risk while profiting greatly off the backs of pioneering companies and small investors. There is no need for this rule. I would suggest the SEC focus their attention on forcing the NSCC to deliver shares on pain of criminal prosecution and banning dark pool abuse to prevent the same illegal practices that this rule change would enable. It is outrageous that rules like this are still being proposed that only favor reckless institutions after the events of January 2021. I strongly request that you oppose this rule change and keep our markets free and fair for all. Respectfully, Gene Kitamura