Apr. 20, 2022
I am a retail investor, and would like to make my thoughts to this proposed rule known. This rule flies in the face of fair market mechanics, and gives unlimited power and scope to bad actors who would abuse such mechanics. It is set in place to "alleviate Fail To Delivers", but in action does nothing to eliminate them, and in effect protects the action of naked short selling, which is ALREADY ILLEGAL. This rule leverages the complexity of financial vehicles to put power in the hands of institutions, effectively safe-guarding them from their own bad bets. Passing this new rule would only further deteriorate the American public's faith in a "free and fair market". I urge you to withdraw this proposal immediately. They call an SFT (Securities Financing Transaction, 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 really high. Seems like a cheap way to can-kick a scary FTD problem, 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.