Apr. 20, 2022
CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you recognize the sender and know the content is safe. This proposed rule is allowing participants to transfer their “bad bets” to a new firm with no repercussions, without settling on the “free and fair” market. It is neither right nor fair to provide a loophole or opportunity for firms to fail to deliver the positions that they’re inheriting. If this truly is a "free and fair" market and a firm has lent or borrowed assets that should not exist, an escape route should not be provided. If you are gong to acquire an insolvent firms positions you must close out those positions. This is yet another example of how participants can fail to deliver what should rightfully be delivered. This goes against a simpler structure and provides a free and fair market. Adding yet another layer of complexity and borrowing doesn’t solve the underlying issue of over lending. It will allow the facade of the “free and fair” market to continue without rectifying the underlying idiosyncratic risk. This issue is directly caused by firms lending what they do not own and the proposed rule would facilitate the transference of these illegitimate positions. This is the alarming underlying reason the markets got to this precarious position. “For the sake of liquidity” is just a justification for their bad bets. If participants maintain a high risk portfolio, those participants are RESPONSIBLE for said risk. DO NOT ALLOW nefarious participants to make extremely risky bets and get away with it with no reprocussions. This will not solve the underlying issues we have in our current markets and further reduces the “free and fair” in our markets. Participants must be held accountable for the risk they take on. Alarmingly this confirms retail sentiment about our “free and fair” markets not really being so, as well as suspicions that big market participants routinely and knowingly engage in illegitimate lending of securities for their own personal gain. It shelters nefarious participants and that is COMPLETELY UNACCEPTABLE. If a retail participant enters into a high risk investment scenario like options trading and it goes south, we cannot transfer our “bad bet” away, we are responsible for it. SO ARE THEY. A clear solution is outlawing FTDs outright, ACTUALLY locating shares to borrow and tagging all shares. This forces participants to always deliver what they said they would, which is how our markets should have always been. Kyle Richards