Apr. 21, 2022
The proposed rule change SR-NSCC-2022-003 should be disapproved under Section 19(b)(2) of the Exchange Act without significant changes. Proposed rule change SR-NSCC-2022-003 fails to fulfill the requirements and spirit of REG SHO and opens the door to RICO violation liability by avoiding the already existing illegal \"naked\" short positions without consequence and by permitting the NSCC and its members to further illegally \"naked\" short securities under the guise of law. If SFTs are only used to provide liquidity it means Market Makers have failed to perform as required. If SFTs are used to deliver short-sales that would have failed to deliver otherwise, this means that the initial short sale was already a naked short, which violates REG SHO. This rule would shield and potentially further enable these activities through less market transparency. This rule enables NSCC members to dodge regulatory capital requirements. The NSCC explains that in the event of a NSCC member de fault, the NSCC will only liquidate the NET positions, and not the GROSS positions indicating that NSCC members are already taking such negligent risks and that action must be taken to minimize the market impact of these risks. The rule change includes no proposal to prevent the negligent risk of NSCC members. Instead, the rule change intends to protect the negligent NSCC member activity by making sure that the member does not go bankrupt in the event of default. Meaning that the negligent risk activity of the defaulting NSCC member will continue as they will re-emerge in the market to perpetuate their negligent risk behavior even further. This rule directly encourages increased risk behavior by minimizing the downside to the risk-taker. This proposed rule change is indicative of further abdication of the responsibilities expected of a regulatory body to deter illegal, negligent, and high-risk behavior.