Dick Cashman Comment On Regulatory Notice 21-19
I apologize for the undoubtedly large number of submissions you are likely receiving from those simply looking to vent rather than actually comment on the specific matters in this notice. The scope of volume seen in trading is absolutely daunting, and I think the first question that should be asked regarding any information being collected is whether it is purely self-reported, or if there is some way to readily independently audit/validate said info in a mostly automated fashion. If data is purely self-reported, enforcement becomes impossible; the effort needed to audit will always outweigh the amount of data coming in. I wanted to remark on the proposals through that lens. Content of Short Interest Data: - Proprietary ... this seems like it would only be self-reporting w/ no way to audit in an automated manner, so I have doubts about its usefulness. - account ... given that the data is delivered to the public as an aggregate, I don't see a justification for limiting the release of any information discussed so far (where this comes up later, I definitely understand the add’l info being non-public) - synthetic ... it would be nice to see this included and tracked similar to the threshold list (ie: a list of securities w/ >x% synthetic shorts). I also imagine there would be fairly easy ways to sniff out instances where this is likely being misreported, whether willfully or negligently (using data already being collected). - loan obligations … I honestly don’t understand the logistics of this practice - TSO … literally could not agree more as to how invaluable this would be juxtaposed with short data - threshold … to reiterate, I’m very against self-reporting. That being said, since this data is already being collected by the exchanges, having it be self-reported could potentially be an easy litmus test for the accuracy of reported data. Frequency and timing: - It seems like the current system is like I got an apartment where the landlord only checked my W2 rather than a year’s worth of paystubs. The job is retail so the hours are variable and sometimes my hours dip to 50% of the average. When that happens I ignore blood draw recommendations and rotate between several places the day before rent is due on bad months. Does he know I’m almost dying from losing too much blood? Nope, the check clears. Does it technically work most of the time? Yeah, sure. Do I think he might have felt differently about renting me a place if he knew I would have to engage in such risky behavior to pay rent sometimes? Absolutely. An increased frequency in reporting can help identify risky behavior, and given advances in technology that allow for HFT unreasonable NOT to expect the frequency of reporting to increase as well. Information on allocations: - In conjunction with the disclosure of synthetic shares mentioned previously, this would be phenomenal. I suspect that self-disclosing the close-out obligation timeframe may be ineffective, but since this could be compared to those numbers for each security it could easily be used to validate submissions. Publication of Short Interest : - The deliberate withholding of data to impair retail’s ability to make informed decisions regarding publicly traded securities is absolutely infuriating. The fact that this is even up for discussion rather than met with disgust over how profoundly unethical this concept is is telling. It’s one thing if specific data is not being collected, it’s another if it is being collected but disseminated to different parties at different times. I think that prioritizing unilateral transparency in this way over the loss of profit mentioned here would instill a lot of trust in retail investors. I skimmed through the rest of the financial disclosures, but it all seemed to basically be various iterations of “you will have to pay to update your system to be in compliance with our reporting requirements should these measures be improved." It is truly unfortunate that there are some institutions that will have to pay for rule changes for which they were in no way responsible for enacting. This is just a pie-in-the-sky idea, but it would be an absolute fairy tale if there were a way to essentially use the fines from repeat offenders to subsidize the cost of systems upgrades for parties who were not disregarding the current set of rules.