As one of the biggest regulating bodies within the overseeing of the stock market, Finra should strive to have a way more transparent, thorough and demanding framework for reporting short positions. You admit in your proposal that the extent of which many of these methods are being implemented in the market - are unknown. As the framework stands today, institutions that profit from short selling are almost incentivised to hiding their short positions, as there are multiple methods for doing this LEGALLY. Finra handles the licensing and regulation of broker-dealers, which in turn demands a much more strict approach for how these broker-dealers overseen. This should be paramount in building a fair and free market, where retail investors aswell as big financial institutions can operate on equal terms. There is not enough transparency for retail investors to accurately know how much of a company's outstanding shares have been shorted, which in turn can create a false sense of security as to how much the shares are dilluting the market. As the SEC rely on FINRA for accurate reports on the positions of broker-dealers, they can not act appropriately unless FINRA itself decides to make the reporting of short positions more accurate. It is also your responsibility to enforce rules for brokers and dealers, and as such these should reflect how much transparency YOU as a regulating body of the stock market - want on the positions they possess. Under current Rule 4560, firms are required to report the gross short interest in a security aggregated across all accounts TWICE a month. This should be severly cut down, as two months gives these firms way to much leniency. In this time frame, the gross short interest no longer accurately reflects their position, and makes it more difficult for both the SEC and FINRA to spot preditorial short-selling. The type and identity of these firm's accounts should also be provided. The concept of arranged financing programs should be seriously reconsidered, as it encourages hedge-funds to take on way more risky investments, as they can just lean on the prime brokers for financial support if they find themselves in a bad position. This not only poses risks for the hedge funds themselves in the long run, but also for the prime brokers which may have to "bail out" these hedge funds. Stock lending is also a serious issue, as there exists several well-documented provings of hedge-funds using this to transfer both long and short positions to another legal entity (often offshore). This gives a false sense of how many long or short positions that are actually posessed by said hedge-fund, and makes regulation of the US-stock market even less transparent. Broker-dealers can also lend internally to close a short-position and create a loan instead. This MUST be considered regulated by FINRA, and such loans should without a doubt be treated as a synthetic short position. In addition, it should be made illegal to use synthetic short positions to facilitate the closure of another synthetic short position. Nothing about this practice brings anything positive to the market, unless you're using these synthetic short positions as a way to artificially exit one position at the cost of opening a new one. No such practice should be allowed to find place. Synthetic positions should also be reported, open ended. There should not be any difference in FINRA's regulation and enforcement for short positions, synthetic or not. Allocation of fail-to-delivers should be delivered automatically instead of FINRA waiting for an inquiry. This should be the standard procedure, as one can not rely solely on firms reporting these if they are in a bad position. For my final words, i want to say that it is very concerning, looking at the US stock market as a foreign retail investor. Many places around the world, short-selling is outright illegal - which is not surprising at all considering the harm they can inflict on the market. I therefore feel like it is FINRA, along with the other regulatory bodies of the US stock market, to takes these matters seriously. Reporting, oversight, handling and enforcement on short-positions should be as accurate and demanding as possible, to ensure that it is not used as a mean to harm to involved parties. Thank you for taking comments from the public. I really hope that some of the comments on here by concerned retail investors are considered equally along the ones from financial istitutions. There is a very important relationship here, that are in severe need of new ways of doing things. Thank you for your effort and time.
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Odin Comment On Regulatory Notice 21-19
As one of the biggest regulating bodies within the overseeing of the stock market, Finra should strive to have a way more transparent, thorough and demanding framework for reporting short positions. You admit in your proposal that the extent of which many of these methods are being implemented in the market - are unknown. As the framework stands today, institutions that profit from short selling are almost incentivised to hiding their short positions, as there are multiple methods for doing this LEGALLY. Finra handles the licensing and regulation of broker-dealers, which in turn demands a much more strict approach for how these broker-dealers overseen. This should be paramount in building a fair and free market, where retail investors aswell as big financial institutions can operate on equal terms. There is not enough transparency for retail investors to accurately know how much of a company's outstanding shares have been shorted, which in turn can create a false sense of security as to how much the shares are dilluting the market. As the SEC rely on FINRA for accurate reports on the positions of broker-dealers, they can not act appropriately unless FINRA itself decides to make the reporting of short positions more accurate. It is also your responsibility to enforce rules for brokers and dealers, and as such these should reflect how much transparency YOU as a regulating body of the stock market - want on the positions they possess. Under current Rule 4560, firms are required to report the gross short interest in a security aggregated across all accounts TWICE a month. This should be severly cut down, as two months gives these firms way to much leniency. In this time frame, the gross short interest no longer accurately reflects their position, and makes it more difficult for both the SEC and FINRA to spot preditorial short-selling. The type and identity of these firm's accounts should also be provided. The concept of arranged financing programs should be seriously reconsidered, as it encourages hedge-funds to take on way more risky investments, as they can just lean on the prime brokers for financial support if they find themselves in a bad position. This not only poses risks for the hedge funds themselves in the long run, but also for the prime brokers which may have to "bail out" these hedge funds. Stock lending is also a serious issue, as there exists several well-documented provings of hedge-funds using this to transfer both long and short positions to another legal entity (often offshore). This gives a false sense of how many long or short positions that are actually posessed by said hedge-fund, and makes regulation of the US-stock market even less transparent. Broker-dealers can also lend internally to close a short-position and create a loan instead. This MUST be considered regulated by FINRA, and such loans should without a doubt be treated as a synthetic short position. In addition, it should be made illegal to use synthetic short positions to facilitate the closure of another synthetic short position. Nothing about this practice brings anything positive to the market, unless you're using these synthetic short positions as a way to artificially exit one position at the cost of opening a new one. No such practice should be allowed to find place. Synthetic positions should also be reported, open ended. There should not be any difference in FINRA's regulation and enforcement for short positions, synthetic or not. Allocation of fail-to-delivers should be delivered automatically instead of FINRA waiting for an inquiry. This should be the standard procedure, as one can not rely solely on firms reporting these if they are in a bad position. For my final words, i want to say that it is very concerning, looking at the US stock market as a foreign retail investor. Many places around the world, short-selling is outright illegal - which is not surprising at all considering the harm they can inflict on the market. I therefore feel like it is FINRA, along with the other regulatory bodies of the US stock market, to takes these matters seriously. Reporting, oversight, handling and enforcement on short-positions should be as accurate and demanding as possible, to ensure that it is not used as a mean to harm to involved parties. Thank you for taking comments from the public. I really hope that some of the comments on here by concerned retail investors are considered equally along the ones from financial istitutions. There is a very important relationship here, that are in severe need of new ways of doing things. Thank you for your effort and time.