William Husband Comment On Regulatory Notice 22-08
William Husband
N/A
The Honorable Gary Gensler
Chair, Securities & Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Proposed changes to Options and Inverse Funds
I am opposed to a wholesale elimination of trading of Options and Inverse funds. These products provide important functions in the market, and should not be eliminated. However, I recognize that these products represent leverage in various forms, and that this is where these products can create risk in the market. I am opposed to requiring individuals to provide financial statements to regarding this matter.
The use of Options, in particular, can be lethal in certain situations. The history of our country is littered with bankruptcies that have resulted from the improper use of Options. I know personally of several large bankruptcies that were the direct result of improper use of Options.
My suggestion is that corporations or individuals that trade in the Options market be limited to liquidity and tangible net worth limitations as follows:
a. Corporations: The aggregate cost basis of Options should be limited to no more than 10% of liquid (current assets) tangible asset value, less debt. This would exclude many broker/dealers who typically carry debt to net worth ratios of 10x. This would also exclude a number of banks for the same reason.
b. The aggregate cost basis of Options owned or controlled by Individuals should be limited to 10% of an individuals tangible asset value, except that value of principal and secondary home should be excluded from tangible net worth*. Individuals should demonstrate knowledge of the security trading business, and the history of economic downturns and effect of interest rate changes on investments
* including cash value of life insurance
Audited Public Corporation financial reports should suffice for establishing corporate financials.
Individuals, like myself, should not have to provide a financial statement. However, it would seem like a good faith certification (subject to verification in the event of default) would be deemed acceptable.
My father was formerly employed by a grain trading firm on the Chicago Board of Trade (1935-1948) and later by the Commodity Exchange Authority in Chicago. He later became the head of the Kansas City office of the CEA.
William Husband Comment On Regulatory Notice 22-08
The Honorable Gary Gensler
Chair, Securities & Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Proposed changes to Options and Inverse Funds
I am opposed to a wholesale elimination of trading of Options and Inverse funds. These products provide important functions in the market, and should not be eliminated. However, I recognize that these products represent leverage in various forms, and that this is where these products can create risk in the market. I am opposed to requiring individuals to provide financial statements to regarding this matter.
The use of Options, in particular, can be lethal in certain situations. The history of our country is littered with bankruptcies that have resulted from the improper use of Options. I know personally of several large bankruptcies that were the direct result of improper use of Options.
My suggestion is that corporations or individuals that trade in the Options market be limited to liquidity and tangible net worth limitations as follows:
a. Corporations: The aggregate cost basis of Options should be limited to no more than 10% of liquid (current assets) tangible asset value, less debt. This would exclude many broker/dealers who typically carry debt to net worth ratios of 10x. This would also exclude a number of banks for the same reason.
b. The aggregate cost basis of Options owned or controlled by Individuals should be limited to 10% of an individuals tangible asset value, except that value of principal and secondary home should be excluded from tangible net worth*. Individuals should demonstrate knowledge of the security trading business, and the history of economic downturns and effect of interest rate changes on investments
* including cash value of life insurance
Audited Public Corporation financial reports should suffice for establishing corporate financials.
Individuals, like myself, should not have to provide a financial statement. However, it would seem like a good faith certification (subject to verification in the event of default) would be deemed acceptable.
My father was formerly employed by a grain trading firm on the Chicago Board of Trade (1935-1948) and later by the Commodity Exchange Authority in Chicago. He later became the head of the Kansas City office of the CEA.