Comment Text:
I strongly agree with Chairman Christy Romero's comments regarding this issue:
https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement062823
Market participants have not demonstrated why vertical integration will help improve market transparency and stability, and there is every reason to expect them to suffer.
This new regulatory organization should be rejected since it only serves to hand over the ability of substantially more risk and leverage to a vertically integrated clearinghouse, which becomes a de facto monopoly. It makes risk more difficult to assess, and creates barriers for a disciplinary feedback mechanism to function.
The current regulatory protections for customers PRESUME THE EXISTENCE of a separation, so any blurring of it will undermine the existing regulatory regime. Indeed: that's the entire point. If the entity which is expected to interact with customers and protect them is now the one benefiting from their trades, then there is an OBVIOUS MORAL HAZARD which should never even be considered, let alone approved.
If the proposed changes are allowed it will further erode investor confidence in the US market, which is essential for the market to function and thrive. Clearinghouses are not looking out for the customers and investors first, because their own interests will necessarily be placed first.
Allowing any consolidation brings additional risks, less regulatory oversight, and less transparency and reporting. It will increase leverage and risk in order to make more money, but at the expense of the investing customer, and with catastrophic results when it is finally revealed due to the inevitable bankruptcy.
