From: Dean Sheikh [dsheikh573@hotmail.com]
Sent: Sunday, November 23, 2003 11:29 AM
To: rule-comments@sec.gov
Cc: dsheikh573@hotmail.com
Subject: File No. S7-23-03 : Propose Bid Test & After Hours Enforcement

Dear SEC:

 In reference to the new proposed bid test rule, under the proposed
Regulation SHO:

In general, I believe the proposed bid test rule will make the markets less
efficient, not more efficient.

If the short sell rule is extended to after hours trading in NNM securities,
a considerable inefficiency will be introduced at and very near the open in
thinly traded NNM securities.  Without traders and market makers being able
to effectively short pre-market, stocks with meaningful negative news (e.g.
earnings miss) will invariably open artifically high.  Market makers will no
longer be able to guarantee the opening print, since they will effectively
not be able to compete in the pre-market.  This will lead to an effective
"one sided" market shortly after the open.....Investors who place buy orders
will get filled (at a high price) and investors who place sell orders will
suffer enormous slippage due to lack of liquidity.  Obviously, this will
hurt investors, not help them.   It will also greatly increase the
volatility after the open.  Increasing volatility without increase overall
porftolio performance....this is exactly what most investors work to avoid!

I suggest that there be no short sell restrictions pre-market.  This will
keep opening prints meaningful and the 9:30-9:45 am timeframe will be a
safer place for average investors to trade.  Since typically only
professional traders, market makers, and institutions trade in the
pre-market, unrestricted short selling should not hurt the market in any
way.

If the short sell rule is implemented in the pre-market, what bid will be
consider the Best Bid?  Currently, the dessimated best bid includes market
makers' quotes.  As you know, market makers quotes are meaningless before
9:20am.  Market makers have no obligation to trade at their "quoted" prices
and have no obligations to update their quotes when presented an order
before 9:20am.  Any single market maker could prevent all short selling by
simply putting a bid of $999 in his/her quote.  In gap down situations,
market makers who do not update quotes will again prevent short selling.
Therefore, only ECN bids should be included pre-market when determing the
best bid.  It may be tempting to add a modification like "Best ECN bid, but
not lower than yesterday's close".  This would be overly restrictive and
would disrupt trading when important information is released ; Yesterday's
closing print is not really relavent after negative earnings are announced,
for example.

To recap:
    The proposed short sell rule should not be implemented pre-market.
    If it is implemented, only ECN bids should be considered in determining
the best bid.
    The short sell rule should not use yesterday's closing print as a floor
for short sell prices.




Best Regards,


Dean Sheikh