April 21, 2009
To Whom It May Concern:
I feel very passionately about the reinstatement of the uptick rule. While I do believe that short-sellers are necessary for a healthy market, I do not believe that speculative short-sellers create any value. If an investor performs the necessary research on a security and decides that it should be sold short because it is over-valued, then that investor should be willing to sell this security short on an up-tick. In contrast, if an investor sells short a security without performing the proper research, then that investor is most likely speculating on a trend in the market and does not add value, somewhat akin to gambling. The investor who does not perform the research will most likely not sell short on an up-tick, but instead will serve as a speculative seller and exacerbate a downward movement. Although the same could be said for the long-only market, there is less wealth destruction when a stock runs and then pulls back than when a stock is driven down by speculative short-selling.
Any of the modified versions of the uptick rule would be a significant improvement over the absence of an uptick rule. However, if a stock is gated after a 10% decline, what happens the very next day? Does it get to go down another 10%? It doesnt address the heart of the problem, which is speculative short-selling. Speculative short-sellers do not help create wealth but destroy it, do not provide discovery of new information, do not contribute to the efficiency of markets, and are a large source of the increased volatility. The reinstatement of the full uptick rule will eliminate many of the speculative short-sellers in the market that do not contribute to market stability.
If the markets were established to create long-term wealth, reinstating the uptick rule is crucial for the confidence in the market and the long-term health of the market. Please use simple, un-politicized logic to agree on a final verdict for the uptick rule. I do not envy your position, but please take the most prudent course of action that will benefit long-term creation of wealth the most. Thank you for your time.
Sincerely,
Michael E. Miller
Concerned Citizen
Motivated Investor