August 18, 2009
The Honorable Mary Schapiro
Chairman
Securities Exchange Commission
Dear Chairman Schapiro,
Subject: In support of the "above bid short selling rule"
As an individual investor, I am writing to support immediate action on the above bid rule and, in addition, immediate and vigorous enforcement against the practice of illegal naked short selling. In 2007, the Commission eliminated the uptick rule which provided that a listed security could only be sold short at a price above the price at which the immediately preceding sale was effected (plus tick), or (ii) at the last sale price if it was higher than the last different price (zero plus tick). The Commission is now revisiting that decision and has proposed to implement a price test, based on either a national best bid or last sale price or, alternatively, to apply a circuit breaker on a particular security during a severe market decline in that security.
Short selling can be a legitimate and important financial tool. Legitimate short selling can operate as a mechanism for generating market liquidity, securing price discovery, and facilitating important risk management activities. However, short selling practices that distort the markets through manipulation and abuse are a threat to our markets, our economy, and the financial health of companies, both large and small. Reinstatement of the uptick rule is needed to reduce the opportunity for abusive trading practices and to restore investor confidence.
A bi-partisan bill in the U.S. Senate, S. 605, ordering the SEC to reinstate the uptick rule has been introduced by Senators Ted Kaufman (D-DE) and Johnny Isakson (R-GA). Senator Kaufman said that abusive short selling was tantamount to fraud and market manipulation. Similar bills, H.R. 302 and H.R. 1406, have been introduced in the House of Representatives.
Should the Commission fail to protect the investing public, Congress will eventually be compelled to do so. However, I urge the Commission to act promptly and avoid the damage that is being done to investors everyday, especially to investors in small companies whose stock can be more easily manipulated.