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December 19, 2003 Mr. Jonathan G. Katz
RE: File No. S7-23-03 Dear Mr. Katz: I am writing because of my fear that the proposed Regulation SHO may result in an unhealthy state of the market and jeopardize the livelihood of traders and small investors like myself. I am currently a professional trader employed by Trillium Trading LLC and my main concern is with the proposed uniform bid test rule. Professional traders and small investors such as myself are important to the distributing of stock between the major buyers and sellers and providing liquidity that will help the market reach an efficient equilibrium. If the proposed bid test rule were to be implemented, it would have an immediate negative impact on the liquidity of the market as buyers and short sellers are now forced not to be able to engage in a mutually desired transaction at a specific price. With this lack of liquidity will come lower volume from small traders and investors for whom it will be less beneficial to participate in the market. This would in fact result in an effect to the market that is contrary to the original purpose of the rule. From my own experience as a trader and what I can see from the other traders around me, short term traders who are in short positions are more likely to cover their positions quickly and maybe even on the offer instead of a long term raid on the stock. By making it harder for people to short the stock, downward movements will become more exaggerated as sellers would not have those already in short positions buying from them on the offer price. These prolonged downward movements and lack of market liquidity that would result from the proposed Regulation SHO would be detrimental to the livelihoods of the small investors and traders who are so critical to the smooth working of the market. I therefore strongly suggest that you reconsider Regulation SHO. Sincerely, Chris Griffin |