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December 22, 2003 Mr. Jonathan G. Katz
Re: File No. S7-23-03 Dear Mr. Katz I decided to write to you after learning about the proposed regulation SHO, which made me very concern. I've been a stock trader for more than six years now and currently Trillium Trading is employing me as a professional trader. I truly fear that a new uniform bid test allowing short sales to take place once cent above the bid, would be bad for the markets as a whole, individual traders, investors, and small trading companies. Under this proposal the only way to short a stock would be on the offer. And in case that the general trend of the stock, sector or markets is down, it would be practically impossible to short the stock. Since market makers and big intuitional traders will set trading programs that will keep the offer lower hence eliminating any chance for the small trader or investor to short. These will immediately impact small traders for not to get involve in the markets that will lead to severe liquidity issues. The lack of liquidity could be actually more harmful to exaggerate down moves in a stock and markets. This proposed regulation would also be harmful to buyers. Because short sellers will not be able to hit the bids, the buyers, in many situations, will have to pay the spread, meaning they will not get the true best price of the stock. Thus, traders who shorted the stock at higher prices will have difficulties in covering their position by placing it on the bid. Think about it, if my bid is in, I want to have someone to hit me. Otherwise, what would be the point even in shorting? Thus, the fact that markets makers will be exempt from the bid test rule is absolutely unjust. Besides the fact that market makers are providing liquidity, they also function mostly as day traders. If you give them this advantage of being able to solely short whenever they want and not for any of the other participant traders is ridicules. This will immediately affect my source of revenue, and all the other `general public', whom all represent a big portion of the markets volume. This is the public that the SEC is entrusted to protect. I strongly urge you to reconsider the proposed Regulation SHO for the sake of the markets. Sincerely, Moshe Fogel
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