Subject: File No. S7-08-09
From: Vineet Agrawal

May 5, 2009

Madam Chairwoman:

Let us not complicate things and re-instate the proposed uptick rule permanently where shorts can short only at higher price than the previous price. Also, let us not debate if longs and shorts shall be treated the same way. The unequivocal answer is NO.

Remember we reward wealth creation not wealth destruction. There are people who argue why there is no downtick rule when the stocks are going up. This is unfair to shorts. This argument is fallacious. The shorts are there in the market for only one reason and that is to prevent from bubbles to be formed.

If the stocks are going up, the shorts can short as much as possible. If the stocks are overpriced, they will eventually burst and the shorts can profit from that. The shorts are not there to drive the prices down to the level where all common sense goes out of window. Anybody who understands valuation does not feel safe in this environment where the markets act more like casinos and less like companies that can keep up or outperform the money supply that the fed injects in the system every year. As you can imagine just the talk to restoring uptick rule in Early March 2009 has stabilized the markets.

Markets are considered as the proxy for the economy. Falling markets can create a false sense of deteriorating economy. If this happens for short period, it may not have much of a negative effect and quick bounce in the market discard this as a false alarm. A prolonged period of falling markets creates negative feedback to the economy and it becomes a self fulfilling prophecy. This is what happened in last 2 years.

We know falling markets are not good for anyone and it does not serve any purpose. Markets need to rise to keep up with the money supply. However, if we provide people with ulterior motive to profit from the falling markets, they will do whatever it takes because it is well documented that fear is more pronounced an emotion than Greed. The hedge funds can book quick profits by instilling fear. This is what happened in last 2 years.

The uptick rule acts as the balancing act. It prevents the hedge funds from propagating unjustifiable fear as they know there is no profit to be had.

Please do not listen to anyone who says that markets are too fast and previous rules are antiquated. Obviously, penny test would not work. It was put in place in 1933. That penny in todays term is equivalent to 10 cents adjusted for inflation at 3% for 77 years.

Let's not reward traders. Let's reward long term investors.

Lets not meddle with something that worked for 75 years. We have seen the result for fixing something that was not broken, let's not repeat the same mistake. Lets put the uptick rule back as it was earlier and adjust the penny to 10 cents to account for inflation.

Thanks

Regards
Vineet Agrawal