Subject: File No. S7-08-09
From: Leon Kappelman, Ph.D.
Affiliation: Director Emeritus, IS Research Center

May 10, 2009

Naked shorting: Being able to create stock out of thin air to sell and drive down the price of real stock is absurd. It is illegal and that law should be enforced rigorously.

Uptick rule: Reduces ability to conduct (whether explicitly coordinated or not) bear raids.

What is probably the greatest wealth destruction in American history was made possible (enabling fundamentals aside) by combining the lack of enforcement of naked shorting rules with the elimination of the uptick rule AND the ability of said shorters to also buy "life insurance" in the form of credit default swaps on the companies whose equity they were destroying. It is unconscionable that the government allowed this to happen, and unconscionable that it continues to do so. The legal, ethical, and moral implications of those doing this is abhorrent. PLEASE:

1. enforce naked shorting rules
2. reinstate the update rule
3. at least require disclosure of those investors (hedge funds included) who have credit default swaps and short positions, and
4. use your computers to see where combined positions of shorts and credit default swaps indicate a possibility for market manipulation.