June 4, 2009
Firstly I would like to thank you for looking at re-instating the uptick rule or a version of such. It is obvious since you announced your intentions investors have returned to the stock markets. Prior to the announcement day after day the markets were being beaten down which would have if allowed to continue would have been a catastrophe as redemptions in mutual funds would have forced a mass selling. You not only saved the markets but in the long run will have given the economy a much needed boost as profits will eventually be filtered into the purchase of goods and services.
Secondly I would like to submit a petition on behalf of those that took the time to sign it. The uptick rule for shorting must be returned in order to put a curtail on abusive practices unless our society wants to not only tolerate but reward bullies. The dumping of stocks have driven investors away and this abuse must stop.
http://www.petitiononline.com/abc456/petition.html
I would also like make a few comments.
1. One approach would apply a price test on a market wide and permanent basis
Comment: This sounds like what we have now but with a name. This allows short sellers to just dump stocks. A short seller should only be allowed to sell at a higher price than the bid in which case would be fair to both seller and buyer. The number of shares offered in a short sale should also be restricted based on the Bid so as not to scare the market. I have seen to often an importunate number of shares offered for sale and removed, without a sale, once the share price goes down.
2. The second alternative price test, similar to former Rule 10a-1, would be based on the last sale price
Comment: The Up tick rule. This is what those that signed the petio were hoping for.
3. The other approach would apply only to a particular security during a severe market decline in that security.
Comment: This will destroy what confidence is left in the markets and alienate most investors. This would, without the uptick rule, allow short sellers to target a stock and send a message to potential investors that they are going to lose regardless of fundamentals.
A similar scenario, which was happening to most stocks prior to your re-instating the
Uptick rule announcement, would be a gang extorting a store forcing its clients to shop at a competitors store across the street. Every time a customer entered the store the gang members would knock the goods off the shelves and intimidate the customer. Although the store kept lowering its prices in an attempt to get new customers the gang would persist driving them away. Eventually the store would close and the gang would move to the next store. Finally customers and stores would be so fed up with the situation they would simply move to another street.
Thank you again for taking this matter seriousily.
Stephen Moore