June 15, 2009
Chairman Shapiro:
As Jack Nicholson once put it so eloquently, You cant handle the truth. The you, in this situation, being the average ignorant and uninformed American citizen believing the sound bites of politicians that short sellers are evil. Investors have been led to believe that it is wholly unfathomable that any stock, at any time, should go down the market should infinitely rise, always. There is no fact finding to be done here by this Commission. The real fact finding was done years ago when this very body decided that the market could do without so frivolous and arcane a restriction as an uptick rule:
The Commissions removal of short sale price test restrictions followed a careful, deliberative rulemaking process, carried out in multiple stages from 1999 through 2006, and was open to the public at every stage. (See SEC Amendments to Regulation SHO Proposal File No. S7-08-09, page 4)
I may be young but in all my finite wisdom Id venture a guess and say not much has changed in the buying and selling of securities since 2007 (stock market performance aside, of course). By the Commissions own admission, some form of short sale restriction would have no material impact on the buying and selling of securities in the open market.
It occurs to me that the Commission should be spending more time investigating claims of fraudulent activity in the market, a duty that has often been overlooked as of late, and less time attempting to ram through regulations that have already been deemed ineffective. The current rules and regulations already in place in regard to short sales are adequate, when properly enforced. Even if a short sale restriction is passed, the Commission will still allow the market makers to short unrestricted. The real loser with a short sale restriction is the average investor who cannot properly hedge their portfolio.
Jimmy Kimmel once did a piece on one of his shows where he held a petition drive to end womens suffrage. He asked women, young and old, to sign his petition against such a great injustice. Many happily obliged while only a handful refused because they knew what suffrage actually was. It is important you keep the preceding story in mind when you take a look at the petition being submitted to the Commission by the great snake oil salesman Jim Cramer.
I urge you to examine the facts and avoid the herd mentality behind the latest push to implement short sale restrictions.
Respectfully,
Benjamin Baller
Trillium Trading