Subject: File No. S7-11-09
From: Rebecca Zhang, CFA

July 22, 2009

Below opinion is just my personal opinion which does not represent my company or any professional affiliation I am related with.

I think that some of the proposed changes will be useful including stress tests, the authority to suspend redemptions and disclosure etc.

I think that some of the proposed changes may do more harm than good. Such rule changes include removing the secondary tier and the illiquid bucket. I also think the average weighted maturity should be cut by less.

I evaluated these measured from the perspective of systemic risks. In a framework proposed by BIS, ensuring financial stability means addressing externalities. Two externatlities are central to systemic risk: the first is joint failures of institutions caused by their common exposure at the same time the second is the dynamics that increase procyclicality in that the dynamics of the financial system reinforces that of the real economy.

Take the proposed rule on the secondary tier securities, removing it will potentially caused the money market funds to increasingly hold common exposure. The same is with the illiquid securities like funding agreements from insurance companies. So these rules may increase systemic risk.

The significant cut on the average weighted maturity will push the level so low that investors will move to less regulated and risky financial productss that usually bear much more procyclinity. So this rule may increase systemic risk.