August 7, 2006
To whom it may concern:
With regards to proposed Reg SHO amendment S7-12-06:
The proposed amendment is insufficient to address the "Failure to Deliver" issues enabled in the original.
Revisions should be made so that the proposed admendment will:
1. Eliminate the Grandfather Clause
2. Narrow the market maker exception (options market makers)
The proposed amendment of "exceptions" to the "locate" rules in REG SHO are not going to guarantee actual "delivery" of securities in the future. The rules should be amended so that delivery is guarenteed with no exceptions. Nothing short of a universal delivery requirement will put a stop to delivery failures.
Also, the data quoted in the footnotes does not include either unreported ex-clearing FTDs nor the misuse of security entitlements that harm the price of securities.
The issue is that trades are not getting settled, and investors are being sold bogus security entitlements. Regulations should be enacted that will prevent this from ever happening in the future.