Subject: File No. S7-12-06
From: James O Carnes
Affiliation: Retired NYSE Corporate Executive

April 16, 2007

"The current definition of a threshold security is based, in part, on a security having a threshold level of fails that is equal to at least one-half of one percent of an issuers total shares outstanding. Is the current threshold level (one-half of one percent) too low or too high? If so, how should the current threshold level be changed?"

Too high. Before stocks can be shorted, they should be borrowed and marked as borrowed, so as to not be eligible for borrow again. If this procedure is followed, there would not be any fails, so consequently, the question is academic. Continued fails constitute serious harm to investors and to me as an investor.

"The current definition of a threshold security is based, in part, on a security having a threshold level of fails that is equal to at least one-half of one percent of an issuers total shares outstanding. Is the current threshold level (one-half of one percent) too low or too high? If so, how should the current threshold level be changed?"

See answer to question 1. Any and all threshold levels would be eliminated if all shorting without a legitimate preborrow is prohibited. If not harm will continued to be experienced by investors, such as myself.

"Should we consider other amendments to the locate requirement?"

The word "locate" in the rules should be eliminated and replaced with "borrowed" and all borrowed shares should be identified and properly segregated and marked in a manner easily tracked, so the same shares may not be re-borrowed. Investors will continue to be harmed otherwise.

"Some people have asked for disclosure of aggregate fail to deliver positions to provide greater transparency. Should we require the amount or level of fails to deliver in threshold securities to be publicly disclosed?"

If you are going to continue the charade of FTD's, yes absolutely. Fails should not be permitted under a specific rule requiring actually borrowing, but if any FTD's occur, the guilty party should be identified to the entire investing public. Anything less is a travesty and constitute continuing harm to investors. Those guilty of violating the intent and spirit of the securities acts should be available for all to see and any attempt by the SEC to make it legal or legitimate should not be permitted.

"Should we eliminate the options market maker exception altogether? Would this impede liquidity, or otherwise reduce the willingness of options market makers to make markets in threshold securities? Please provide specific reasons and information to support an alternative recommendation."

An unequivocal yes. The options market maker should secure a bone-fided borrow if he is going to short. Otherwise, any attempt to curb the FTD problem, is going to fail. The problem with the current persistent fails has already been identified at least in part to the exception granted to the options market maker and to the grandfathering provisions. There should be absolutely no exceptions for anyone. Settle the trades at T+3. Anything less eliminates any protection and harms the average investor, who the law was designed to protect. Those same laws charge the SEC with it's enforcement. Unfortunately, no recognizable enforcement actions in recent times has been forthcoming much to the detriment of a lot of investors.