Subject: File No. S7-19-07
From: Michael Paquette

July 31, 2008

Certain parties, notably associated with hedge funds, feel that 'naked shorting' is necessary, and are annoyed by the threat of actually enforcing existing rules, or implementing even more restrictive regulations.

Recall the uptick rule. The argument against it was that longs didn't have to wait for a downtick, so removing it was just leveling the playing field. Let's level the playing field for naked shorts as well.

If naked shorting is to be permitted, I want naked longs. I want to 'buy' shares without having to deliver any cash or have shares available to buy, and I want to sell to cover my long position and keep the profits. Without needing actual capital on hand, and not needing to borrow cash, think how much more efficient (and profitable) my investments can be

Now, the above is patently absurd, and would constitute a license to effectively print money. The existing ability to naked short similarly constitutes a license to print shares of stock. Removing the options market maker exception would be a good first step towards removing the current absurd ability to create shares via naked shorting.