August 6, 2008
To Mr. Christopher Cox, Chairman of the Securities and Exchange Commission:
I support elimination of the market-maker exemption for selling short corporate securities. I further support the temporary requirement for a "hard locate" before selling short the securities of nineteen large financial institutions. The requirement should be made permanent and must be extended to all publicly-traded securities.
To give a single example of the rampant short-selling abuses that have distorted the financial system, the Financial Select SPDR Fund (XLF, American Exchange) has issued 83,573,000 shares. Each of these shares represents a portion of the largest banking companies in the United States. As of July 10, 2008, there were 168,477,646 shares sold short, or more than double the number of outstanding shares. Since these shares have been sold and are electronically reported in accounts around the world, in effect this has diluted the shares held by all and sundry by over 50%.
Fairness demands an immediate and permanent end to the rules that have allowed such abuses, including the market-maker exemption. The national security of the United States of America is at risk. The abuses in short-selling attack the economic well-being of the entire country, not merely its largest banks.
Robert M. Nosow, Ph.D.