Subject: File No. S7-19-07
From: Vijay Kumar

September 17, 2008

Why does SEC allow naked shorts to sell non-existent shares? Will the SEC allow investors to buy stocks with non-existent money? They shouldójust to create a level playing field.

If sellers can be allowed Fail-To-Deliver on shares then buyers should be allowed Fail-To-Deliver on money. Broker should allow customers to take long position without any money as long as they undertake to make up the difference upon closing their position. Will the SEC allow thatójust so that we are all on the same level playing field?

But the SEC wont allow that. Forget T+3 days, the buyer must put up 100% of the money before even placing a buy order. A portion of that 100% may be contributed by the broker as margin moneyóbut its still hard cash that the seller receives.

So why not have the same fairness at the other end? Why is it that the naked short is allowed to sell non-existent shares but the buyer must put up real cash?

My second question is why the uptick rule has not been reinstated despite the tremendous volatility that has been created in its absence? Our markets are on the brink of disaster. The Feds are pouring billions of taxpayers money to save the systems. Companies are being driven out of business by bear raids. And none of this would have happened if protections like uptick rule were still in place.

My third point relates to lending of shares. Currently the broker lends customers share certificates without getting an explicit approval from their customer. This is wrong. There should be an explicit approval by the customer that allows the broker to lend their stock certificates to the short sellers. Since the short sellers actions result in causing harm to the holder of those shares an explicit approval should be mandatory. I am sure some constitutional right are being violated here which the legal department should look into. Again, let me reiterate, any such approval shouldnt merely by a blanket coverage or something in fine print that the customer agrees to at the time of opening their accountóbut an explicit approval for all individual stocks that the customer holds.