Subject: File No. S7-19-07
From: C Rice

July 8, 2008

Dear sirs,

Please eliminate the market maker exemption. It is being abused. Evidence points to pervasive "cheats" using this exemption to defraud investors from recieving prompt and accurate trade settlement

Your commissioners are well aware of the findings of the SEC study conducted by Dr. Leslie Boni on market fails. She reported

Sellers of U.S. equities who have not provided shares by the third day after the transaction are said to have failed-to-deliver shares. Using a unique dataset of the entire cross-section of U.S. equities, we document the pervasiveness of delivery failures and provide evidence consistent with the hypothesis that market makers strategically fail to deliver securities when borrowing costs are high. We also document that many of the firms that allow others to fail to deliver to them are themselves responsible for fails-to-deliver in other stocks. Our findings suggest that many firms allow others to fail strategically simply because they are unwilling to earn a reputation for forcing delivery and hope to receive quid pro quo for their own strategic fails.

This is the market system that the SEC is supposed to be maintaining as fair and honest?

As an example of the abusive extremes occuring under the SEC's duty to control, reported by Wharton and North Carolina Economists in a paper titled, Failure Is An Option, for one clearing member they studied, there were 86 buy ins for an aggregate 69,036 FAILURES TO DELIVER over a two year period.

Who amongst the SEC knows such abuse occurs? And why have the loopholes that are abused still allowed to continue?

In a 2004 comment letter to Comm. Katz, CEO at the DTCC Jill Considine acknowledged that unmatched trades were being automatically settled, and that the industry needs to dramatically improve the rates of agreement on such trades.

Why arent unmatched trades after T+3 either cancelled, or settled via a broker buy-in at T+3? Why are unmatched trades allowed to be automatically settled at the NSCC?

I believe the answer is that the Industry has been profiting significantly from the strategic use of fails to delivers for a very very long time. And, that employees within the SEC and other government bodies been influenced to not interfere.

I believe that a deep investigation needs to be conducted as to which upper level SEC employees may have been influenced, and by what means.

It is interesting that former Comm. Nazarath once stated that Naked Shorting was only what investors cried when they wanted their share price to go up. Now, of course, naked shorting is known to be significantly prevalent enough to warrant much attention.

The evidence speaks for itself.

The SHO threshold list has companies on it for hundreds of days. Dr Boni's report details pervasive significant fails by participants. The DTCC admits that unmatched trades are automatically settled. Taser had a shareholder meeting in 2005 where 80 million shares were voted, when the entire outstanding share structure was 60 million. FBI Operation Uptick finds close activity between organized criminals and some of the largest Participants. On and on, a deep level of market corruption is evidenced, and the SEC has still made no significant moves but to buy more time for participants...from Grandfather clause to the toothless Reg SHO, to these extended comment periods,.. the Industry's abusive practices are protected by the SEC who is supposed to protect the investors.

The SEC allows for FTD's to be considered "securities entitlements" and exist as such in investor accounts, unbeknownst to the investor that they really hold only an FTD IOU and not a real share. And the SEC allows such by deferring to interstate Uniform Commercial Codes, rather than following the Federal law Act of 1934 section 17A mandating prompt and accurate trading of "securities"...and not any sort of futures entitlement in it's place.

The industry cheats and their abetting influenced officials will not pursue reforms on their own. They will only cease their abusive market practices when forced to. In my opinion, the SEC still does not excercise the Integrity to enforce the Congressional mandates set forth in the SEA 1934 and section 17A. However, I still hold hope that Justice will eventually be met, and that the paper trails of these abusive market practices will be traced through investigation, and that heads will roll for the crooked participants and treasonous officials who would benefit themselves through the harm of so many others, and our great nation's economy.

Thank You

US Citizen