July 10, 2008
The SEC published today July 10, 2009 a memo within the Comment section of the newly proposed options market making exemption. The memo, issued by the Office of Economic Analysis is dated June 9, 2008. Because it is dated June 9, 2008 the memo is buried deep down into the reams of new comment memo's submitted since the Division of Market Trading re-opened this 2 year reform for comment on July 8, 2008.
Of concern is not only that this memo has been buried deep into the comment section for this rule, and dated not for when it was uploaded but for when the draft was issued nearly a month previously, but that the memo illustrates the callous and irresponsible nature of the SEC's rule making policies.
Consider that in June 2006 the SEC first proposed changes to the options market making exemptions. In August 2007 the SEC re-opened comments to that reform adding additional alternatives to the singular rule change proposed in 2006. One must assume that the SEC did not spend 13 months making alternatives to the 2006 proposal without the data to substantiate the changes or, for that matter, the data to support the very need for a rule change back in 2006.
In September 2007 a comment memo comes in from an Attorney working for Boston based Ropes Gray, who happens to be a committee chair at American Bar Association using the ABA letterhead for emphasis, and demands that data be presented to substantiate the needs for this change. This would be from the very same attorney who in 2006 stated the same demands so the comment memo's contents should have come as no surprise to the Commission.
Instead of publishing data used to support the proposal for change the SEC stalled.
In the Office of Economic Analysis memo published, and now available, it is understood that the time period for the data being analyzed ranged from April 9, 2007 thru March 31, 2008. So here is the issue:
1. A majority of this data is post the 2007 re-opened proposal comment period (September 2007). Didn't the SEC do their homework before the 2006 rule changes were first proposed or at least evaluate data that supported re-opening the proposal back up for comment in 2007? If not, why not? Are we to believe that nearly two years passed after a rule change was proposed to the public before the SEC actually received and/or audited the data necessary to support the changes proposed?
2. March 31, 2008 is six (6) months after closure of the comment period and six (6) months after Mr. Higgins drafted his comment memo citing a lack of empirical evidence to support a rule change. Clearly the SEC did not decide to gather the data for Mr. Higgins in September 2007 when he presented his issue. In reality the audit could have initiated no earlier than April 2008 based on the performance period of the data closing on March 31, 2008. Why is that? Why did the SEC not initiate a study when first responded to based on the polarizing nature of this issue and the potential damages that could be inflicted on millions of investors?
Being July 10, 2008 and not yet officially in the comment period, investors and issuers can assume that change is not likely to come for another six months to a year despite the clear evidence that a problem exists. Such calculated delays are inexcusable.
The Division of Market Trading, and the members of the Commission staff who have to date been non-responsive to the requests of State Regulators, the Chamber of Commerce, and Members of the US Congress to address this issue, are beyond negligent in their duties. To much of the investing public these individuals are acting in a near criminal manner (evidenced by the tone of the comment letters submitted these past 2+ years).
Securities fraud and market manipulation is destroying investors, public issuers, and our US economy and the members of the SEC who are aware of this abuse are aiding and abetting the fraud due to their inactions. Clearly the Division of Enforcement has little to work with when the Division of Market Trading allows this form of manipulative trading to exist - by law.
Confidence in the US Markets, domestic and foreign, is diminishing over this very issue and the SEC continues to take appropriate action.
It is time the SEC stopped screwing the investing public and started honoring the mission set forth upon them by Congress back in 1934 - protect the investing public as a number one priority.