July 11, 2008
July 11, 2008
This letter is sent to strongly support the amendment to rule 203(b)(3)(iii) of Regulation SHO. I urge you to eliminate COMPLETELY the close out exemption for option market makers as proposed. There is no reason to keep this exemption in place. With the discovery on the part of some that the Option Market Maker can be rented out on an as needed basis when pressure is required to manipulate a stock price, this exemption has been used and abused on a regular basis. Hedging with puts by an Option Market Maker only creates phantom shares, which, by regulation, should be illegal. This opportunity for illegal creation of shares should be curtailed immediately, with clear wording, and very clear consequences for the instigator.
I also very strongly support the amendment to rule 200(g)(1), requiring Broker-Dealers to document the location of a security related to a sale marked long, and to determine if the customer does own the security. Equity Security Investors are being harmed by Broker-Dealers mis-marking short sales as long, and thus circumventing short sale rules. The point of having rules is to make sure everyone travels the same route. If its so easy to take the low road, many will do so. There are advertisements on national television to convince Equity Security Investors that purchasing stocks is so easy, a baby can do it. Thats all well and good, until you remember theres a well known phrase regarding the difficulty (or lack thereof) involved in stealing from unsuspecting youngsters, who place their implicit trust in those assigned to watch over them. The phrase is, Its like stealing candy from a Baby. The markets will work with significant changes to the rules governing the marking of short sales, and the ability to rent the options market maker. They will just work differently. Which, as we all know, will be better for the average investor. That would be me.
Attachments: Office of Economic Analysis Report