July 21, 2008
To the Commissioner:
We who trade in the retail market and control indirectly some trillions of dollars in private funds need you to step up and level the balance between us and the so-called big guys. My brokerage (or anybody's) won't let me sell short without making me a loan of the stock. They would laugh and threaten to close my account if I suggested they help me do that. At least it goes against my margin though I really don't know what goes on behind the trading room doors. You should.
I was very surprised by the removal of the uptick rule last year. Now it is possible for any medium or large player to trigger and drive downward spirals in stocks. Short sales are legitimate moves to take advantage of supply and demand situations and provide short-term liquidity to damp excess volatility.
Go ahead and apply the law across the board. No more naked short selling. Period. No select lists; all equities.
Reinstate the uptick rule. It was put there for just the reason we have experienced with the banks and other stocks that have been driven in free-fall down to below book value.
If you open the door to greed and manipulation, only the criminally greedy will eventually win. If you lose the American individual investor, you lose the nation. We can and will take our money somewhere else. We can buy land, Ferraris and Lancias in garages, scrap metals, goats and sports cards, and go back to work earning money to live on and sit on them for a long, long, time before we trade another stock or option if we think the playing field has gotten out of control. We stop putting money into 401K accounts and start buying something that has a chance at preserving our future. Imagine our economy with 50% of its individual investment fuel removed.
You have the clout and the moral imperative. Use it or lose it.
Ray H. Gay