Subject: File No. S7-20-08
From: Paul Huang
Affiliation: Financial Commentator

July 24, 2008

Effectiveness of the New SEC's Rules Against Abusive Shorting

To find out the market impact of the new SEC rule against abusive shorting, I have constructed a portfolio based on the 19 selected stocks, and another one based on several market benchmarks, using the closing prices of July 14 (I read about the news on July 15). Moreover, I assume $100,000 investment in each name.

The 19- stock portfolio:

The Benchmark portfolio:

To date, despite the nearly 300 points market correction yesterday, the 19-stock portfolio is up 19.94% while the benchmark portfolio is up only 6.15%. You may also notice that among the benchmarks used, the financial sector has way outperformed the others. We conclude therefore that the new SEC policy against abusive shorting has been very beneficial for the selected companies.

Therefore, we recommend the SEC expands the rules to the entire market so we may be safely out of the shadows of the abusive shorting. Once the market's bear trend has been reverted to a bullish trend, the FED then may consider a gradual rise in interest rates to support a strong-dollar policy.