Subject: File No. S7-20-08
From: James R Clift, Jr
Affiliation: Principal Engineer

August 6, 2008

In regard to the emergancy ruling to prohibit naked short selling of selected firms it seems like a logical first step in curbing the abuses that exist in our financial system. How the SEC justifies this action for only select firms is perplexing. This action serves to protect to a large extent institutions that regularly engage in naked short selling from the abuses that they propagate. If the SEC is serious about stopping these abuses then the rules should apply to all companies not just the select few that seek protection. They should also make permanant any measures that curb the problem of introducing conterfeit securites into our financial system.

The markets function efficiently by affording market makers the flexabilty of conducting tades without first actually buying or selling equities. This also adds a great deal of liquidity to the financial system. The problems that exist are not related to allowing trades to occur whether long or short prior to actually identifying shares but rather are related to the SEC position that when a trade fails to be delivered within the three day imposed limit no action is required other than to identify the trade as failed. Even after trades fail allowing conterfeit shares to be introduced into the system the rules are quite lax. A firm must have substantial failures for 13 consecutive days before any action is taken. Then they can still short sell that equity but must first pre-locate shares. How a firm can be allowed to have substantial failures and then not use any identfied loaned shares to close out previous failures prior to engaging in any short selling in a specific equity is also perplexing. If an individual investor has shares or has identified the shares then it is thier right to short these shares, but a firm which locates shares for an investor should not be allowed to do so without first closing out all existing failures to deliver in that equity. Simply put there should be no consectutive days requirement because this introduces loopholes which are easily circumvented. The rules should specify severe penalties for any failure to deliver that exists for a prescibed period of time. If failure exists for 13 days the SEC should subject the firm responsible for the failure to a fine equal to the value of the trade for each day beyond the 13 day limit that the position is not closed. Do this and you will demonstrate that that you are serious about stopping the manipulation that exists. I sincerly doubt that the SEC will take any action in this matter which does not continue to allow these abuses. Looking at the total failures to deliver data for the first calendar quarter of this year it astonishs me that 65 billion shares were failed to be delivered. There is no excuse for trades of this magnitude not being delivered within the three day limit. The apathy by the SEC allowing these abuses has and will contiue to result in companies being unfairly targeted and in some cases literlly detroyed as was the case with Bear Stearns. It has also contributed signifcantly to losses in peoples retirtement funds as well as job losses. What is being allowed to occur in no different than allowing money to be conterfeited and the impact on our economic future ignored. This madness must stop.