September 16, 2008
Please make naked shorting illegal and strongly enforced. Please do this immediately. Capital markets exist to allow companies to raise capital to grow their businesses. As a result, investing should have an advantage over shorting. Short selling is an important part of a free market system, however in today's market hedge funds are manipulating stocks beyond fundamentals. Currently, as a long only investor, I have to put up capital to invest in a company. Short sellers, through naked shorting, can earn significant profits WITHOUT PUTTING UP CAPITAL. Securing borrowable stock before shorting is necessary to keep the playing field level.
These rules will do much to protect individual investors (who are exiting the market in droves as evidenced by the mutual fund record outflows in August), and to save the taxpayers from having to bail out financial insititutions that are decimated by short selling.