Subject: File No. S7-21-06
From: H Glenn Bagwell, Jr.
Affiliation: Attorney

February 12, 2007

To the Commission:

Thank you for the opportunity to comment on certain proposed amendments to Regulation SHO, reference File No. S7-21-06.

It is disappointing yet telling that the Commission focuses its efforts on removing a hindrance, however feeble and easily avoided, to market manipulation and unbridled short selling by removing at this time one of the few regulatory limits on bid slamming by short sellers.

The investing public had hoped the Commission would first take substantive action to prevent the daily bear raids and short side manipulation against victim issuers (and their shareholders) that result from the counterfeiting of securities and so called "naked" short selling. Yet the theft continues as Wall Street makes the Commission look ever more hapless and foolish, or worse, bought and paid for, on this incredibly important issue.

The Commission knows that settlement failures are epidemic on all U.S. public markets and exchanges. The Commission knows that Wall Street's brokers, market makers, prime brokers, clearing firms, and their bank and hedge fund masters--aided and abetted by the utterly corrupt Depository Trust and Clearing Corporation (DTCC)--are stealing billions annually from the investing public by taking investors' money and exchanging that real money for what amounts to nothing more than fraudulent unregistered securities created by the manipulators themselves, without the consent or even the knowledge of the corporations these counterfeit securities purport to represent, much less the victim purchasers of the fake securities.

Market makers on over the counter securities abuse their special "market maker exemption" on a daily basis as they short sell "naked" the shares of small issuers for quick profit, colluding to stack offers and thus "paint" the Level 2 screens of their victims as weak while overwhelming buy side pressure with counterfeit securities and depressing the prices of their victims. Then these Commission-blessed predators have the gall to submit comment letters to the Commission claiming that removing the grandfather clause will reduce market liquidity. Meanwhile, as an example, no one from Knight Trading or Deephaven Capital Management has gone to jail or even been indicted for abusing the former's market maker exemption in conjunction with the latter's PIPE investments.

While Wall Street and Congress fret over the loss of world "market share" for American securities exchanges and markets and blame it on too much regulation, the brontosaurus in the room is studiously ignored by the regulators, politicians, and New York financial media. These guys can continue to fiddle while their money masters torch Rome, but the rest of the world knows that if their companies list on the U.S. exchanges or markets, the regulators and self regulatory organizations (SRO's) here will not protect them from financial industry predators who artificially and illegally increase the supply of victim securities to depress the prices thereof.

Since Wall Street has decreed that the Commission permit all of them to hit bids without restraint (after all, why should market makers, specialists and other counterfeit long sellers have all the fun?), and has provided the Commission with a few industry shills to provide "academic" cover for the decision, we the public know that the "fix is in" and this proposed rule may as well be labeled final now.

However, as a corporate and securities lawyer who sees more and more potential investors giving up on the U.S. markets, and more and more private companies refusing to list in the U.S., in both cases because of the unregulated and uncontrolled bear raids and stock counterfeiting that occur daily in the U.S. markets and exchanges, I would like to go on record requesting that the Commission, as a symbolic gesture, restrain itself from removing this minimal protection against attacking bids until the Commission or at least the SRO's begin enforcing the current rules and regulations and require settlement of all trades in a timely manner.

The Commission must amend Regulation SHO to immediately eliminate the grandfather clause and the market maker exemption. It is unfathomable that the Commission continues to stall these initial amendments to Regulation SHO. The Commission should go further and require all market makers and specialists as well as every other market participant to timely deliver all the securities they purport to sell, and if delivery is not timely made to immediately buy them in at market prices to prevent settlement failures.

The Commission must remove the financial incentives for market predators to continue to create and sell unregistered securities and in general abuse the settlement process. Don't let them have any of the cash, including any commissions, until they settle the trades. Don't let their clearing firms mark down the prices of shares the participants short as the prices are driven down. Force the clearing firms to police themselves and their participant firms. Shut down the DTCC's corrupt stock "borrow" program for good. And finally, start referring these criminals to the U.S. Department of Justice for criminal prosecution for market manipulation and for the counterfeiting of corporate securities, which is what planned, non-incidental settlement failures are.


H. Glenn Bagwell, Jr., Esq.