From: Tolga T [ttolga28@hotmail.com] Sent: Tuesday, December 30, 2003 11:39 AM To: Rule-comments@sec.gov Subject: Regulation SHO File No. S7-23-03 Mr. Jonathan G Katz Tolga Erman Securities and Exchange Commission 38 West 85th St. Apt#2R 450 Fifth Street, NW New York, NY 10024 Washington, DC 20549-0609 Re: File No. S7-23-03 Dear Mr. Katz: I am writing to you in response to the proposed Regulation SHO. Since graduating from Columbia University in 1996, I’ve been actively involved in trading NASDAQ securities. Decimalization, the introduction of ECNs along with infinite program trades that almost never provide a firm quote have become the realities of our current marketplace. As a result, the revision of the short sale rule has become imminent. Although I was delighted to read about the Pilot Program which recommended a two year suspension to the bid test rule in liquid stocks, I would like to address my concern regarding the institution of the new uniform bid test for other stocks. Short selling provides the market with at least two important benefits: market liquidity and pricing efficiency. The proposed uniform bid test would severely infringe both these benefits. During 1999 investors paid astronomical prices to many stocks that became artificially overvalued because of the limited availability to short them. The argument that barring short sales at prices equal to or below the consolidated best bid would cause an artificial price decline is completely unfounded. A speculative stock’s price to be manipulated to artificially high levels is a much more common occurrence compared with a established stock’s price, with good earnings, to be pushed down unjustifiably to extremely discounted levels. The latter only happens when the market itself has a severe down move. Therefore, I recommend that the new uniform bid test should at least allow short selling at a price equal to or above the consolidated best bid. A stringent bid test should only be reinstituted is a much more common occurrence in extraordinary market conditions. The 1999 NASDAQ bubble was proof that the current Short Sale Rule had to be reevaluated. I’m sure that after all the data is analyzed from the Pilot Program, the following conclusion will be reached. A stocks pricing efficiency and liquidity increases with the elimination of the Short Sale Rule. In the mean time, it would be prudent to institute the current uniform bid test under the conditions stated above. Sincerely, Tolga Erman _________________________________________________________________ Have fun customizing MSN Messenger — learn how here! http://www.msnmessenger-download.com/tracking/reach_customize