December 23, 2003
Mr. Jonathan G. Katz
Re: Regulation SHO
My name is Jimmie Williams, and I am a licensed registered representative for a large day trading firm on the street. This letter serves as a personal platform to list major concerns with regards to the proposed replacement of SEC Rules 3b-3, 10a-1 and 10a-2, under the Securities Exchange Act of 1934, with Regulation SHO.
From my understanding there are three main proposals concerning Regulation SHO listed here in as follows:
As a professional trader I feel more than qualified to express trepidation with two of the three main proposals. The main problem with implementing this particular new bid test would require that a short sale be effected at least one cent above the best bid at the time of execution. This differs from the current Nasdaq bid test, which prohibits short sales at or below the best bid when the best bid displayed is below the preceding bid. Effectively, the new proposal limits a trader's opportunities to participate in fair market place. Eliminating the current Nasdaq bid test confines a trader to lose the opportunity to short on an "up arrow," restricting one to pay an exceedingly higher price to execute a buy order. If a customer wishes to buy his or her securities at a specified price and another customer desires to get short that security why should that be an illegal execution? I believe that changing this rule will result in an unfair market that will not enable buyers and sellers to match at the best possible price.
In regards to the suspension of the bid test rule in certain securities, I believe this is a step in the right direction, but still could be improved. Due to the massive volume in these stocks, I do not believe that it would give an accurate assessment of the short sale rule. As I am an active participant in market activity, I should not be restricted to shorting rules when major market makers are aloud to short whenever they want. I believe that it is an unfair advantage given to entrenched players in the stock market that limits small time investors who play active rolls in the market. The short sale rule should be abolished altogether, not just in liquid stocks, so that everyone who is involved in the market has the same opportunity as major market players.
Thank you for your consideration with my concerns. I look forward to your changes and hope that they work out to the advantage for every investor and not just the privileged few.
Jimmie E. Williams