Securities and Exchange Commission
Dear Securities and Exchange Commission:
My name is Robert Masiello, and I am writing with regard to the proposed changes the SEC is contemplating with regards to the short sale rule. As a registered representative with experience both as an equity trader and as an employee of Labranche, it is my opinion that any change to the current rules regarding short sales would be detrimental to all parties involved, from market makers and traders to the public as a whole.
Although there is no doubt that in some instances short selling should be limited, short selling for the most part is beneficial not only to the individual trader but also to the market as a whole. Short sellers are always eventual buyers, and often times short covering helps to reverse a bear market and bring buyers back into the market, as was most recently evidences in August of 2002. The rapid short covering that occurred at the end of July into August 2002 help to kick start most major indices to a 30%+ increase over the past 15 months. By making short selling more difficult, the SEC is only taking money out of equity markets and into markets with fewer restrictions (i.e. currency), thereby reducing the value of every shortable stock.
In a free and orderly market, buyers and sellers should be able to trade without the unnecessary interference of the SEC. While there should be protections in place for those who are legitimately making a market in a stock, there is absolutely no need for protection on exchanges such as ECN's, where every order placed is completley voluntary. By limiting short sales on ECN's, the SEC would be doing a disservice to both the party wishing to sell short and the bidder, as the bidder will be less likely to acquire the stock he wishes to buy at his optimal price.
As someone who has worked on both the market-making side and trading side, I believe the current system in place is the most optimal for listed and OTC securities. Legitimate short selling for purposes other than manipulation adds value and liquidity to the market, and should be protected by the SEC.