Subject: File No. 4-627
From: Simon Dinar
Affiliation: Not a Plumber (not joe)

May 31, 2011

Thank you for the opportunity to comment on File No. 4-627. I have been mostly a long side retail trader in the US equity markets, but on a few occasions I have also shorted a few hundred shares over a few days, both for gains as well as losses. Now that the background is clear, my comment would be TRULY question the so -called liquidity provided by short selling. Please note: I use the term stock and share interchangeably in this comment.

Fundamentally, if any real product is to be sold and bought, either the true owner/manufacturer or a retailer is the one who sells it. They maintain actual inventory and sell it. How is this truly handled in the US market?

Do brokerages who hold shares in the street name for an investor possess a right to lend shares out? Do they possess this right if the shares are held on margin?

If not, then why should short selling be allowed at all? if there is really a great demand for a company's stock - the said company itself can issue more stock. Or the perceived buyers can place ads in the stock market publicly and buy it from true owners. Middle men (aka the ever so helpful "market makers") are not needed. Systems of buying and selling should be simpler not more complex.

At the least, since short sellers are selling an IMAGINARY product, they should be allowed to do so ONLY against the UPTICK. I am tired of the counter argument (a fallacious one) that buyers can buy only a down tick.

As regards other "John Smith May 5" short sellers exposing fraudulent companies and "saving" investors, we are well aware of your true intention every bit. By being short ahead of time and then revealing "research of fraud", short sellers are essentially trading on inside information. Period.