Apr. 10, 2025
By Email Vanessa A. Countryman Secretary U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 205499–1090 rule-comments@sec.gov Ms. Countryman: As a concerned retail participant in American capital markets, I am compelled to express my vigorous endorsement of We The Investors's request for regulatory modifications to Regulation SHO. The persistence of market manipulation through settlement failures has continued far beyond what any reasonable investor should tolerate. Professor John Welborn's comprehensive analysis titled "Reg SHO at Twenty" (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5141255) thoroughly exposes the dangerous gaps that remain in our current framework. These regulatory blind spots enable utterly baffling situations where certain securities inexplicably occupy positions on the Threshold Security List for extended durations - numerous equities for hundreds of consecutive sessions and several exchange-traded products exceeding a thousand days straight. Such persistent failures significantly erode public trust in our financial infrastructure while simultaneously introducing unnecessary systemic vulnerabilities. My personal experience as an individual market participant has reinforced my belief that accurate price discovery constitutes the backbone of efficient markets. The ongoing settlement failure issue doesn't merely impede this crucial mechanism - it fundamentally distorts it. The apparent lack of regulatory enforcement combined with these glaring loopholes leaves me profoundly concerned about market integrity. Implementing automatic financial penalties against institutions that fail to fulfill delivery obligations - whether through negligence or deliberate strategy - would establish much-needed accountability for entities perpetuating this damaging behavior. A universal requirement to secure borrowed shares before initiating short positions guarantees only legitimate short selling practices can proceed. As Welborn's research convincingly demonstrates, contrary to claims from high-frequency trading operations, these requirements will enhance rather than degrade overall market quality. Furthermore, closing the settlement exception loopholes originally introduced during Bernie Madoff's tenure would finally terminate an exploitative practice that should have been addressed many years ago. This reform is considerably overdue. I respectfully urge the Commission to expedite consideration of this petition and promptly propose these essential amendments. Addressing these regulatory deficiencies will reduce inefficiencies and eliminate opportunities for potential exploitation. Put simply, removing these Regulation SHO exemptions will create more transparent and effective markets. Such meaningful changes would help restore my confidence and that of countless other retail investors by ensuring a settlement framework characterized by clarity, fairness, and trustworthiness. With sincere concern, Oivind Brockmeier