Subject: File No. S7-08-08
From: Merlin J Cottier

March 17, 2008

Comment on File No. S7-08-08

The SEC has spent numerous hours and no doubt large amounts of taxpayer money chasing around those who would fraudulent sell shares of stock they do not own and do not intend to borrow.

There doesn't exist in the market today a valid fail-to-deliver situation on the funds paid for securities. Whenever a security is bought, the funds are required to be delivered by settlement and as far as I can tell, there is no way around this requirement of the settlement of funds.

So why would the funds be required when there are no securities to deliver at settlement? Just what is the buyer paying for at settlement? A simple IOU from the seller?

Would anyone working at the SEC accept an IOU from a car salesman after handing them a check for a brand new car? I don't think so, so why would you demand that the public accept the transferring of funds for a trade without getting the security being purchased?

The simple answer to the problem of fraudulent naked short selling is to only deliver the funds paid for the securities at the same time the securities are delivered.

A fail-to-deliver transaction would then have no financial benefit for those seeking to defraud the public if the funds were never delivered to them without the delivery of the securities being sold.