Subject: File No. S7-08-08

May 14, 2008

I have the following comments:

Most of the abusive naked short selling is done on the options level, and not on the open market securities level. The proposed rules does not address naked short selling of call options, and purchasing of put options (when the person does not own the underlying security, or had made prior arrangement to borrow the security). The security symbol "CALM" Cal-Maine foods had been on the threshold securities list for an extended period of time for failure to deliver over 10,000 shares. The stock is extremely difficult borrow for shorting purposes. Yet, I found the following postings on the CALM message board on

1) Here is a link to messages posted on message board on CALM where short sellers are unable to borrow shares for shorting. This message details how they can get around this problem in order to conduct naked short selling. Sell uncovered calls, or execute naked short straddle by selling uncovered calls and buy puts (without holding shares for cover in case the puts were exercised).

One person asked:
Quote: Anyone able to get short CALM? 9-May-08 03:49 pm
Sell naked calls...almost the same...CALM has a pretty liquid options market so you shouldn't have a problem getting filled between the bid ask...

OR use options for a synthetic short. Sell the MAY 30 Call and Buy the May 30 PUT...your betting the call will expire worthless and the put will gain in value. Most of the time you can place this trade for a small credit.

The Jun 30's look good, if you really want to be short...
End Quote:

Therefore, any meaningful rule will have to address selling of naked calls, and purchasing of naked put options when the underlying securities is not on the easy to obtain list maintained by the broker/dealer.
best regards
Jason Wong