Subject: File No. S7-08-09
From: Dominic L Frost
Affiliation: Registered Nurse/ Retired/ Stock Trader

May 5, 2009

I've been trading stocks for years and believe were long over do to limit short selling. Limits need to be placed on how many shares may be shorted with severe fines for exceeding these limits.

During the economic crisis shorting became a self-fulfilling prophesy for many financial stock or stocks dependent on the financial institutions.

Many stocks were dependent on maintaining stock value limits. If their stock values fell below these limits, loan covenants would kick in requiring review of loans and redoing loan agreements. Large funds would short a stock until the price depressed to the point where the loan covenants would kick in. This would further depress the stock values by creating the illusion that the companies were having trouble repaying their loans. Then the institutions would easily cover their short positions.

This game ties up Billions of dollars of investment capital when short selling artificially creates temporary shares in a company. It also creates excess volatility in the markets, scaring investors away when shorting first creates artificial lows then when short shares are covered it creates artificial highs.

The markets were designed as a way for companies to raise capital. Shorting is just a game that strips small investors of their money and makes it difficult for companies to raise capital. It also ties up billions of dollars of investment capital in imaginary stock shares. Capital that does not go to work building the economy.

I hope you severely limit this wasteful practice that is simply another Wall Street gambling game.

Dominic Frost