Subject: File No. S7-08-09
From: Kenneth Tang

May 5, 2009

Letter below from dailykos is on the mark:
To Ms. Shapiro at SEC,

Should Naked Shorting be banned? Absolutely. Strict Regulations and Serious Consequences Must be Established by the US Government to End the practice of Naked Short Selling.

It's called a "Market" for a Reason.

Some years ago, I began a process of learning about Markets, and nowhere did I ever learn that a fundamental property of a functioning market was the capacity for a seller to take a buyer's money, and NOT deliver the "product." The very concept of Naked Short Selling is contrary to Basic Market Philosophy.

The SEC, itself, has made the following quite definitive statement "in addition, where a seller of securities fails to deliver securities on settlement date, in effect the seller unilaterally converts a securities contract (which is expected to settle within the standard three-day settlement period) into an undated futures-type contract, to which the buyer might not have agreed, or that might have been priced differently." By this definition, Naked Short Selling of stocks is certainly akin to Fraud. The buyer in this case has not agreed to the purchase of an undated futures contract. The buyer has agreed to pay for a share of Stock, which is not received.

Just because the shares are digital, and the buyer won't actually notice that no delivery has taken place, DOES NOT make it right to refuse to deliver and account for those digital shares.

It's simple how can the market possibly function as designed, if the supply of shares is allowed to be inflated arbitrarily, and in secret, by Elite Market Gamers? I ask you, where did the basic Laws of Supply and Demand go, when the supply of shares of a company is allowed to be diluted at will (by way of introduction of undated futures contracts) by Brokers and Hedge Funds?

As an Investor, I cannot expect to make money if I make wrong decisions. However, I should be able to expect the following things.

One: If I buy a share of stock, then that stock will be delivered to my account within an appropriate timeframe. If that share is borrowed from me for a Short Sale, then that is arranged-for within the contract that I've agreed to with my Broker. Brokers MUST be held to high standards in how they treat my shares.

Two: If I buy a share of stock in a Company, I should be able to expect that the number of Shares in circulation is constrained upon the basis of the number of Shares Outstanding of the Company, itself. How else am I, the Investor, able to appropriately gauge the Value per Share, if I am unable to determine with significant certainty how many Shares are actually floating.

I can only hope that the Obama SEC is taking this situation with the utmost seriousness, particularly considering the ugly possibility that in Bankruptcy, Naked Short Sellers have the capacity to permanently infect the system with never-to-be-delivered shares. It is Capitalism, itself, that is at great risk.