Subject: File No. S7-08-09
From: Louis E Silver
Affiliation: Professor of Micro Enterprise Development

May 5, 2009

While it is important to protect the functioning of financial markets from inappropriate manipulation, it is also just as important to protect finacial markets from undue intrusion from government and other regulatory entities. Hence any intrusion must be minimal. Certainly, regulating the prices of securities through any of the "uptick rules" that have been proposed is an extreme intrusion into the oblective functioning of the financial markets, and hence should be avoided.

Halting trading for the remainder of the day of any security that has dropped precipitously is also an inappropriate intrusion into the objectivity of free financial markets, and one that could have the opposite effect of stabilizing the market for a particular security, as pent up selling and short selling may be exacerbated as traders and investors begin to think the worst and rumors surge as people search for information. This could cause even more extreme price declines.

An important measure is strict enforcement against naked shorting. Regulations should be tightened up so that shares must be borrowed contemporaneously with the placement of the short sale. There should be extensions if shares are not available to be borrowed in the brokerage firm through which the short sale is placed. This si obviously necessary to insure that downside supply is not increased beyond the real supply of shares of a particular security, which would have an undue downward impact on security prices.

Thank you for the opportunity to comment.

Louis E. Silver