Subject: File No. S7-08-09
From: Frederick L. Lukoff, Esq.
Affiliation: Lawyer

May 14, 2009

For many years, the uptick rule tended to act as a brake on the speed of decline of stocks. History shows that it obviously didn't prevent their decline, and the SEC considered that it didn't have much effect, although much of its analysis was done in periods of buoyant markets, when shorting is in any case less prevalent and less profitable.

In recent years, leveraged ETF's, e.g. the notorious Pro Shares Ultra Short Financials, have made it possible to put virtually irresistible downward pressure on specific individual stocks, in fact almost any specific stock. One can argue whether these are not violations of the margin rules in themselves, but the last 6 months of extreme volatility, the disappearance of the American investment bank, and the near crash of the banking system, suggest that measures that prevent stocks being simply crushed with no safety valves, are good policy.

The uptick rule is just one of a number of measures that might be used to ensure that any decline of stocks is at least orderly, and one can argue that it may not be all that effective. Probably not, but it's hard to see how it does any harm, and therefore I suggest reinstituting it.