Subject: File No. S7-08-09
From: Jeff Kriner
Affiliation: Licensed Professional Nuclear Engineer

May 23, 2009

Reinstate the original uptick rule without any modifications. The lessons learned in the Great Depression led to this important rule. It is important to recognize the difference between the effects of fear and optimism have on human nature and the trading of securities, and the amplification of these effects in stressed markets. The original creators of the uptick rule knew that fear in stressed market conditions created amplified panic selling, and the further deterioration in conditions fed upon itself and caused additional panic selling. The human emotion of "get out while you can" places pressures on those holding the security to panic sell, especially during times when the overall economic condition is poor.

On the other hand, optimism that leads to panic buying can be powerful and also have feedback mechanisms that lead to more buying, but the urgency or volume of the buying pales in comparison to the speed and volume of panic selling. Panic selling is similar to people trying to get out of a burning theater (i.e., if I don't sell I will lose it all). However, panic buying is not driven by this "if I don't act immediately I will lose everything" emotion that is present in panic selling. In a panic buying environment, I know intellectually and emotionally that I will not "lose everything" if I don't immediately act.

The recent stock market conditions created uncertainty and loss of confidence in investors. Some short sellers fully understood the effects that their strategic unrestricted short selling would have on the already fragile human emotions created by the economic crisis. Without the uptick rule in these stressed markets, individual securities could be endlessly shorted with the goal of creating fear, an avalanche in panic selling and driving the security price down. In severe cases, the price drop triggered other negative effects and added fuel to the fire, such as downgrades by rating agencies, forced selling, and negative publicity.

Bring back the uptick rule (and no naked short selling) and help restore the public's confidence in the markets by reducing the ability of short sellers to manipulate the markets.