April 24, 2009
As a manager in a mid-sized business I have limited time to comment on issues such as Reg SHO. However, I feel compelled to add a few comments on this subject.
I've read every comment on this proposed rule. As I am sure you realize, these comments suggest American citizens are growing increasingly aware of a gross injustice that is occurring in our country as we speak. While many commenters believe uptick rules and circuit breakers are the answer, most -- including supporters of the proposed rule changes -- have discovered an issue far more insipid.
Naked short selling and failures to deliver appear to be mechanisms whereby New York City bigshots can make as much money off of innocent American investors as they want. Buy puts, sell short, don't borrow, don't deliver, drive up "supply", drive down price, make a killing.
Reg SHO was intended to curtail the practices of naked short selling and failing to deliver. Everyone agrees these practices are unfair and inappropriate as they deprive stock buyers of actual securities and attendant rights. Most conversations about the practice are distorted by references to the value of (not naked) short selling in a public market.
Short selling is fine. Borrow the shares, pay the vig, sell it short and cover when you've made a few clams. Speculation. Distasteful, but not illegal.
Naked short selling is not fine.
Some people think Reg SHO reduced naked shorting. What Reg SHO actually produced is a collection of Reg SHO Threshold Lists... lists of securities that had been sold short and left undelivered. For years on end. Millions and millions of shares. No meaningful enforcement ensued.
My understanding is that failure to deliver is illegal. Every single undelivered share. Why is SEC not prosecuting those who failed to deliver the securities on the published Reg SHO list? These are documented violations of federal law that were not pursued.
Mary Schapiro takes the top job at SEC and promises to act as if her "hair is on fire". Three months later what do we have?
On "Amendments to Regulation SHO", a regulation specifically targeted at failures to deliver duly purchased securities, Ms. Schapiro wants public comments on restoring the "uptick rule" and instating a "circuit-breaker".
What the...?
What does that have to do with failures to deliver?
Does the Chairperson of the SEC not even understand what Reg SHO is about?
Does Ms. Schapiro care if our markets crash and burn?
Why are we taking public comments on an "uptick rule" and a "circuit breaker" with respect to Reg SHO -- a regulation specifically targeted at eliminating failures to deliver equity securities sold short and documented on the Reg SHO Threshold Lists?
Can we please get someone -- anyone -- at SEC to pay attention to documented failures to deliver for more than five minutes? It doesn't need to be the Chair, but can someone look at this?
Yes we the American investing public are losing confidence in the equity markets.
No we will not regain confidence until outright fraud such as naked short selling and failure to deliver are stopped.
Please. Stop the madness.
Thank you for allowing public comment but Lord have mercy is anyone listening?
And 60 days for public comments? Are you kidding? What part of "sense of urgency" and "hair on fire" do you not understand?
My 20-year commitment to investing in public equities is becoming tenuous.
Please do something ladies and gentlemen of the SEC. I know you mean well and you have my full support. E-mail me if I have been unclear. From my point of view, you are failing spectacularly. Knock it off.
Mark Shearer