June 11, 2009
June 11, 2009
Elizabeth M. Murphy
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Re: File Number S7-08-09
I am opposed to the reimposition of unnecessary restrictions on short-selling as proposed by the Amendments to Regulation SHO. As the staff knows, short-sales and short-sellers add to market efficiency and market liquidity. Restrictions on short-sales and short-sellers will only reduce efficiency and liquidity, and these are not appropriate public policy objectives.
It is clear that these proposed changes are driven by political pressures from parties that do not understand how markets work. Yielding to them will be just as poor a policy decision as the FASB's backing off from its mark-to-market requirements for valuing assets. Limits on information and limits on transactions do not increase investor confidence or market efficiency.
If the SEC is determined to reinstate the up-tick rule in a misguided effort to reduce decreases in stock prices, then I believe the SEC should also implement a down-tick rule, under which purchasers of stock cannot buy shares unless stocks first trade at a lower price. Following the rationale offered by those favoring limits on short-sales, this would limit irrational increases in stock prices resulting from uninformed buyers demanding shares at ever increasing prices. If the SEC is prepared to restrict stock sales, it is only fair that it impose similar restrictions on stock purchases.
Taking the rationale for limits on short-sales to its logical conclusion, if the SEC truly wishes to prevent stock price declines, then it should ban all stock sales at prices lower than the last traded price. This way, stock prices will only increase. Of course, there may be some minor complications from increased inefficiency and illiquidity, but these would be small prices to pay in exchange for ever increasing stock prices.