April 27, 2009
Mrs. Elizabeth Murphy
Secretary, Securities and Exchange Commission
100 F Street, NE
Washington DC, 20549-1090
Ref. File No: S7-08-09
Dear Mrs. Murphy,
As a registered principal at Trillium Trading LLC, I am writing to share my opinions on SEC’s consideration of various short sale proposals. I have been a trading supervisor, very active in the equity markets for the past 12 years, and have written to the SEC on several other occasions in hopes of helping shape the future of the market place. After carefully reading File No S7-08-09, I have come to the following conclusion. The short sale rules should remain in their current form and no additional shorting related restrictions should be applied.
A tick test, for example, would only impair rather than facilitate the market. Since all market makers and public orders should only be quoting on the box if they are actually interested in buying or selling stock at a particular price (regardless of weather there is an up or down arrow) the public should be allowed to sell the stock under all circumstances. Market markers will continue to benefit because they can establish the positions they desire more easily, while the public will continue to benefit from added market liquidity (making investing in the market cheaper thanks to tighter spreads). If a market maker or a customer is not genuinely interested in buying stock, he should not be quoting at that price on the level II quote box in the first place.
Here is a specific example: Stock ABCD is trading at 10 x 20. If I am bidding a penny below the current bid at 9, I should be able to buy stock from anyone who is willing to sell it to me - regardless if the other person is long the stock or attempting to get short stock. Why should I be deprived of buying the stock by allowing only those who are long to sell to me? By doing so, a short sale rule would be limiting the pool of liquidity that can access my order.
While it is unfortunate to see the market come off such a large percent in such a short period of time, we must not try to solve this problem with shorting legislation. The short sale legislation, that we already have, is the result of years of thinking, debate, and market analysis. Changing those well thought out rules will not reverse the recent market downturn or improve the market. In summary: A re-introduction of any short sale rule will only create a less equitable, less stable market place.
Thank you in advance for your time and consideration in the above matters.
Sincerely,
Howard Teitelman
CSO, Trillium Trading