June 3, 2009
Mrs. Elizabeth Murphy
Secretary, Securities and Exchange Commission
100 F Street, NE
Washington DC, 20549-1090
RE: File Number S7-08-09
Dear Madam:
I am writing in reference to rule change S7-08-09 to Regulation SHO under the Securities Exchange act of 1934. In an effort to ensure a more equitable and efficient equity market the Securities and Exchange Commission overturned the archaic uptick ruled instituted in 1938 after extensive experimentation and empirical statistical analysis proved the rule to be obsolete. Since the repeal of the uptick rule, continued analysis has been performed by industry analysts and economists all arriving at the same conclusion this commission did in 2006. Not only did the statistical analysis show the ineffectiveness of the uptick rule alleviate downward pressure on a stock; evidence showed that the reduction in liquidity caused by the uptick rule has a measurably detrimental effect on an efficient market, which is contradictory to the established objectives of the SEC. Empirical evidence since the revocation has done nothing but prove the SEC's decision to repeal the uptick rule in 2007 was nothing but the correct ruling in order to provide the most efficient market possible.
In recent months with the historic decline in the United States equity markets along with the extraordinary volatility the uptick rule has become back in demand for reinstitution. This call for restoration comes absent any statistical evidence or analysis, and comes only under the guise of increasing confidence in the US marketplace. This immeasurable theoretical reasoning for reinstatement of a rule disproven by statistical evidence is not sufficient to reinstate the uptick rule. The necessary reasoning for the Securities and Exchange Commission to be independent of the traditional American democratic process is its ability for greater insulation from the rash and completely unreasonable requests by politicians, journalists, and citizens who are incapable or unwilling to reason through their quick fix solutions for extremely complex problems.
The SEC has the expertise, statistical evidence, and expertise to know that reinstituting the uptick rule will solve none of the concerns and requests that those calling for its reinstatement believe it will accomplish. Reducing the liquidity in the US equity market along with reducing the volubility of possession of a stock by making it harder for it to be used to borrow will at best decrease efficiency marginally, with the potential for much more dire consequences. This will come with no potential for any upside benefit as all the research has dictated.
The implications of the Securities and Exchange Commission bowing to the will of political pressure in spite of irrefutable statistical evidence sets an extraordinarily dangerous precedent for this Commission. Therefore I strongly urge the SEC to reject rule change S7-08-09 to Regulation SHO in all its forms and continue to provide the most equitable and efficient market; solely on sound economic principles backed by statistical evidence.
Sincerely,
Evan Pine
Registered Principal