June 12, 2009
3550 Biscayne Blvd
Suite 601
Miami, FL 33137
12 June 2009
Elizabeth M. Murphy
Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
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. As a point of interest: With no short sale rule in effect, the Dow Jones Industrial Average has recouped all of its losses for 2009. This recovery, which occurred naturally, without bid test or circuit breaker restrictions, proves that short selling does not singlehandedly drive stock prices lower, since many short sellers still trade actively today.
Many of the cries for short sale restrictions originated from concerns about the sharp decline of US equity markets over the past 12 months. Any restrictions on short selling would prove detrimental to the natural operations of United States equity markets for a number of reasons. Historical results from such periods as the fall of 1976, October 1987, and from the years 2000-2001 show little benefit to short sale restrictions. Such restrictions only increase overhead costs for market participants, even for those who do not regularly participate in short selling. These costs can be substantive and restrictive for firms and investors who legally and safely comprise the vast majority of equity trading volume in the United States, and no reduction in illegal nor manipulative activity will result.
Rules such as price test restrictions and circuit breakers do little to curtail the malicious intentions of those attempting to illegally manipulate stock prices. In fact, the rules do not restrict malevolent activity at all. The only way such activity can be prevented is through open, fair, and free equity markets. To combat scenarios such as bear raids on particular stocks, the SEC and equity market regulatory bodies should foster free and open trade, not restrict the actions of legitimate market participants. These market participants, including market makers, hedge funds, trading firms, and individual investors, provide the transparency and accuracy that make the United States equity markets accessible and viable as value indicators and as reliable investment opportunity providers.
Please do not institute additional short selling restrictions of any kind, as these will only serve to inhibit the free and orderly operations of the United States equity markets.
Sincerely,
David McWhinney
Registered Equity Trader