Subject: File No. S7-08-09
From: Richard C. Pope
Affiliation: Trader/ Investor 15 + years

June 14, 2009

Dear SEC,
I would like to voice my support for restoring the Original Uptick Rule as it offers Investors the greatest degree of protection from potentially harmful manipulation by Shortsellers. ( It is the best choice from among the 5 Options we are presented with)
The Original Uptick Rule helps prevent Stocks from being attacked when there are a lack of buyers at the table. This happens from time to time and it's perfectly natural to have a lack of demand when the economy is sputtering or when the Stock Market has risen higher than fundamentals can justify. But even in such instances, it's unfair to create additional supply and allow Shorts to take stocks down. At that point, you don't have a market of Buyers and Sellers. You have artificial supply creating downward price pressure. So the Original Rule of only allowing short sales after a price uptick helped to ensure that there were both Buyers and Sellers participating in a fair exchange. The classic argument in favor of allowing Short Selling in the first place is that it facilitates a more Efficient Market via Price discovery - which is irrelevant in a falling market.
In a rising Market or even a Sideways Market, there isn't any problem for Shorts to take their positions and wait for the prices to Fall ... being that they were shrewd enough to have located price inefficiencies well before the average Investor. In my opinion , the Modified Rules proposed by the various Exchanges are a stealthy way of keeping the current system in place. I feel the Exchanges are biased because they have benefitted from vast volumes of New Business which they are getting from SHORT ETF's and it's extremely tough if not impossible to accomodate them with the Original Uptick Rule... and that's why they have offered Circuit Breakers.. But think about it.... If Shorts can take down stock prices lower by up to 10% per day, that's plenty for one day. Tomorrow, they can do the same... And the next day. I suggest for all of you who get to decide this issue: Run a Stock Screener program that covers the NYSE and NASDAQ to find out how many stocks are ever down more than 10% on any given day. Not many.
And usually they will be stocks of Companies that have put out very Negative Press Releases and DESERVE to be down that much or more.
Also: short raids can be toned down to become multi-day events in order to game the system while still complying with modified Rules. The people who want to game the system have a much easier time gaming it with the Modified Rules that don't requires Buyers at the table to offset the downward pressure that Shortselling exerts on Stocks.
Here's another thing to keep in mind. If bringing back the Original Uptick Rule didn't have adverse consequences for those who have been reaping the benefits of its not being there to protect Investors, they would not be arguing so vociferously against it. They would simply say " Who Cares... Go for it..."
Advances in Technology have made the world of trading much more sophisticated but basic human nature is unchanging.. and in this regards, there will always be entities looking for vulnerabilities in the system and for the means to exploit them. The SEC handed them an absolute gift by removal of the Uptick Rule and I have no doubt that it has played a significant role in exacerbating the Market declines that we saw after its removal.
My closing thought is this: Suppose the critics are right and the Uptick Rule is ineffective? Even if this were true, bringing the Original Uptick Rule back will still provide significant benefits to both Investor Confidence and Investor Psyhocology because Investors believe that the Uptick Rule works in protecting their investments. And this will bring many Investors back to the markets that have left because they've felt victimized by manipulated markets and that the SEC was not looking after their interests.
Naked Shorting and Unrestricted Futures trading also need to be dealt with but I'm only addressing Uptick in my comments to you at this time.

Thanks and best regards,