Subject: File No. S7-08-09
From: eric zinger
Affiliation: Trader

June 16, 2009

Ms. Elizabeth Murphy
Secretary, Securities and Exchange Commission
100 F Street NE
Washington DC 20549-1090

File Number: S7-08-09

Dear Ms. Murphy,

I would like to thank you for the opportunity to weigh in with my opinion on the proposed restructuring of the short sale rule in the market. Several options have been discussed including reinstating the old up tick rule, as well as coming up with new variations of that rule. However this in my opinion completely misses the point.

As a propriety trader with 3 years of experience I feel that the regulatory bodies are focusing on the up tick rule while ignoring the greater problems that led to the recent financial destabilization. The much more important issues are the completely unregulated credit default swap market and the issues of naked short selling. The lack of an up tick rule did not cause any of the financial powers to fail rather it was an overwhelming lack of oversight by the SEC in the financial derivatives markets. There were trades being placed on mortgage backed securities in the CDS market that exceeded the value of those securities by several hundred percent. No margin requirements existed, no disclosure requirements existed, there was no regulatory oversight and what resulted was the current financial disaster we experienced.

I am not in favor of reinstating the up tick rule. The lack of an up tick rule did not cause the U.S. equity market to fall. If someone wishes to bet against a company failing they can do so at any time in the options market by buying puts or selling calls. In fact that is a much more efficient way of betting on the way of a companies stock then by placing short sales on the shares themselves. To put in an up tick rule would only have the effect of decreasing liquidity in the equities markets by discouraging shorting, a healthy practice essential to markets functioning normally and efficiently. Naked short selling on the other hand did lead to a state of financial panic and is something that must be further regulated and controlled.

The SEC is merely looking for an easy way to save face in this case without addressing the actual problems. It was their lack of oversight in the CDS market that most directly led to the failure of several solvent financial institutions.. As a result they are trying to blame shorts and are using the reinstatement of the up tick rule as an easy way to trick the public into thinking they have a handle on the problem and that it wont happen again.


Eric Zinger