April 28, 2009
Mary L Schapiro
100 F Street, NE
Washington, DC 20549
Dear Mary Schapiro:
Please allow the Securities and Exchange Commission to complete the short sale rulemaking process without political interference. I understand that you have oversight authority regarding the SEC and that you are under an immense amount of political pressure to enact some form of short sale regulations immediately. However, I also hope you understand that rushed rulemaking and accelerated compliance requirements increase the likelihood of unintended consequences.
The equity markets have functioned extremely well during the recent financial meltdown. At times they have been the last frontier of liquidity. When an investor has wanted to trade stocks the equity market has been there with bids and offers to facilitate their transactions. This has not been the case in other markets, even those that were touted as being "as safe as cash." The U.S. equity markets have functioned well during this crisis because they possess the appropriate balance between competition and regulation. Competition among trading venues, market participants and technological solutions providers enables the markets to offer the investing public a complex array of execution solutions at a reasonable cost to the investing public. When one segment of the investing community begins to exert political influence to hastily change the rules, it upsets this complex competitive environment and could lead to a host of unintended consequences including a loss of investor confidence.
I support appropriate regulation and the unbiased enforcement of regulations. I am a proponent of a rulemaking environment where interested parties have the opportunity to air their opinions on issues, opinions that are then fully considered by regulators before final rules and regulations are promulgated. Rules and regulations are best vetted with the input of a diverse group of informed practitioners who openly express their viewpoints. This debate affords many different perspectives to be heard and often identifies potential unintended consequences of proposed regulation. Our financial markets cannot function efficiently when rules and regulations are changed in the heat of the moment or by political edict. In our current environment of exceedingly interconnected markets even seemingly very minor changes can have disastrous unintended consequences.
I believe the SEC is proceeding in the most appropriate fashion in this rulemaking. It is difficult to understand how any legislator could fault this process as it is exactly how successful public servants conduct their daily duties. Deliberate fact finding and informed debate are the building blocks of successful regulation and legislation.
I urge you to support the Securities and Exchange Commission's deliberate rulemaking process on the short sale issue. I believe that this process has delivered the U.S. Markets the appropriate balance between regulation and competition and made our markets the envy of the world.
As a constituent of yours, my opinion is: One should look at the portfolio of debt in a financial institution's holdings to recognize the problem.
To blame short sellers for the price of the securities is not unlike blaming the doctor when one gets ill. The short sellers continue to make shares available at a less expensive price than if they were banned from the market or if it became onerous to short shares. I know that short sellers are not popular, but they do provide liquidity in the market to buyers. Whatever steps the SEC takes to change our security laws it will probably end up harming the liquidity in the financial markets through "unintended consequences"