February 9, 2009
Dear Chairman Schapiro,
As a small time investor I would ask that you look at re-instating the "up-Tick rule" which was removed back in 2007. I strongly believe this would help stabilize the markets as it did for some 70 years before its removal. One only has to look at what has happened to the markets since it's removal by Chairman Cox in 2007 to see that this was an error in judgment and placing it back would help bring more confidence to the markets as many (I as one) believe.
I would also recommend the rating agencies get away from a market cap model where as the price of the stock would force upgrades and downgrades depending where the price of the shares are. By the up-tick's rule being removed it gave the "short traders" leverage to push the share prices down IMHO and has a cause in affect to whereas today many companies trade at a discount to true valuation. It would be fare better if the rating agencies used accounting principles, thus companies books to see clearly what publicly traded companies are truly worth and to give a fair rating. As of today the agencies, from what I can see, are using the outstanding share count multiplied by the share price which can be incorrect if institutional (i.e. mutual fund, hedge fund)sellers flood the market because of forced redemptions, not to mention possible "short traders" activity using "put" and "call" strategies. When the use of calculating such as this is used, being the current method, if has forced downgrade after downgrade which further hurts companies forcing them to raise capital even if they didn't need it, not to mention the insurance industry's inability to write new business as they lose their top ratings. If agencies use accounting principles vs. the current method used it would help not only unnecessary downgrades and undo pressure on needing capital, but more transparency, thus improve investor confidence.
I hope you will look into this and consider my request.