Subject: Stock Market Manipulations Using ProShares Ultra Short ETFs

December 25, 2008

The public is extremely angry and on a verge of riots secondary to Mr. Cox SEC policies and ignorance. If the SEC does not correct its two major mistakes of removing the uptick rule and allowing Ultra Short ETFs, people will riot. These two mistakes MUST be corrected by the SEC immediately.

Mr. Cox has been a spokesman for the industry (do only what the Wall Street crooks want) and not protecting the investors. Everything that he has done was directed to please the industry lobbyists and to screw the investors: removing the uptick rule and introducing turbo-charged ultra short ETs that resulted in historically high levels of volatility and wide spread market manipulations.

The rule was introduced in the Securities Exchange Act of 1934 as Rule 10a-1. The uptick rule prevented short sellers from adding to the downward momentum when the price of an asset was already experiencing sharp declines. The SEC under Mr. Cox has eliminated the rule on July 6, 2007

As soon as the rule was eliminated the market were subjected to massive bear raids that the rule was designed to prevent and market volatility has spiked to levels not seen since early 193s (since pre-uptick era)

Since the uptick rule was removed and ultra-short ETF's were blessed by Mr. Cox, average absolute daily percent changes reached record levels (the highest ever) Bespoke Investment Group has plotted the data to illustrate created by the SEC volatility bubble.

The SEC must read the analysis by Eric Oberg, who worked in fixed income, currencies and commodities for Goldman Sachs for 17 years before retiring as a managing director, and ban these Ultra Short ETFs effective immediately.

Eric Oberg raises very valid alarms, “uhere are only three reasons someone would buy these Ultra Short ETFs: 1.) They are uninformed, 2.) They were trying to sidestep the margin rules, or 3.) They were trying to manipulate the markets.”.

Why Short Sector ETFs Aret So Smart This leaves us with market manipulation. And this is where these levered ETFs are especially dangerous and why the SEC needs to step in and investigate trading in these. Market manipulation in these is made possible because of two specific characteristics these possess: the bifurcation of bear and bull, and the fact that ETFs have a create/redeem process.

The bifurcation means they have separated the longs from the shorts. (Again, it would be crazy to go long the market by shorting a short-sided ETF that has its return capped at the difference between sale price and zero, when you could just go long the long product.) So we are dealing in a less liquid environment -- always a warning flag for manipulation. The fact that ETFs have a create/redeem process means that the supply is not capped. We can continue to create and

create short ETFs, regardless of obtaining a locate -- that is to say, obtaining a borrow. Because of the create/redeem process of ETFs, and the fact that these are backed by a swap, if someone wants to pile on shorting the underliers, they can just keep buying the short-sided ETF -- they do not need a seller of the ETF to get out of their position. Without finding the other side, there are no checks to the process. Clearly, these issues were not fully thought through when these products were created or approved.”.

Looking Deeper Into the Pitfalls of Short Sector ETFs etfs.html