Subject: File No. S7-08-09
From: Gary Rupp

August 18, 2009

The Uptick Rule is not the answer to the elimination of Naked Short Selling (NSS) and Fails to Deliver (FTD). Those who are inclined to illegally work the system for their own benefit will continue to find ways to take massive short positions with or without the Uptick Rule in place.

Electronic trading has greatly accelerated the pace of trading. As a result, a great deal of harm can be done to the perceived value of a security within minutes of bad news... well before that news can be verified and validated. Frankly, the short seller hopes to be in and out of the trade before anyone can verify whether the bad news is in fact correct and accurate.

And how often have we heard, even from people like Jim Cramer, how brokers and hedge fund managers have often been the source of bad and maliciously information, even soliciting help from their friends in the media, to support their vested interests in their short positions. The reality is that there is a certain segment of the population who feel they are entitled to act beyond the bounds of the law and ethical behavior.

In my opinion, there is only one way to curtail this type of activity... and that is to make it hard for short sellers to sell shares they don't actually have the right to sell.

e.g. force the short seller to borrow the shares before they are allowed to sell them. The limited amount of shares on the market will make it more difficult for others to Pile on before the information is actually verified. If the bad news is accurate, a free market will, on its own, sort out the real value of the security quickly enough.

Most importantly, all short sellers must be required to cover their short sales on the market at T+3 with significant fines levied for ANY Failure to Deliver... period. Failing to borrow or purchase a security before selling on an electronic exchange without verification of the borrow or purchase, is an act of counterfeiting.

Finally, the SEC needs to force the DTCC to get its act together in this area, and put in place tools that allow investors to see the historical record of the shares they are purchasing, by individual security number originally given out by the issuer. Data storage is cheap, and this technology is simple electronic bookkeeping of an asset. A security is an Asset that can be managed just like any other physical Asset that a company might want to keep track of.

- Gary
Denver, CO