Subject: File No. S7-08-09
From: James N Hill
Affiliation: Former Trader Securities Fraud Investigator

September 24, 2009

James N. Hill Former Trader Fraud Investigator

I have previously outlined to the SEC methods that can be used to skirt the intent of any type of "Uptick" rules. I have been amazed at some top officials that did not know that any uptick rule can easily be circumvented, illegally, but circumvented.

I am on record in the public domain as having spoken against the total abolishment of the uptick rule as far back as 2004 when the idea was first circulated. My statement then was that we would be handing the welfare of our markets over to hedge funds and short sellers if there was a total abolishment of the then uptick rule. I believe I have been proven right. One high ranking United States Senator wrote a letter to an Agency head outlining the need to bring back restrictions on short selling. Of the 5 paragraph letter, 4 paragraphs contained information I had provided to the Senator's staff.

One only needs to look at the VIX in the 90 days immediately following the abolishment of the uptick rule to draw certain conclusions.

Last November, I devised an alternative to any uptick rule. I talked about my plan to a wide spectrum of market participants, including but not limited to former SEC officials, Exchanges Executives, large fund managers, leading academics in market execution, fraud experts and CEOs of publicly traded companies. Their opinions varied somewhat but I was able to draw certain conclusions.

I proposed the following alternative to any type of uptick rule.

When a stock is sold short, the full proceeds go into the sellers cash account. My offer is to give the seller only a certain percentage of the cash proceeds of the short sell. The short sell can occur in any market. The amount of the sale that is deducted (to be determined) would then flow through to fund a Super Regulatory Agency that would be charged with overseeing the safeguard of our entire financial markets. Part of this funding would be used by this agency to micro-examine and track the delivery of borrowed shares in a short sell. I have heard Senator Schumer and Senator Shelby both speak of the need for funding to oversee certain market regulation. This is the vehicle they have asked for. Part of the money withheld from the short sell would flow back to the company that is being short sold. Short interest should be reported on a daily basis.

By and large, short selling is NOT a Main Street American investment vehicle. In my unscientific method of determination, most investing Americans do not really understand short selling. I am fully aware of the contentions by certain entities in their claim that short selling provides liquidity and price discovery in the trading of securities. I have my doubt about the total validity of those two reasons.

I have heard SEC Chairman Shapiro state that it was her charge to oversee the protection and enforcement of regulation of our financial markets in order to safeguard the American Investor.

It's time that rules and regulations were made for the American Investor and not for the benefit of Wall Street. Do the right thing and implement a policy akin to the one I have proposed.