Subject: File No. S7-08-09
From: Jon Alexander
Affiliation: Investment Manager

September 28, 2009

Fact: Short Selling Does Not Aid in Price Discovery, it distorts it.

I have read the arguments made in favor of no uptick rule and the praising of short selling and have found that they all come from self interested parties. The exchanges want the added volume and volatility, the Investment Firms want the hedge fund business and trading, the professors are paid consultants.
No one who lists their companys shares on an exchange to provide value and liquidity to their shareholders is in favor. No investor that buys shares of a company for the purpose of long term growth is in favor. Yet it is these two parties that matter the most.
To read that Short Selling aids in price discovery by those self interested only reinforces that they will make up facts to justify their greedy objectives. It is to say gravity does not exist.
Economics 101 Rules of Supply and Demand ANY increase in Supply when demand is constant will result in Lower Price. PERIOD.
And then after the shorts have successfully sold their shares, and the price has been distorted to the downside, they must now reverse the rule to add distortion on the upside when they cover AS ANY INCREASE in Demand when SUPPLY CONTRACTS results in HIGHER PRICES.
To have your professors and exchange executives state that short selling improves this basic tenet of price discovery flies in the face of established Economic Rules. Short Selling can only DISTORT PRICE as it artificially increases supply and then artificially increases demand while reducing supply. Thus as a rule it distorts price down then up which can only AID IN PRICE DISTORTION.
When you add to this the ability to scare the markets with bursts of added supply, which happens when the uptick rule is NOT in place, the rules of volatility are distorted further and panic selling results.
These are simple facts taught at EVERY University around the World. To argue otherwise only exposes bias to justify rules to support volatility and manipulation.
Stop this madness of a casino stock exchange and return the markets to the Companies who list their shares and the investors who buy them. The short sellers are a cancer to the capital markets and by definition DISTORT PRICE when they are in the markets.

Jon Alexander
Investment Manager
Bloomington, IN