May 4, 2009
Millions of Americans lost significant portions of their life savings in 2nd half of 2008 and first quarter of 2009. A great portion of those who lost their life savings did so because the short sellers moved the market so swiftly that the average American was simply unable to understand what was happening. This was particularly true for those Americans invested in Mutual Funds and who do not monitor the market on a daily basis.
The argument for the short sellers is that they provide liquidity. Fine. My position is that providing the average American investor with the opportunity to digest the news and sell his or her own stock is more important to our nation than the liquidity offered by short sellers.
My solution is simple, short selling of a particular security shall be prohibited below a price which is more than 1% below the previous day's close.
A rule such as this will provide average American investors with the opportunity to preserve their savings. And shouldn't an owner of shares be permitted the opportunity to sell those shares before someone that doesn't own shares.
Further it provides short sellers the opportunity to sell without restriction (other than loacation and delivery) so long as the price remains above the down 1% trigger. Shart sellers can provide all the liquidity they like. They just can't burn the house down before the owners have had the chance to evacuate.
In addition short ETF's and Options Market Makers must be must be subject to the short sale rules. If they are not, short sellers will simply purchase Puts knowing that Options Market Makers will simply sell the stock short without restriction. The Options Market Makers will fight this tooth and nail, but if they are denied an exception from the uptick rule, the Options Market Makers will be forced to "break the cycle" and price their Puts in such a way as to include the risk that the Options Market Maker may not be able to hedge his or her position any more completely than you or I.
Ladies and Gentlemen of the SEC, I beg you, consider the retirement needs of the average American before the desire of the Wall Street firm's and the Market Maker's for transactional volume.
Thank you for your time.