Subject: File No. S7-12-06
From: Aaron E Ashcraft

September 28, 2006

The purpose of this letter is to request that the SEC completely overhaul the fatally flawed SHO sytem. The present system is clearly designed to subsidize brokerage houses, market makers and hedge funds who engage in fraudulent trades it will ultimately destroy confidence in our markets.

The SHO system has been proven not to work. There are now 471 companies on the list short interst in these companies just continues to rise-no attempt is being made to cover these shorts, even when they far exceed the float. Clearly SEC policy is to protect the market makers and hedge funds at the direct expense of the shareholders. As a consequence, my retirement fund is approximately HALF of what it should be.

I clearly understand that short selling is essential for a healthy market it penalizes companies that are poorly managed or run into trouble. However, there is no excuse for the SEC to allow short sales that exceed the float That is precisely what is happening with the current SHO system, and no attempt is being made to force market makers to cover.

The Justice Department sent Martha Stewart to jail for insider trading which sort of hurt nobody yet the penalty for naked short sellers is only a gentle slap on the wrist, for the far greater crime of stock price manipulation that destroy the portfolios of individual investors. Naked short sellers commit crimes against many many people and are not penalized at all. If you put a few in jail for fraudulent trading, then and only then, SHO might work. As it is, naked short sellers can make $300-$400 million, and suffer a fine of $4-5 million-it is just a cost of doing business to them.

Former Fed.Chairman Greenspan frequently commented on the risk of derivatives to the U.S. financial system few people ever asked him to clearly explain. I believe what he was talking about is Naked Short Selling. The Chairman believed Naked Short Selling could completely undermine the U.S. financial system, cause a run on the U.S. dollar and prompt China/Japan/Korea to sell the hundreds of billions of U.S bonds they presently hold from our trade imbalance. Nobody wants to even think of that possibility.

The SEC has the responsibility for protecting the U.S. financial system and individual investors. The SEC is NOT DOING ITS JOB. The SHO system is not working. Please, please, please get back to doing what is right and reassert confidence in our financial system.