From: Jim Chen
Sent: September 7, 2006
Subject: File No. S7-12-06

Naked shorting is illegal in the first place. During the 60-day commenting period, the involved parties have plenty of time to close out failed to deliver positions. There is no need for additional 35-day phase-in period. I think SEC should require immediate close-out of failed to deliver positions when the rule becomes effective. SEC should also access fine for anyone failed to deliver within three days. The fine should be progressively larger. For example, access fine of 1% of transaction value for first day, 2% for second day, 3% for third day, and so on. If short sellers can't profit from naked shorting, the practice will stop by itself. Overall, SEC is too lenient to short sellers in the expense of ordinary investors. Why SEC is concerned about short-squeeze? Naked shorting is illegal and it should be punished, not protected. SEC's current rules make ordinary investors question who SEC is working for.