From: Randall McCormick
Sent: July 21, 2006
Subject: Re: Reg SHO, File Number S7-12-06

As a small investor, all I ask for is a level playing field. As it stands now, the stock market is heavily skewed against the individual investor and in favor of the big Wall Street players, the broker dealers and hedge funds. A prime example is naked shorting, which has gone on virtually unchecked for the past decade or more, and has directly harmed my stocks in numerous instances. Almost no enforcement actions have been carried out by the SEC to punish the naked shorters and those that facilitate them (the prime brokers, hedge funds, market makers, DTCC, etc.), or to offer restitution for those harmed by it.

Reg SHO was proposed as a means to help control the problem. Instead, what we got was a largely toothless regulation that has plainly failed to stop naked shorting (to wit, two of my stocks, NFI and OSTK) have been on the Reg SHO list for the better part of a year or more, and their short interest continues to grow). Where is the enforcement? Where are the penalties to deter the FTD's?

The grandfathering of prior naked shorts is a travesty, and probably of questionable legality. Why is the SEC so concerned about generating "market volatility" on the upside, when it has shown no concern about the downside market volatility created by massive naked shorting? It would seem the SEC cares only about protecting those engaged in naked shorting, and not about the investors who have been harmed by it. ELIMINATE THE GRANDFATHERING CLAUSE.

The options market maker exception has been abused by naked shorters and also needs to be eliminated. But allowing the FTD's to continue only until the options expire will not clear up the problem, if long-term LEAPS are permitted to keep those positions open for several years at a time.

The laws originally promulgated after the Great Depression to halt naked shorting are simple, clear and effective--if enforced. SETTLE THE TRADES. SETTLE THEM PROMPTLY. LEVY HARSH PENALTIES IF THEY ARE NOT SETTLED.

And lastly, DO SOMETHING ABOUT EX-CLEARING. This looms as an even bigger problem than the in-clearing FTD's. Deal with it now, or try and deal with it later--when it has potentially spiraled into a system-destroying problem.

Oh, and one more thing. Annette Nazareth, who had the gall and tastelessness to refer to investors concerned about market manipulation as "people who are just upset because their stocks didn't go up," has to go. It is unbelievable that an individual with such an openly contemptuous attitude towards the investors that the SEC is supposed to be protecting is in charge of maintaining a fair and orderly market. ANNETTE MUST GO.


Randall McCormick