Subject: File No. S7-12-06
From: Didrik P Stene

July 23, 2006

Eliminate the criminally-complicit grandfather clause
Enforce (and therefore limit) "for the sake of liquidity" provisions after clearly defining them, of the naked shorting exemptions of the Options Market Makers and Specialists, or preferably, since self-regulation is a license to steal and enforcement would be onerous, eliminate these exemptions. There can be no fair market so long as these MM's and Specialists can create extra "shares" to mitigate to trivialization or roll forward to infinity their own risk and that of their hedge fund and other institutional customers
Require a borrow first, not later which can equal never-forever on companies targeted by short sellers and complicity MM's and Specialists
Require a borrow be documented no single share should be borrowed and sold and re-borrowed and re-sold more than once/repeatedly
Report short sales, total short interest daily with same transparency and public reporting of total daily volume.
Settle all trades within 3 days, buy in Failures To Deliver immediately on day 4. There is no legitimate rationalization for any extended period of manipulative counterfeiting of shares created from thin air.
Audit the stock loan program of the DTC/DTCC and all its subsidiaries and establish oversight to assure settlement accuracy -- and prevent the hiding of over-voting of proxy shares
I strongly recommend the following amendments to Reg SHO
1. Make it mandatory for all short sales to first borrow (not just locate) real shares prior to executing a short sale.
2. No naked short sales or counterfieting of shares
3. Eliminate any and all possibility that the same shares are available for borrowing to more than one broker/dealer, or short seller. Eliminate multiple sources for the same borrowed shares. Insure there can never be more shares in the system than the issuing company has issued.
4. Make FTD data for all stocks on an individual basis available to the public.
5. Enforce the rules rigorously with stiff fines and lifetime disbarment from the securities business for those who break the rules
6. Omit the grandfather provision completely

I agree with these comments and would add:
7. Get rid of the current commissioners who have allowed this farce to continue under their watch and especially the one who made the comments "naked shorting doesn't exist, it's only that people are upset because their stocks aren't going up." That mentality can't be washed away over a few proposed changes to Regulation SHO. In fact I demand a change of commissioners, I pay your salaries.

(Attached File #1: dpstene9593.pdf) (Attached File #2: dpstene1503.pdf)