From: Ralph Gang
Sent: July 26, 2005
Subject: File No. S7-12-06

In October 2003 the SEC submitted Regulation SHO for public comment and by June 2004 the Commission staff approved the rule. The staff allotted a six-month window for the industry to come in full compliance bringing us to January 2005 before industry compliance began.

In the period between October 2003 and June 2004 the public was afforded the opportunity to write comment letters to the SEC while the SEC was meeting privately with the congressional oversight committees and members of Wall Street to openly discuss option. What resulted from these private meeting would blow away the hopes of the investing public.

Despite the concerns raised by aides for the House Financial Services Committee, and despite a proposal submitted by the NASD in March 2004, the SEC Division of Market Regulation created an alteration to the proposal submitted for public comment. The alteration was a "grandfather clause" that was inserted into the rule making which allowed all prior settlement failures to be immune from the new closeout provision of SHO. The alterations came at the benefit of, and most likely the bequest of, Wall Street.

The final draft served notice to the investing public that their rights would take a back seat to the rights of broker-dealers and certain clients.

Fast-forward to today and the same Division of Market Regulations, with much of the same individuals involved; have identified this grandfather clause as a loophole that now needs to be closed. Repeal of the grandfather clause part of the modifications presented to the Commission staff.

With the above history in mind, I will still submit the following suggestions:

1. Rescind the grandfather provision and force buy ins of all FTD positions.

2. Prevent future FTD positions by reverting back to the 1934 Act that created the SEC and link clearance of cash to deliverly of stock. If no stock is delivered, or bought in, no cash is cleared.

3. Eliminate exceptions for market makers, if no stock is delivered, no cash is cleared.