Subject: File No. S7-12-06
From: thomas reilly, pt. 2

April 26, 2007

Dear SEC,

In order to illustrate the mechanics of the slush fund created by the SEC's grandfather clause I submit the following:

At last count (Via FOIA) there were over two thousand (2000) companies with more than 10,000 FTD's in their securities however most of those companies did not breach the .5% of outstanding shares to put them on the threshold list. The total number of FTD's was over 900,000,000 total shares for all markets.

The SEC's "grandfather" provision created an enormous slush fund where shares can be sold to the investing public and never be delivered as long as the shares are sold before the the security is placed on the threshold list. There is no forced close out as long as the sales were made before the security was placed on the threshold list.

Let's use MSFT and CSCO as examples of how big of slush fund this can be. There are 2000 companies on the DTCC's list, these may or may not be two of them since the company specific data is not available to the public.


Outstanding Shares - 9,790,000,000
.5% of Outstanding - 48,950,000

Current price - $30

Slush Fund at Max .5%- $1,468,500,000


Outstanding Shares - 6,040,000,000
.5% of Outstanding - 30,200,000

Current Price - $26

Slush Fund at Max .5%- $785,200,000

Two companies represent a potential 2+ Billion dollar slush fund for Wall Street. One can only imagine what 2000 companies represent. That is why transparency is so important regarding this issue. The investing public deserves to know what is going on with this slush fund the SEC has created in the form of the "grandfather" clause and whether or not the Brokers are using it to pad their quarterly numbers.

I suspect the reason the Industry does not want the data released by security is because folks will start asking why 2000+ companies have fails and why that number has been relatively constant since Regulation SHO went into effect.

I also suspect the SEC is avoiding any mention of aggregate monetary value of fails because it has increased since the SEC passed Regualtion SHO.

It's time to get a handle on this matter. The smoke and mirrors must cease. Investors need and demand transparency.

Thank You,

Thomas Reilly

PS. My previous post had a typo of 1.5% when it should read .5%