May 7, 2007
I believe the comment period has expired, but I would like to make a suggestion rather than a comment.
It appears that the commission is going to eliminate the grandfather clause in Regulation SHO. As I've read, the reason the clause was inserted in the first place was to avoid possible damaging effects of a short-squeeze due to the large number of shares that would have to be covered immediately. Since the shares weren't shorted in a single day, week or month, more time should be allotted for covering short positions.
Here's my proposal:
Twenty-five percent of all grandfathered short shares must be covered in each of the four quarters following an "effective date". That gives the hedge funds, market makers and brokers time to absorb the financial impact of covering their positions. It will also restore the lost faith many investors have had in the market lately.