Subject: s7-19-07 Regulation SHO comments

July 18, 2008

I feel that Regulation SHO is completely ineffective.

The regulation must require any fails to be covered in one day. Otherwise the ability to abuse the system is rampant, and getting worse. The regulation must require the broker dealers to assure delivery. Any counterparty who does not cover a "naked short" must be cut-off immediately from any further trading until such time as their position is covered.

I work in the collateral management field, where we cover transactions for OTC derivatives under the Credit Support Annex under ISDA. Any violation such as the naked shorting of shares under reg SHO would cause an immediate Default Event.

There are too many loopholes in the regulation such as exempting primary dealers which makes the regulation a cruel mockery. The recent attempt at emergency procedures to the regulation shows how ineffectual it is.

I personally feel that the blatant naked short selling that exists is undermining the credibility of the markets. I personally have stopped buying shares and will no longer purchase shares in any company until such time as I feel that these laws are being enforced. Until then, the pure theft and manipulation by the abuse of this rule makes gambling my money at a casino a better option.

Once trust is lost in any market, the participants will no longer wish to participate. Unfortunately the abuse of this regulation, allowing naked shorting to take place is already becoming common knowledge. It is only a matter of time before more and more refuse to participate.


James Riley