Subject: File No. S7-19-07
From: Gerry Desorcy

July 19, 2008

If Regulation SHO works so well why must you suddenly change it to protect the worst violators? Something is amiss here. As you may note from the Failure to Deliver list on each exchange it is not working. Too many companies are on the list numerous times which means the violators short it down, buy back the stock when they seem fit then reshort it. The rules must be changed or at least enforced. The 13 day day rule is a joke. Get rid of it. No exceptions to this rule. None. Not market makers, brokerages, etc. If they cannot find the stock to short move on. Also get rid of the practice of borrowing shares from margin accounts. Someone has bought and paid for that share and it should not be allowed to be used somewhere else. While Reg SHO stipulates that a broker is supposed to locate shares prior to executing a short sale, there are certain exceptions to this rule. One is that if a stock appears on an "Easy to Borrow" list, this is considered "reasonable grounds" to assume the stock can be located for settlement, and the short sale may proceed without the broker contacting the source of the shares or specifically locating them. Bad rule as it also allows fraud. Get rid of it. Another exemption is for "Bona-fide market making." Does this reflect that "Bona-Fide market making is cool but almost market making is not? Too much leeway for those. Get rid of it. Another horrible practice is having the securities lenders allowed to loan out the same shares to numerous short sellers. what a recipe for disaster. The rules must be completely rewritten to ensure fairness in these markets. Everyone except the regulators already know what a joke these markets have become. Get rid of all exemptions. If someone wants to short a stock the stock must be located first. This is how the system works for the individual investor so make it the same across the board. Any short sales shall be closed by the end of the day. This would alleviate the mess we are now in and make the markets fair and square to all. The days of the regulators penning the rules and regulations through the hands of the brokerages, banks, etc must end. The regulators are paid by the taxpayer to enforce these rules and not by the banks and brokerages. At least I hope this is true.