July 15, 2008
I would reconsider the idea that a market maker's liquidity should be inhibited merely to reduce fail to delivers. Currently fail to delivers are at historical low when compared to the amount of transactions processed. The SEC in the past (prior to Regulation SHO) has tried to promote an efficient back office process. Regulation SHO puts the back office in front of the front office without sufficient justification as the back office is not broken. This proposal is not a plus for a liquid and efficient market.