Subject: File No. S7-19-07
From: Thyra Mangan
Affiliation: Private Investor

August 24, 2007

As I continue to evaluate the rules you have placed within the Regulation SHO package, I am deeply concerned as all investors must be.

The SEC has placed rules effecting a benefit to broker-dealers, option market makers, off shore hedge funds, and others who would manipulate the market to their own benefit, leaving untended any enforcement that might protect the owners of actual securities.

Without enforcement and penalties that seriously hurt the offenders, your rules will continue to damage the companies that issue publicly traded securities and their shareholders.

The current rule you have for broker-dealers, which allows failure to deliver securities to garner profits without payment for securities, is unenforced.

Here is your rule:
6. Mandatory Close-Outs of Threshold Securities.
Regulation SHO requires broker-dealers to close-out all failures to deliver that exist in threshold securities for thirteen consecutive settlement days by purchasing securities of like kind and quantity ("close-out").20

Until the position is closed out, the broker or dealer and any broker or dealer for which it clears transactions (for example, an introducing broker),21 may not effect further short sales in that threshold security without borrowing or entering into a bona fide agreement to borrow the security (known as a "pre-borrowing" requirement).

Here is evidence of failure to enforce your rule:

NovaStar Financial series C preferred has been a Threshold Security beginning July 30 through yesterday August 23 on the Regulation SHO list for a total of 18 days. Add to that the preceding five days of continual failed to deliver status leading to its listing, making 23 settlement days without purchasing securities of like kind and quantity to cover the failed to deliver shares.

Now, you ask for comments regarding the options market maker exception to that rule? You cannot be serious.

The exception was not only unfair to the companies that issued publicly traded securities or their shareholders, but the parameters of the rule failed to foresee that any part could be misunderstood, and failed to foresee the necssity of enforcement with penalties in a way that would deter the options market maker from continued counterfeiting of securities or manipulation of the market.

The options market maker's profit line is surely being aided by the SEC's failures.

The companies who issue publicly traded securities and their shareholders are unwilling to donate their property to the options market maker.

Enforcement and penalties.

Answer those of us who are shareholders, and those companies who issued the securities what you can do to enforce and penalize. Make it tough. It's been tough for us to donate so much to them.

T+3 is my recommendation.