Subject: File No. S7-20-08
From: Brad Patterson

August 5, 2008

SEC Preliminary Guidelines of Naked Short and Fail-To-Deliver Reform(condensed highlights in rough draft form)

DTCC NSCC Federal order to open their books via DOJ, ICC, and SEC

To protect the privacy and practices of current trading strategies, a new regulation (Regulation FTD) will be mandated to provide a daily list indicating all open fails on every security where one exists in the marketplace. The total of fails shall be updated daily on each security. No equity or derivative shall allow any borrow from any entity until all current and past fails are eradicated.

Immediate buy in on all current and existing fails out side of 13 days. Current fails have up to the mandated 13 days per Regulation SHO to "buy-in" and be covered.

Going back to introduction of SHO, any fails never bought in and covered will be "busted" and accounts disgorged with fines. Current fails listed on the Regulation SHO list outside of 13 days will be bought back in at market effective immediately.

All fails since the introduction of Regulation SHO will be reposited to every broker-dealer, market maker, hedge fund, and individual account as a short sale by cusip replication on a journal basis for the extent of time they were in fail status. No actual trade will occur. The fail will remain in the account affected for the entire time the position was in fail status. The position must be covered in such time or shall be "bought in" by the SEC and DOJ. Example: If the fail occurred exactly 3 years ago, it will remain in the client account for three years.

No additional short position shall be allowed on any particular security or derivative in which a journal entry exists or a current fail is open until that position is either bought in by the party involved or by the deadline of the fail period noted.

Any party affected with a particular fail can and may buy in to cover the open ledger entry fail at any time before the end of the period of original fail.

When fails are recovered on the open market, subsequent journal entries will be made affecting every equity or derivative to retire those securities from circulation and return those companies affected back to their exact oustanding and authorized shares.

By way of example, if the market maker SBSH or NITE or UBSS has net fails of 1.2 trillion shares over the past 3 years since the introduction of SHO, then those parties that traded those shares in net fail status shall have 1.2 trillion shares placed back in their account net short. They may not execute a short on that particular security at any time until the exisiting fail is covered by an order to buy on the open market. Each market maker will take the proper measures necessary to clear the fails recorded and report the transactions accordingly to their corresponding broker dealers. In finality, each broker dealer has 24 hours to accurately report the journal entries and "buy to covers" to their associated client accounts. No individual client may affect the buy-in on their own. The transaction must come at the broker-dealer level as prescribed by the commission.

Any customers who end up with a deficit balance in their account as a result of these transactions will have their accounts closed and appropriate action will be taken to recover those losses beyond the capital in their account.

Should a company no longer be in existence then those fails will result in a special task force designed to reverse all transactions involving a fail that occurred from the introduction of SHO until the company's exit from the market. All monies involved in the failed transaction will be pooled and disgorged from the parties account that initiated the fail. A list of all shareholders that held that particular equity from the introduction of SHO until its exit from the market will be compiled. All monies will then be divided among the shareholders of record and returned to them by equity.

A separate task force will be implemented to calculate all fails "ex-clearing" of the DTCC. An intercontinental coalition will be formed to force the buy in under the same regulations for all foreign entities. They will then be extradited to the United States for prosecution.

It is expected the SEC, ICC, and DOJ will employ 5200 employees for a period of 48 months to complete the process with the option to extend for up to 12 months. The cost of such a program is expected to be $1.5 billion and shall be born by the entire program on a "per fail" charge basis to the offenders involved. At the conclusion of this program, the DTCC and NSCC will become a branch of the government and fall under the auspices of the DOJ.

The Securities Act of 2008 will be set into effect and will include but not limited to:

No further naked shorting of any kind will be considered legal or acceptable by any measure or entity. Details of the only acceptable measure to initiate an open short position will be released at a later time.

Regulation FTD to list all past net fails and current fails on a share basis.

Full hedge fund disclosure of all positions held and timely reports filed with the SEC.

The immediate initiation of full electronic trading across all exchanges and trading vehicles. No algorithmic programs will be accepted or allowed.

Regulation NMS will be rescinded indefinitely immediately preceding this order.