Subject: File No. S7-27-09
From: Richard E K Brawn
Affiliation: Private investor

January 31, 2010

I have four comments: Manipulation of market prices, denial of market-making information, rules that force wronged market participants prove 'wrongful intent' of market manipulators, and unacceptable risk. The SEC is entirely responsible for allowing dark pools to operate. Unless stopped, I will leave the equity market and invest elsewhere.

Market prices depend entirely upon both the buyer and the seller being in possession of information necessary to establish value of the asset for both parties. Further, value at any moment in time is dependent upon knowing the amount of equities available AND the existence of buyers that have the intention and the means to buy. These are basic to establishment of any 'market price.'
Dark pools exist in order to deny other market participants information on the volume and availability of specific equities.

Second, dark pools can allow the buildup of an 'overhang' of unsold equities. This artificially elevates the price and is synonymous with market manipulation.
Third, the function of a regulator is to provide and enforce rules that do not force an ordinary participant to establish in a court of law, the "wrongful intent" of another participant. The public has lost faith in the SEC because it is perceived (correctly or not) to create rules that specifically allow legal and functional loopholes. The SEC should never allow either legal or functional loopholes that give advantage to potential market manipulators.

Forth, I will not participate in a market that allows others in the market to hide market-related risk from me. I can easily refuse to participate in the equities markets. If my faith in the fairness of the market discipline erodes further, I and thousands like me can and will simply leave the equity market, and move into hard assets. That would destroy the capital and liquidity our presence allows. If the SEC does not prevent dark pool operations, I will indeed leave the equity market. I view that situation as creating risks for me that I cannot know and will not take.