From: Roman [osmar92@optonline.net] Sent: Tuesday, December 02, 2003 11:37 PM To: rule-comments@sec.gov Subject: S7-23-03:17 CFR PARTS 240 and 242,RIN 3235-AJ00 IN reference: We are aware that these proposals represent significant changes in the operation of Rule 10a-1. We request comment about the appropriateness of the proposed bid test and the alternative bid test. Q. Should short sales continue to be limited by a price test? If the Commission did not adopt a price test under Regulation SHO, should it also preclude the ability of the SROs to have price tests? Q. Would there be any benefits in eliminating a short sale price test? Would the elimination of a price test benefit the markets by allowing investors to more freely short sell potentially overvalued securities so that their price more accurately reflects their fundamental value? Are there other benefits to the removal of a price test, such as elimination of systems and surveillance costs? It stands to reason that more freely short selling will create plenty of opportunities for two sides. Fundamentals will take care of itself ultimately meanwhile every participant will enjoy movement in a security. More liquidity will be only a benefit. It is great when great company’s stock is falling fast it creates only opportunity. It may make some anxiety for faint hearted, but market is not judged by short term swings. For sake of argument, let’s say stocks swings back and forth between $ 25 and $30 ten times instead of two in 5 min instead of 5 hours. In terms of filling orders it is beauty. Who cares if it is volatile, fundamentals will bring it to a proper place anyway. Rules create other rules, subtexts, exceptions, amendments and so on. Then we need surveillance, systems, programmers, managers and so on. We cannot dictate nature how much rain to fall even if it is flooding. If fundamentals are a OK, fast and volatile stock movement is irrelevant for long term investors. It’ll be balanced out anyway. Q. Would the proposed "bid test" in Rule 201, allowing short sales above the best consolidated bid, effectively prevent short selling being used as a tool for driving the market down? Q. Would short sale regulation using the proposed bid test operate effectively in an auction market? If not, why not? Q. Would short sale regulation using the proposed bid test operate effectively in a dealer market? If not, why not? Q. Would there ever be a circumstance where there would not be a consolidated bid in an exchange-listed or Nasdaq NMS security? If so, please describe. Q. The proposed bid test likely would inhibit short sales in a declining market because there would be few execution opportunities above the best bid. Is this appropriate? Q. Is a one-cent increment an appropriate standard for allowing short sales above the best consolidated bid? If not, what is an appropriate increment? Q. Would short sale regulation using the proposed bid test present any automated systems problems for market participants? Q. Would the proposed bid test operate effectively in the current decimal environment, i.e., would bid flickering inhibit the operation of the test? Q. Would the proposed bid test fulfill the fundamental goals of short sale regulation? Q. Would the alternative test allowing short selling at a price equal to or above the consolidated best bid if it is an upbid better fulfill the goals of short sale regulation? In refer: The Commission notes that the general anti-fraud and anti-manipulation provisions of the federal securities laws would continue to apply to trading activity in these securities, thus prohibiting trading activity designed to improperly influence the price of a security.105 Further, the pilot would only suspend the operation of the proposed bid test. All other provisions of proposed Regulation SHO, including the marking requirements of Rule 201 and the locate and deliver requirements of Rule 203, would continue in effect. Finally, the Commission could terminate the operation of the pilot, in whole or in part, prior to the end of the proposed two-year period as it determines necessary or appropriate in the public interest or to protect investors by removing all securities selected for inclusion in the pilot. Q. Is the proposed rule temporarily suspending the short sale price test for liquid stocks appropriate? Are liquid stocks more difficult to manipulate through short selling? If stocks have substantial institutional presence it is impossible to manipulate even less liquid stocks. I would suggest suspend short sale price test for National markets (NMS Nasdaq and NYSE) with average daily volume more than 200K and institutional holdings more than 25% Q. Is a two-year temporary suspension of the short sale price test a sufficient period to fully study the impact? If not, what time period should be selected? Commenters should provide specific reasons to support their view in favor of establishing another time period. The benefit will be seen even in shorter time but 2 years is an OK. Q. Is the proposed selection method for the pilot, including our contemplated use of the Russell 1000, appropriate? If not, what other selection method should be considered? Is it possible that one market could benefit over another market depending on the selection of stocks for the pilot? Q. Should the short sale price test be automatically reinstituted in extraordinary market conditions, for instance, if, on an intraday basis, the price of a security falls more than a certain percentage based on the day's opening price (e.g., if the price of a security falls 10% from the day's opening price short sale restrictions would be reinstituted)? NO need, if I am a bargain hunter I want to buy as cheap as possible. Let natural forces to settle this issue. Q. The pilot, in part, would allow the Commission to obtain data to assess whether the price test should be removed for some types of securities and to study trading behavior in the absence of the proposed bid test. After analyzing the results of the pilot, the Commission may propose that the bid test be removed for certain exchange-listed and NMS securities. Should the Commission await the results of the pilot before applying the uniform bid test to exchange-listed and Nasdaq NMS securities that may later have the bid test removed? Q. Should the pilot apply to existing short sale rules even if we do not adopt the new uniform bid test? Q. The securities included in the pilot would still be marked and specialists and market makers can observe this mark prior to executing the short sale. How would this affect the outcome and reliability of the pilot, if at all?