Sent: Tuesday, December 23, 2003 11:54 AM
Subject: File No. S7-23-03 - Regulation SHO

Commissioners,

As you wade through the tremendous volumes of comments you shall receive
regarding this proposal please maintain the proper focus on why we are
agian in this comment period.  Your focus should be blind to the lobby
group and more to the operational jurisdictions of the Securities and
exchange Commission.  Make sure that the Market is designed operate on an
equal playing field for all.

In 1999 this Commission had requested comments on proposed rule changes to
short selling and was deluged by comments from investors who believed that
their investments were being manipulated by a system of naked shorting.
The commission read those comments but later decided against any major
reforms that would protect these investors.  Instead the Wall Street
Institutions, and their lobbying power, overwhelmed the Commission with the
politics of change and got what they were seeking, relief.  We are now 4 ?
5 years later and in the same circle again.  Lets hope the data gathered
within these past 5 years would demonstrate the failures in not listening
before.

Naked Shorting, unlike Affirmative Determination Shorting, is a process
left uncontrolled by present day regulations.  The allowances for Market
Professionals to naked short for liquidity in order to maintain an orderly
market has gone unchecked and has created, by the SEC's own admission,
conditions where the naked shorts exceed the entire float by one or more
multiples.  That is no longer a liquidity issue as each naked short sold
has a real buyer, with real money, backing that trade.  Dilution hurts and
present regulations allow for uncontrolled and undocumented dilution.

In todays trading environment we read about the rise in trading volumes and
the revenue being generated in the industry due to this rise in volume.
Reports, however, indicate that it is the micro-cap market that is playing
a significant role in this revenue stream as the micro-cap trade volumes
now meet or exceed the volumes being traded on the NASDAQ.  That is far
from being illiquid.  But with the renewed liquidity what are we finding
out?  Stocks remain at relatively flat levels and the number of shares in
circulation continues to rise as naked shorting is controlling growth.
Micro-Cap stock prices continue to fall on news of growth in revenue.  On
the NASDAQ, however, we see stock prices rising trmendously on revenue
decreases and operating expenses in the red.

It was my understanding that beyond the liquidity issue, the SEC has
authorized the use of naked shorting to minimize the threats of Pump and
Dump schemes by Company insiders.  This too has failed over time due to the
failures of the SRO's and SEC to monitor the status of naked short
positions.  The SEC and SRO's have simply moved the scam of Company insider
fraud to a venue where Market professions can now commit the crime.  Stocks
no longer see the "Pump" as naked shorting would simply hold that stock
down.  Who, however, looks at the hold down efforts to insure that they are
legitimate?  As we continue to see, we have simply moved one form of fraud
into another.  This time it is the Wall Street professionals that hold the
cards and theirs are always hidden in the back offices for no one to see.
Back offices of firms who have recently been involved in scandal after
scandal associated with ripping off the investing public.  The SEC, in
trying to cease one form of fraud, has simply created an equal and oposite
to it.

I have one final comment prior to making my counter proposal to the
commission.

In February of 2003 the SEC fined Rhino Advisors $1Million for stock
manipulation associated with naked shorting.  While this is perceived by
many to simply be an issue about breach of contract many others know it is
much more.  Rhino Advisors was fined for selling short stocks to manipulate
the price of Sedona.  The recent DOJ arrest of Andreas Badian clearly
spells out the process as well as the co-conspirators.  To perpetrate this
fraud it took a collusion amongst the market professionals to hide the
short positions and to wash-sale these trades to make it appear that they
were not in fact short sales.    This case, and it's implications, involve
many separate parties including Offshore Financiers, US Brokerage firms,
and Rhino as the third party dealer.  To orchestrate this with such a broad
range of involvement would indicate that this was not orchestrated to
manipulate a single company but instead as a normal process of doing
business.   The US Brokerage firms, key to this scheme are the ones that
present regulations fail to control in their abilities to naked short our
stocks.

From a news report covering the Indictment against Andreas Badian;

The criminal complaint filed in federal court in Manhattan charges the
Badians ordered aggressive short sales of Sedona stock through a New York
broker.

Andreas Badian told the broker to sell Sedona shares short with "unbridled
levels of aggression," and be "merciless" with it, prosecutors charge. He
later congratulated the broker on a "good job" because the stock price had
"collapsed, " according to tape recordings of telephone calls to the
broker, prosecutors said.

Clearly the implications of our Brokerage Involvement in orchestrating
fraud is clear.  This is not about an orderly market but about the theft of
millions to the investing public.  The actions against Sedona resulted in
more than $40Million in market capitalization losses.  Losses incurred by
the investors in that stock during this abuse.


Now to my proposal:

1.    Fair Markets and the mitigation of fraud can only take place if there
is trade settlement on all securities within a defined time constraint.
Regulations must be restricted from open ended wording such as "Best
Efforts" and provide for strict timelines on trade settlement.  Once a
failure has taken place, the procedures to settle must be fully defined
with escalation penalties for failures.  Penalties that are placed on the
Broker Dealers who fail to meet those requirements and penalties that
cannot be passed on to the investing public by way of increased fees.

2.    To create liquidity in the stocks considered illiquid, a single
depository must be created that maintains a fixed quantity of "Accessible
shares to borrow".  For these stocks, brokers will not be allowed to submit
shares into the loaning pool.  They will only have access to make
affirmative determination off a single depository of securities.  If that
depository is dry of shares the short sale is prohibited.  The number of
shares available in the depository shall be defined as a fixed percentage
of the Outstanding Shares registered by the issuer to the Depository Trust.
As the issuer created new shares, the pool will increase by that percentage
accordingly.  Dilution beyond any reasonable means no longer becomes good
for the market but instead a detriment to any paying investor.

3.    To maintain liquidity the pool must cycle through shares.  Once
devoid of shares for a duration of time TBD, the Depository will be
required to force settlement of a certain percentage of shares to increase
the shares on hand availability for others to use. The process would work
on a first out first in basis.  Those on loan the longest would be called
in first and so on and so on.  This, in theory, is no different than what
would take place on the Big Boards except that the Big Boards securities
rarely reach full short position potentials.

4.    All trades executed through US brokerage firms, regardless of where
the trade originated, will be required to meet these trade guidelines.
Failures by US or Foreign Brokerages to follow these guidelines of trade
settlement will result in fines, suspensions, or complete banishment from
trading in the US.  This will involve both the firm and the individual
trader who has failed to properly execute the trade.  These firms are
required to know their customers and only execute legal trades.  To execute
an illegal trade is failing to take on that responsibility and thus the
sanctions must be severe.

In conclusion, Commissioners I believe you are fully aware of the enormity
of the problem we now face on the books of our Brokers.  These problems are
based on the failures of the Commission back in 1999 to listen to those who
spoke of fraud outside of the realm that the SEC cared to understand.  How
then does the Commission resolve the sins of the past?  Start by being
tougher today.  Start by instilling fear instead of complacency.

The World of Wall Street is one in which the Brokers operate behind a black
curtain.  Those investors not part of the industry never know what is
taking place in these back offices.  What we are seeing is that these back
offices have some issues.  Issues they created.  Because these firms
themselves created the problems the Commission cannot be concerned about
the collateral damage that will come from this regulation.  Firms who
failed to take advantage of the lax regulations of the past will come out
fairly unscathed.  Those firms who took full advantage of their secrecy in
operations may pay dearly for their sins.  As they should.  They were
cheating an investing public who put money up for trades to be properly
executed.  These firms had their own Self Regulatory Authority and thus
they are ultimately responsible for their own fate.  If they got greedy
they must now pay for that greed.

I urge you to listen this time to the masses and expedite these changes as
appropriate.  Playing to the lobbying of an industry riddled with scandals
would simply be an admittance that the SEC is not looking out for the best
interests of a fair market place.  Follow your own evidence to stop the
abuses everyone knows exists.  Don't wait for this to simply be another
scandal that the SEC failed to respond to in time.


Dave Patch