From: Dick Yost []
Sent: December 16, 2003
Subject: File No. S7-23-03

RE: File No. S7-23-03 Short Sales

I believe the proposed rule is too restrictive. I am against this proposed rule. However, I believe you have identified some problems and some rule changes should be implemented.

Any abuses by short sellers can best be addressed by tightening of the delivery requirements. However, your proposed rule will require excessive costs to implement. It would be better to implement simply a requirement to deliver by a certain date and if such securities are not delivered by that date to prohibit that dealer from any short selling in that security for a set time period(however 90 days is too long, I recommend 30 or 60 days maximum). The proposal to require delivery by two days after settlement or have restrictions imposed is a good mechanism, but the period should be three or four days (reduced from the current ten) after settlement and there should be some minimum quantity threshold for failed delivery before the short selling restriction penalty applies. For example, failure to deliver 100 shares of a $5/share stock should not cause a penalty. The threshold should be set, relatively low, specifying that if either a set number of shares (expressed as a percentage of the float)or a set dollar value of shares (expressed as a percentage of the market capitalization of the float), of any short sold security, is not delivered within three (or four) days after settlement, then the dealer and customer cannot short sell in that security for 30 (or 60) days. There also could be a SMALL fine for each infraction, plus a requirement to buy back any undelivered stock within a short period of time (5 or less days), with a larger fine if the buyback is not implemented in time. This should minimize costs and minimize opportunities for manipulative short selling. Extending this rule to everyone,including market makers, should prevent abuse by almost everyone, except for those who are criminals, who you need to aggressively locate and refer for prosecution.

There should also be new rules to prevent short squeezes by organized efforts to "withdrawing securities from DTC or requiring custody-only transfers" as expressed in the last paragraph of section II. A. This is also harmful market manipulation; it needs to be prohibited or restricted with criminal penalties for violations.

All your other new restrictions are too costly, compared to any possible benefits.

The proposed new bid test is far too limiting regarding short sales and will result in reducing short sales and the efficiency of the market. The short sale price tick rules should be eliminated. The only restrictions on short sales, besides the borrowing/delivery requirement, should be the "circuit breaker" restrictions when the market is rapidly falling. These restrictions, as long as they are not overly restrictive and used very infrequently, are appropriate and protective of investors and the market.

I am an independent investor, a relatively small one. I do not work in the securities or money management industry. I try to think of what is best for all investors, because that will benefit me and all other investors.

Richard Yost
2181 S. Trenton Way
Denver, CO 80231