This letter is in response to your proposed rules changes, regulation SHO, regarding naked shorting of stocks. Initially I would like to thank you for finally addressing this long-standing problem in our markets. I feel the need, however, to point out that you ignored thousands of complaints and letters regarding naked shorting for a reason that is difficult to fathom. As a regulatory agency of my federal government, funded by my federal taxes, you have been woefully remiss in your duty to protect me and my fellow citizens from blatant fraud and abuse of the system by the very corporations that make up that system we call the stock market. You requested comments on the subject several years ago and despite what could only be termed a massive response from investors, company officers, and other concerned citizens you took no action.

As to the currently proposed rules change, I agree that they will help prevent abuses but I urge you to go further and include serious penalties for violating the rules. Unless and until penalties are costly and damaging to those who choose to flaunt the rules, the abuses will continue. The 90-day "suspension" penalty is inadequate and weak. If an entity can profit by millions of dollars by flaunting the rules and they only risk the ability to trade in that one issue for 90 days, there will be those who decide the gamble is worth the risk.

The somewhat vague terminology for what constitutes availability of securities for "borrowing" should be carefully considered as well. To rely on "reasonable grounds" and "blanket assurances" leaves the door wide open for those that will break the rules and then pass the blame. In light of the willingness of broker-dealers and market makers to bend the rules to suit their needs and improve their balance sheets the new rules need to be definitive and unambiguous. The ultimate victims of trading abuses are American citizens. When trades fail to settle it is because the system was abused. The consequences should be borne by the broker dealers and market makers, not the investors who have no other system to choose from if they want to invest.

Market makers should be held to a higher standard if they are to be allowed to naked short to assure liquidity in the markets. They need to be required to limit the period of time that they can hold any naked short position in any security in any market. There is no valid reason to allow a market maker to hold a naked short position for more than 2 days past settlement date. If market makers choose to hold large naked short positions and hope to benefit from a change in prices they should also assume the risk inherent in that gamble.

The failure to deliver in a timely fashion in today's technologically advance world can only mean one thing - a failure to make an affirmative determination before placing a trade. The practice of settling trades electronically has allowed abuse of the system. There can be no gray area, no loopholes, and no excuses for not making sure a single share of stock actually exists before selling it to an unsuspecting and innocent buyer. Naked shorting creates "electronic shares" that were never issued by the company yet they can end up in the trading accounts of investors and in essence gives control of the "float" of public companies to market makers and broker dealers. This is dilution and artificial liquidity that can drive down the price of the issues affected. How can anyone not have a problem, practically and morally, with a system that allows that to happen? A broker has not met it's contractual obligation and fiduciary responsibility to an investor if purchases for that an investor a single share of stock that is not back by a certificate.

In conclusion - if the SEC hopes to restore confidence in the American markets it must take definitive and unwavering steps in the direction of fairness and a level playing field for all participants. While I am sure there are many who would like to see no changes made and business as usual continue, their motives can only be self-serving. The growing numbers of investors who have had enough of the greed and rule flaunting in our markets will not be deterred nor will we go away.

Gregg D. O'Neill