December 23, 2003
109 West 78th St. Apt. #C
New York, NY 10024
Mr. Jonathan G.Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609
Dear Mr. Katz:
I am writing regarding the SEC proposed regulation SHO, under the Securities Exchange Act of 1934, to replace SEC rules 3b-3, 10a-1, and 10a-2. This letter will specifically address the proposal for a new uniform bid test in rule 201. This proposal is in direct conflict with fundamental objectives of a fair and orderly market place.
The new bid test proposal does not inherently restrict short sellers from effecting short sales in exchange traded securities when the price of that security is declining. Furthermore, it does not prevent short selling from being used as a tool for driving the market down.
This proposal will effectively make the market place less liquid. Restricting a short sale to at least one cent above the best bid at the time of executions will negatively impact the individual investor. The new restriction of this bid test will effect the executions of the ECNs, and will limit a customer's ability to choose where he/she can obtain the best price. Without this choice many customers will be forced out of the market place. This will inevitably decrease liquidity.
This proposal will also make pricing less efficient. The Market Maker's ability to offset temporary imbalances in the market place is not effected by the current bid test. The investor's inability to hit a high bid because it is not at least one cent above the best bid; however, does have a negative impact on the investor who wants to sell stock at that price, and the investor who is willing to buy stock at that price. Consequently pricing is less efficient.
Thank you for your time and attention to this matter.
Elizabeth Goldstein, Registered Representative