From: Peter Michaelson [pmichaelson@qwest.net]
Sent: Wednesday, October 29, 2003 8:32 PM
To: Rule-comments@sec.gov
Subject: File No. S7-23-03 Regulation SHO

Dear SEC:
 
During the meeting last week regarding Regulation SHO, discussion took 
place indicating that tighter restrictions on short-selling were warranted 
in lower tier markets to counter-act the negative effect of 'bear raids'.
 
At http://www.sec.gov/rules/proposed/34-48709.htm the SEC says "In part, 
this action is designed to address the problem of "naked" short selling."
 
Does "a problem of naked short selling" really exist?  What is the nature 
of the problem?  Is it sufficiently pervasive to introduce additional 
regulation?
 
I have not seen pervasive manipulation by short-sellers.  Judging by SEC 
enforcement history, a very very few isolated cases have occurred.  Is 
there solid evidence to indicate that short-seller manipulation or bear 
raids are a material problem?
 
In my experience, as supported by the history of SEC enforcements,  
fraudulent touting is a very pervasive problem.  Short-selling manipulations 
are very rare in comparison.  I believe that short-sellers act as a very 
necessary, free-market foil to the otherwise nearly unfettered 
misrepresentations put forth by company insiders.  SEC Enforcement can not 
hope to keep pace with the hundreds of recidivist stock manipulators out 
there.
 
Is this aspect of Regulation SHO a palliative to the very loud complainers 
of some rather low level companies and not based on solid empirical evidence?  
Would the net effect of the new rules be positive or negative for fairness 
in the markets?
 
If there is strong empirical evidence that I have overlooked, I would be 
grateful if you could refer me to it.
 
Sincerely, Peter Michaelson