Theodore J. Siegel
Mr. Jonathan G. Katz
Dear Securities and Exchange Commission:
I am writing in regards to the proposed changes to the short sale rule. Recently, the SEC declared that "married puts" are illegal forms of establishing a long position for the purposes of shorting on a down tick. I am a registered representative at an equity trading firm, and I am concerned about regulation SHO.
It would be very inappropriate to give specialists the ability to short stocks if the public does not have this same ability. I frequently trade listed stocks. Trading NYSE stocks is much more difficult than trading NASDAQ stocks, mainly because of the specialist system. Specialists frequently front-run large orders, non-obligate traders in violation of the direct plus rule, and show fake bids and offers on the Level II quote box. These acts are in flagrant violation of the law; this hurts the general public because professional traders are less likely to provide liquidity in stocks where specialists can get away with breaking the law. Until the NYSE and NASD start enforcing their own bylaws, specialists do not need another advantage over individual traders. If anything, the general public should be allowed to short stocks that specialists cannot; however, I feel that it would be fairest if traders and specialists played by the same rules.
I studied economics at Dartmouth College, and restrictions on selling short go against what I have studied in class. These restrictions on the free market reduce liquidity instead of adding it. I very much favor suspending the bid test rule in major stocks, especially all stocks that trade over four million shares per day.
However, I agree that the short sale rule needs to be made uniform. It is very confusing when different trading systems have different rules and restrictions to establish a short position.
Theodore Jeffrey Siegel