PETER R. MACK & CO., INC.
19 EAST 71ST
STREET, SUITE 3
NEW YORK, N.Y. 10021
TEL: (212) 744-3939 FAX: (212) 744-8484 EMAIL: PRMCO@AOL.COM
MEMBER FINRA & SIPC
SENT BY E-MAIL
February
27, 2009
Chairwoman
Mary Schapiro
The
Securities and Exchange Commission
Dear
Chairwoman Schapiro:
In
looking at the pre-market trading in Citigroup (C-NYSE) and seeing its descent
by over 60% or so from its previous close on the NYSE on high volume in
response to the Treasury department’s news, it would seem a safe assumption
that much of the pre-market trading involved high amounts of short sales done
electronically without pre-borrow or other stock loan arrangements, which, if I
understand the SEC rules correctly, would be a violation of those rules.
Extraordinarily
high short selling, whether in pre-market or during regular trading hours,
causes extreme volatility in a market
where individual investors, pension funds and mutual funds have had their
portfolios devalued and available funds depleted, The weakness in the economy
and equity markets and decline in consumer confidence, down to 25% at last
reading, has created an un-level playing field and enabled a condition of
extreme volatility, allowing the markets to be easily manipulated. In my view,
the Commission has a responsibility to ensure orderly markets.
Late
last year, I wrote to the Commission regarding re-institution of the uptick
rule and received a response explaining that, with decimalization and price
increments commonly one cent a share, the judgment was that the uptick rule
would be inconsequential and hard to implement. The solution, then, in my
opinion would be to limit decimalization to identifiable units of perhaps five
cents a share, or in any amount that would once again permit the effective
implementation of the uptick rule and permit the Commission to regulate markets.
Moreover,
although I personally have very little knowledge of how leveraged “ultra” short
index funds work, there must be some contribution to extreme downside market
volatility from these vehicles as well, perhaps involving short selling, and if
so, they should be subject to regulations and not exempted. But, again, I
really am ignorant about that product and how it works.
I
have worked in the financial markets for almost 46 years and I lament the fact
that I and my clients and the majority of the population now believe that the
equity markets are a giant casino, that they are manipulated and that they are
too risky for responsible allocation of assets. The markets need prompt and
effective regulation to insure their stability and viability in these troubled
times.
Thank
you for your attention.
Sincerely
yours,
Peter
Mack
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