Date:    12/16/1999  1:52 PM

SUBJECT:  comments of parts of File No. S7-24-99
     
I do believe the short sale rule 10a-1 does help stabilize a market.  I am 
unsure how removing this rule would effect the volatility of stocks.  I feel 
confident in stating that in high volume stocks on the NYSE and NASDAQ, there 
is usually enough transparency to allow for fair markets with a suspension of 
this rule.  It's a little less true on NASDAQ, especially when it comes to 
the smaller stocks and more thinly traded stocks.  And on the NASDAQ, with 
more market makers not trading in collusion, a fair market should be 
attainable without rule 10a-1.
     
However, the NASDAQ Smallcap market and the OTC:BB should require rule 
10a-1, and be much more strongly enforced.  Even though I'm fairly certain 
it's illegal, it appears that some market makers on both of these exchanges 
manipulate stock prices in their favor when it comes to retail market orders 
by trading ahead of incoming market orders and pushing the price in a 
direction more advantageous to the market maker.  Granted, this is a 
separate issue, it does go to show the extent to which market makers will 
act in order to shape a market to their advantage.
     
This appears to be more true when it comes to shorting.  There are strong 
limits on shorting by the retail investor, typically to stocks with a bid of 
at least $5, and not on the OTC:BB, regardless of share price.  But these 
restrictions do not apply to the market makers.  And as of now they can 
short whenever it suits them.  In fact, it does appear that they short not 
only when there's no uptick, but also when there are no shares to be 
borrowed.  This is commonly referred to as "naked shorting", which is 
shorting of shares that don't exist.  This is the most blatant of 
manipulation by market makers, and forces the markets in certain issues to 
be far from fair.  On this point I can provide evidence.
     
From the OTC:BB website one can obtain by e-mail the trading logs for any 
particular previous day.  I'm an investor in a highly risky issue called 
Consolidated Capital of North America (OTCBB:CDNO).  I understood the risk 
when I bought in, but was unaware of the manipulation in this particular 
market.  After reviewing the trading logs provided by the OTC:BB website, I 
observed that with retail buys of this security far outweighed the number of 
sells, both in number of trades and volume, the share price fall.  This has 
happened on many occassions.  After subtracting the total number of sells 
from the total numbers of buys, one can obtain the retail accumulation, 
assuming the logs are accurate.  After many months of these calculations, it 
appears that the number of shares accumulated has exceeded the current 
outstanding number of shares as verified by the transfer agent.  This 
implies that the market makers have had to naked short the stock in order to 
sell ell of those shares.  Granted, over the period I have been observing 
this stock, there has been a significant increase in the number of shares 
outstanding.  That does account for some of the decline in price, but not 
all of it.
     
I've made similar observations in this security while watching the market 
live.  I would see many retail buys, maybe 5-10, and the bid and ask would 
stay the same.  Then, a much smaller sell would occur, and the market makers 
would lower at least the bid, and sometimes the ask along with it.  There's 
no question in my mind that the market makers pretty much put the bid and 
ask where they want it.  I realize that the market makers have fronted their 
own capital to make a market.  My understanding was that their reward was 
that they make their money from the spread.  But that appears not to be 
enough, as they move the bid and ask in their favor.  I would say they move 
it up when their inventory is high and they want the retail investor to pay 
more for the shares, and then they lower it when their inventory is running 
low.
     
It is my understanding that the only way the market makers can lose in an 
environment like this is for all shares to be accounted for and exchanged 
for new shares.  This can happen by all investors calling for their 
certificates or when a company changes so significantly that its CUSIP 
number changes, also forcing an accounting for all shares.  Both of these 
events have the effect of forcing the market makers to cover their shorted 
shares, both naked and truly borrowed, which most likely has the effect of 
dramatically increasing the stock price as the market makers scramble for 
shares.
     
The OTC:BB market has been a haven for fraudalent companies to take 
advantage of many investors of all levels of experience and for market 
makers to further take advantage of these investors.  The SEC rule that 
forces all of these companies to report to the SEC is a great step in the 
right direction.  However, much more needs to be done on the exchange side 
to create a fair market.
     
In conclusion, suspending rule 10a-1 should be adequate in high volume 
issues, or any other market that is noticeably transparant.  But it needs to 
be strongly enforced on the NASDAQ Smallcap market, and especially the 
OTC:BB market.
     
Thank you for your consideration in this matter.
     
Jeff Abrams