SEC corruption

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E*TRADE Financial Corporation and its subsidiaries (collectively, "E*TRADE)' appreciate
the opportunity to comment on a significant proposal recently issued by the Securities and
Exchange Commission ("SEC" or "Commission") to remove all short sale price tests under
the Securities Exchange Act of 1934 ("Exchange ~ c t " ) . ~ E*TRADE commends the
Commission for its past efforts regarding short sale regulation and for its decision to issue the
current proposal. Our general view is that short selling enhances market liquidity and
contributes to stock pricing efficiency, and thus is an important part of our securities markets,
and that the existing restrictions on the execution prices of short sales ("price test
restrictions") inhibit the free-market price discovery mechanism of an efficient market.
Accordingly, we fully support the Commission's proposal to eliminate the current price test
restrictions.
This proposal is a result of the many years of experience by the SEC on the operation of price
test restrictions for short sales, the amendments to Exchange Act Rule 10a-1to add various
exceptions, and consideration of numerous written requests and granting exemptive relief
from its re~trictions.~ Most importantly, the Commission's Office of Economic Analysis has

http://www.sec.gov/comments/s7-21-06/s72106-29.pdf