September 19, 2008 Dear TradeStation Clients: Yesterday, we informed you of the new short selling rule adopted by the Securities and Exchange Commission (SEC) on September 17, 2008 (the "Rule"). In the Rule, the SEC expressed concern "about the possible unnecessary or artificial price movements based on unfounded rumors regarding the stability of financial institutions and other issuers exacerbated by "naked" short selling." SEC Release No. 34-58572 <http://www.sec.gov/rules/other/2008/34-58572.pdf>. In order to allay some of these concerns, the SEC imposed enhanced delivery requirements on short sales of equity securities. What this means for you is that if you sell an equity security short, and there is a failure-to-deliver the securities you shorted by the settlement date (Trade Date + 3), we are required to close out your short position no later than the beginning of the regular trading hours of the next business day (T+4). We have received some questions as to whether TradeStation will notify you (or attempt to notify you) prior to closing out your short position in accordance with the new Rule. THE ANSWER IS YOU WILL RECEIVE NO FURTHER NOTICE. If required to do so by the Rule, we will take whatever action is necessary, including closing out your short position at or before the market opens on T+4. As a reminder, when you opened your equities account, you agreed that "all of your transactions shall be subject to all applicable laws, rules and regulations." (Section 2 of the TradeStation Securities Account Agreement.) Please consider this message as your ONLY NOTICE that we intend, from time to time as the Rule requires, to "buy-in" and close out your short sale position(s), without further notifying you, no later than market open on the fourth day after your trade date (T+4). As a reminder, any losses suffered or lost opportunities realized as a result of any such buy-ins to close out your position to satisfy the Rule will be solely your financial responsibility. We strongly recommend that you read the SEC Release and Rule and incorporate the limitations associated with this new rule into your trading strategies and decisions. As always, we remain committed to being your direct trading firm of choice and encourage you to contact the Trade Desk at (800) 871-3563 should you have any questions or comments. Very truly yours, Joe Nikolson President TradeStation Securities, Inc. Isn't it the BROKER'S responsibility, if they give you shares to short, that THEY ACTUALLY HAVE THEM TO BORROW? Or is TS engaging in naked short selling?