Subject: File No. 4-610
From: Thomas F Dolan, Jr

April 5, 2011

THIS IS BEING WRITTEN IN RESPONSE TO WHAT I UNDERSTAND TO BE A SECURITIES AND EXCHANGE COMMISSION REVIEW OF THE MUNICIPAL BOND MA A PROCESS WHICH SOLICITS INQUIRIES AND COMMENTS FROM BOTH WALL STREET PROFESSIONALS AND THE PUBLIC. AS A RETIRED COUPLE MY WIFE AND I FALL INTO THE LATTER CATEGORY.

MY INQUIRY REVOLVES AROUND THE BEST EXECUTION OBLIGATION WHICH BROKERAGE FIRMS ARE REQUIRED TO EFFECT DURING THE EXECUTION OF TRADES ON BEHALF OF THEIR CLIENTS. MY UNDERSTANDING IS THAT FOR STOCK TRANSACTIONS THERE ARE WELL ESTABLISHED, COMPUTERIZED SYSTEMS IN PLACE WHICH INSURE THAT WHEN, FOR EXAMPLE, 100 SHARES OF XXX CORPORATION IS PURCHASED, THE BEST OFFERED PRICE AVAILABLE FROM ALL MARKET MAKERS ON XXX IS THE BASIS ON WHICH THE PURCHASE IS MADE FOR THE CLIENT. DOES THE MUNICIPAL BOND BUYER ENJOY THE SAME PROTECTION?

IF MY UNDERSTANDING IS CORRECT, THERE ARE SOME BROKERAGE FIRMS, PARTICULARLY DISCOUNT BROKERS, WHICH DO NOT INVENTORY MUNICIPAL BONDS. THESE FIRMS SELL MUNICIPAL BONDS TO THEIR CLIENTS BY UTILIZING AN ELECTRONIC PLATFORM ON WHICH BONDS ARE OFFERED BY MANY COMPETING FIRMS. IN A COMPLETELY TRANSPARENT MARKET, IF MORE THAN ONE FIRM IS OFFERING THE IDENTICAL BOND, THE CLIENT WILL SIMPLY BUY THE LEAST EXPENSIVE OFFERING AND BEST EXECUTION IS EFFECTED, UNLESS FOR WHATEVER REASON SOME INDIVIDUAL OR GROUP OF MARKET MAKERS ITEMS ARE INTENTIONALLY SHIELDED FROM THE PROSPECTIVE BUYER. I WOULD ASSUME FROM A REGULATORS PERSPECTIVE IT IS NOT OVERLY COMPLICATED TO MONITOR AND REVIEW TRADES OF THIS TYPE TO ASSURE BEST EXECUTION. SAID FIRMS WOULD GENERALLY HAVE NO INCENTIVE TO RESTRICT COMPETITORS BONDS FROM THEIR CLIENTS VIEW, WHICH INHIBITS BEST EXECUTION.

COMMON SENSE WOULD DICTATE THAT FIRMS WITH PROPRIETARY INVENTORIES MAY FALL INTO ANOTHER CATEGORY. BY OFFERING COMPETITORS BONDS IN COMPETITION WITH THEIR OWN, THE BROKERAGE HOUSE HAS EFFECTIVELY RELINQUISHED A MONOPOLY POSITION OVER ITS CLIENTS, AND SO THERE IS A SIGNIFICANT TEMPTATION TO RESTRICT COMPETING OFFERINGS, REDUCING TRANSPARENCY IN THE PROCESS.

GIVEN THE ABOVE, MY QUESTION IS THIS: WHAT STEPS ARE TAKEN BY THE SEC, OTHER REGULATORY BODIES, AND BROKERAGE HOUSES THEMSELVES TO ASSURE OPTIMAL TRANSPARENCY, FULL DISCLOSURE OF AVAILABLE OFFERINGS, AND BEST EXECUTION? A FEW QUESTIONS COME TO MIND. TO WIT:

DO BROKERS WHICH CARRY PROPRIETARY INVENTORIES EMPLOY ELECTRONIC PLATFORMS TO PUT THEIR OFFERINGS IN COMPETION, AND IF SO ARE THE PLATFORMS BEING UTILIZED AS DESIGNED AND INTENDED? MY UNDERSTANDING IS THAT THE PLATFORMS EFFECT A SIGNIFCANT NUMBER OF TRADES. ASSUMING THIS IS SO, IF A GIVEN FIRM TRANSACTS ONLY A MINISCULE NUMBER OF PURCHASES FOR ITS RETAIL INVESTORS OVER THE PLATFORM, AN OBVIOUS RED FLAG IS BEING WAVED THAT SOMETHING IS INTERFERRING WITH THE PLATFORMS PROPER USE (HOUSE BONDS CANT ALWAYS BE THE MOST ATTRACTIVE). WOULD THIS LACK OF MARKET TRANSPARENCY NOT INTERFERE WITH BEST EXECUTION SINCE POTENTIAL COMPETING IDENTICAL BONDS ARE NOT SEEN? ARE THE REGULATORS AND THE IN-HOUSE OVERSIGHT PERSONNEL LOOKING FOR THIS?

IF A GIVEN FIRM ACTUALLY USES THE PLATFORM, ARE ALL AVAILABLE BONDS ON THE PLATFORM DISPLAYED, OR ARE OFFERINGS FROM ONLY FAVORED COMPETITORS SHOWN WHILE OTHERS ARE EXCLUDED. IT DOES NOT SEEM FARFETCHED TO ME TO ENVISION A RELATIONSHIP WHEREBY FIRMS A AND B AND C HAVE A RECIPROCAL ARRANGEMENT TO SHOW ONE ANOTHERS BONDS, BUT OTHER FIRMS OFFERINGS ARE SHIELDED. IF FIRM Q HAS A SIMILAR PROFILE TO FIRM A, B OR C AND DISPLAYS ITS OFFERINGS ON THE PLATFORM, YET BONDS ARE PURCHASED FROM A, B AND C ROUTINELY BUT FROM Q ONLY RARELY BY COMPARISON, SOMETHING DOESNT ADD UP. IF A LARGE NUMBER OF FIRMS WHICH TOGETHER SHOW THOUSANDS OF BONDS, BUT SOMEHOW PRACTICALLY NEVER SELL BONDS OVER THE PLATFORMS TO A, B OR C, IS NOT SOMETHING AWRY? IF THIS DOES OCCUR, HOW WOULD THIS INTENTIONAL LACK OF TRANSPARENCY AND FULL DISCLOSURE OF OTHERWISE AVAILABLE BOND OFFERINGS NOT INTERFERE WITH THE CLIENT GETTING BEST EXECUTION? AGAIN, IS THIS SOMETHING REGULATORS LOOK FOR?

AS AN OCCASIONAL VISITOR TO THE MSRB EMMA WEBSITE, I AM OFTEN ASTONISHED TO SEE THE SAME BOND PURCHASED BY INVESTORS ON THE SAME DAY AT A WIDE RANGE OF PRICES. WOULD NOT THE REQUIREMENT TO SHOW ALL COMPETING OFFERINGS AVAILABLE ON THE PARTICULAR PLATFORM UTILIZED BY EACH FIRM INCREASE TRANSPARENCY AND HELP EFFECT BEST EXECUTION?

I UNDERSTAND THAT CERTAIN OFFERINGS WOULD BE SHIELDED FOR LEGITIMATE REASONS, E.G., LOW RATED BONDS. HOWEVER, THIS WOULD ONLY APPLY TO A SMALL PERCENT OF OFFERINGS AVAILABLE.

THE BOTTOM LINE QUESTION IS THIS: ARE THE SEC, OTHER APPROPRIATE REGULATORY BODIES, AND WALL STREET IN-HOUSE WATCH DOGS ROUTINELY TAKING APPRORIATE STEPS TO ASSURE THE PUBLIC GETS BEST EXECUTION IN THE MUNICIPAL BOND MARKET?


SINCERELY,

TOM DOLAN