Subject: File No. 4-610
From: Michael M. Becker
Affiliation: Former BD now Public Customer

November 22, 2011

I am a former options trader (broker-dealer, AMEX Exchange Official, arbitrator, disciplinary hearings panelist) who suffered through a best-bid, best-offer rule mandated by the S.E.C. in the 1990's, that narrowed the bid-asked and enabled the public to get better prices on equity options, (at my expense).

Similarly, the stock markets and option markets became decimalized, enabling the public and traders to get more competitive prices.

In the year 2000, the S.E.C. settled with many O.T.C. stock Market Makers, forcing them to pay $900 million to the public for conspiring to manipulate NASDAQ stock bid-asked prices. This settlement was a drop in the bucket to the O.T.C. market makers, who made far more than that keeping markets wider than they should have been for countless years.

This history brings me to the Municipal Bond markets.

I am shocked that such a best-bid-best offer market system does not exist in municipal bonds, (and perhaps corporate bonds as well). Certainly the technology has existed for many years for there to be a public best bid-best offer system.

I am a gray haired public customer now.

My broker, in this case, Merrill, does not charge me any "commissions."

Buying new issue bonds at par are not a problem. But like a "roach motel," I can get in, but I can't get out. When it comes time to sell my bonds, my broker gets me "quotes" that I can accept or reject. Getting a quote takes from 30 minutes to 2 hours. Last Friday, for example, my bond is marked as closing at 110. So on Monday before the opening, I go to my Merrill broker to sell them. My Merrill broker calls the Merrill MUNY Bond desk gets me a bid (quote) of 107 at 11:00 a.m. My bond closes at 110 again Monday night. This is VERY typical of several times I have asked for quotes, on several different MUNY bonds. I have given up trying to sell my bonds because I can't get a fair price for them. If a fair price for these bonds is 107, why are they consistently marked as closing at 110?

My (paranoid) suspicion is that when I am bid 107 for my bonds that closed at 110, the Merrill MUNY Bond desk will buy them from me and sell it to someone else they have lined up at 108 or 110. Or something like that.

I'd rather pay my broker a very nice commission on a bond trade and be shown the best bid or the best offer on the other side of a public market. I'd like to be able to post my bid or offer and have everyone, everywhere, see it. I don't think the MUNY Bond desk at Merrill will do that.

As an unsophisticated outsider, and I am totally ignorant of how these bonds are actually traded, but I suggest you investigate how these bond markets work and see if rules can be written to give the public a fairer shake.

I ask the S.E.C. to look into whether MUNY Bond trading practices have robbed the public of getting the prices they should be getting on MUNY bond trades. Perhaps the S.E.C. could sue the MUNY bond market makers for faulty trading practices like the S.E.C. did with the O.T.C. market makers ten years ago. Even the threat of such a suit may pressure the brokerage firms into changing how they make markets on MUNY bonds (and perhaps corporate bonds as well).

Michael Becker