From: Marc P. Eisen []
Sent: February 28, 2004
Subject: File No. S7-07-04

I have been a member of the Philadelphia Stock Exchange for 17 years. I have benn a specialist as well as a ROT which I am now. I have been trading for myself for almost 5 years now and currently make markets in 2 proprietary products for the PHLX, the Xau and Osx indexes. I have witnessed dramatic changes over the last few years in the options industry. My expenses keep rising while the spreads in the options are tightening. With customers not paying hardly any fees to trade the exchange has passed those costs to the members. Also with technology upgrades i have seen my expenses rise over 50 in the last 2 years. About a year age the exchange adopted a see what you get policy. Basically that is saying that whatever market is on the screen, we have to honor it. We are now at the mercy of potential mistakes from the specialists as well as the computer systems. The ROTs have very little recourse. Not a day goes by that we are picked off by a firm on an erroneous market. Unless the market was way out of line we are stuck with the trade. This has cost myself thousands of dollars and it is rewarding the firms who hardly pay fees to pick off the ROTs in the trading crowd who are keeping the exchange running.

Since payment for order flow started it has forced many ROTs to stop trading individual equities and move to the indexes. Probably 40-60 percent of PHlX traders are in the indices. The size of the crowds has dramatically cut the spreads in the markets. If penny-wide options markets happen there is no way any small firm will survive.