April 27, 2000

Secretary, Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No. 4-430

Gentlemen:

We are writing in response to the Commission order of April 13, 2000, with respect to the staying the deadlines for decimal implementation, and notice-requesting comment on revised decimal implementation schedules.

The order of April 13, listed a number of questions, and following is BNY Clearing Service LLC's response to those questions.

Question 1:

Is it feasible to begin Dual Pricing by September 4, 2000? If it is feasible, should trading in all exchange-listed securities be in nickel or penny increments? If it is not feasible to begin Dual Pricing by September 4, 2000, why not?

Answer:

BNY Clearing Services LLC does not believe it is feasible to begin trading all exchange-listed securities in decimals (in nickel and penny increments) by September 4, 2000.

There are too many unknowns in a big bang conversion to decimal (nickel and penny increments) trading of all exchange listed securities. These unknowns include:

Question 2:

What, if any, systems changes or other steps would be necessary to implement Dual Pricing by this September 4, 2000 deadline? What type of changes would need to be made to the systems of securities firms, investment companies, and vendors? What would be the impact on systems capacity? In light of your answers to the foregoing questions, what changes would need to be made to the current decimals testing schedule?

Answer:

System changes:

Capacity

There are too many uncertainties to accurately determine the actual impact of decimal trading on system capacity. Industry sponsored studies suggest vast increases in the number of executions which could adversely impact systems capacity. Therefore, it is not advisable to immediately begin trading all exchange-listed securities in decimals as of one date. A phased in approach will allow the industry to more accurately gage the effects of decimal trading on system capacity and make changes accordingly.

Testing Schedule Changes

Additional Extended Point to Point Tests for listed securities and options must be scheduled for July and August, and then tests in January, February and March in 2001 for NASDAQ securities.

Capacity tests should be scheduled for quote vendors and data providers. After these capacity tests, the participants should provide the industry with the results on their systems (a sign off by the participating vendors).

Question 3:

Is the risk of customer confusion because of Dual Pricing significant, and if so, how should it be addressed?

Answer:

Yes, there is a very real risk of customer confusion. The premise for changing the US securities markets from fractional to decimal trading was to improve trading by closing the quote spreads thereby creating savings for the investing public. If you create a confusing trading environment (fractional and decimal trading) are we helping or hindering the investing public. And are we lessening the client's ability to obtain best execution. The SEC should lead the way in publicizing the change if they are mandating such a confusing situation.

Question 4:

If commenters believe that implementing Dual Pricing by September 4, 2000 is not feasible, what date(s) is (are) feasible to implement Dual Pricing? Commenters should include a discussion of the systems changes and testing schedules that would be needed for their alternative implementation date(s).

Answer:

Our internal system (service bureau) would be completely ready for the September 4, 2000 Dual Pricing conversion. However, we do not know about the rest of the industry, and as stated previously do not think it is advisable. The September 4, 2000 date could be the beginning date of a Pilot program with specific listed securities trading in decimals.

Testing could be accomplished with the addition of Extended Point to Point tests in both July and August 2000.

Question 5:

In addition, if commenters believe that implementing Dual Pricing by September 4, 2000 is not feasible, is the alternative Decimals Pilot proposal feasible or preferable? If commenters believe that the Decimals Pilot is feasible, what if any, systems changes or other steps would be necessary to facilitate this schedule? In particular, what changes would need to be made to the current decimals testing schedule? What type of changes would need to be made to the systems of securities firms, investment companies, and vendors? What would be the impact on systems capacity? Is there risk of customer confusion, and if so, how should it be addressed?

Answer:

The proposed Decimals Pilot program is preferable to the arbitrary selection of September 4, 2000 as the date for all exchange listed securities trading in decimals. This date however is still 6 months in advance of the projected NASD conversion, which would still cause confusion among the investing public. The question that begets itself: Is the 6-month Decimals Pilot too long of period until NASDAQ begins trading in decimals? The Decimals Pilot should be flexible enough to allow for addition of more securities if conditions permit and for the inclusion of some NASDAQ securities if they can be properly supported.

Testing Schedule Changes

Additional Extended Point to Point Tests for list securities and options must be scheduled for July and August, and then tests in January, February and March in 2001 for NASDAQ securities.

System Changes

Capacity

During the pilot phase, trading patterns could be reviewed and then those results extrapolated to determine capacity issues. There are too many uncertainties to accurately determine the actual impact of decimal trading without real trading data. Industry sponsored studies suggest vast increases in the number of executions which could adversely impact systems capacity.

Capacity tests should be scheduled for quote vendors and data providers. After these capacity tests, the participants should provide the industry with the results on their systems (a sign off by the participating vendors).

Customers

There is a very real risk of customer confusion even with a Pilot program. But since there would be a limited number of securities, customer and operations personnel confusion could be managed through education, mailings announcements, etc.

We hope that our comments are helpful to the commission in preparing for the conversion to decimal pricing.

Sincerely,


C. Michael Viviano
Chairman, BNY Clearing Services LLC