June 17, 2004
Dear Mr. Donaldson
I am writing today to thank you and the commission for holding public hearings on Reg. NMS before instituting regulatory change. While Arthur Levitt reformed the market through fiat you have encouraged a meaningful dialogue and have started a process that will result in better regulation and fair markets. You and the commission deserve kudos for the job you have been doing in regards to market reforms and corporate governance. Bill, under your leadership the commission has finally begun to ask insightful questions in regards to market structure and its greater impact on the financial sector and the economy.
I would like to take a moment to point out that should the commission decide that trade through is needed the commission also needs to:
1 Add size in addition to time as rational for opting out.
2 Ban ECN access fees.
3 Protect electronic quotes from being traded through
If the regulatory subsidy that the ECNs enjoy is eliminated and trade through is only allowed in cases where the combination of size and time are considered as equal to price under best execution then customers will have flexibility to trade different markets while preserving the integrity of the markets. Also by adding a size qualifier 5000 visible shares or greater for opting out, limit order placement and transparency may be encouraged since traders will be rewarded by price improvement for entering larger orders.
Richard R Tullo Jr.