The following comment on Letter Type L,
or variations thereof, was submitted by
various individuals or entities on S7-10-04.
Letter Type L:
January 13, 2005
The Honorable William H. Donaldson
Securities and Exchange Commission
450 Fifth Street, N.W. Room 6100
Washington, DC 20549-0609
Re: File No. S7-10-04 Proposed Rule on Regulation NMS
Dear Chairman Donaldson:
I am writing to express my concerns about the Securities and Exchange Commission's proposed Regulation NMS, which is designed to update and strengthen our national securities markets. A core part of the proposal contains, as one of two options, a provision that would radically change the structure of the U.S. capital markets and effectively turn our internationally competitive, investor-driven markets into a government utility.
The provision in question would create the equivalent of a Consolidated Limit Order Book (CLOB), a radical concept first envisioned in the late 197O's, then debated by Congress and by the SEC in 2000. The CLOB has been rejected by Congress and the SEC previously, and should be again, for one overriding reason: it would effectively nationalize the U.S. equity markets, removing incentives for markets to compete with one another.
The U.S. equity markets are the strongest in the world. In a splintered, electronic-only marketplace where exchanges must chase displayed orders from market-to-market, large orders of stock would be difficult to manage. Instead, they could be traded in private markets or overseas. The NYSE is on the verge of implementing its new Hybrid Market. The NYSE Hybrid Market will offer customers what they have been demanding - the ability to choose to trade electronically or through the auction market. The proposed CLGB would eliminate the opportunity for a negotiated trade within the system, and preclude any possibility that the hybrid market will ever become operational.
As a concerned citizen and a member of the New York Stock Exchange, I urge you to support the Regulation NMS proposal without the CLOB provision. Thank you for your consideration.